Friedrich Sturm Report - 14.09.07
What happened this week: For the week after the show in Shanghai, the sector was pretty much in a ‘sorting out’ mood and with many players returning from Asia most were busy with the paperwork that was waiting for them on their desks. Many of the people visiting Shanghai obviously came home with Asian flu, in this case less a physical problem than a mental one. This seems the only possible explanation for how readily abattoir prices for male hides were accepted.
While there was little doubt that market activity and interest for dairy cows was steady and just a bit influenced by the US dollar movements, one could certainly not sense any particular enthusiasm for male hides. With the standard buyers for bulls in Europe being in combative mood it is quite interesting that some processors are not really taking a strong position regarding lower buying prices for bulls. Maybe there is something on the way and soon prices will rebound and tanners will readily pay more again for this type of material. Other markets, especially Italy, were not particularly active and it seems that either tanners are still well covered or prefer to wait until most of the other fairs have passed and deliver more information about leather demand.
Shoe business remains still quite decent and the GDS fair this weekend in Düsseldorf should offer more confirmation of the same. Upholstery leather still seems to be suffering from low split credits and an inadequate price structure for the different selections one obtains from the European standard hides. The return of Foot and Mouth Disease in the UK this week was another shock and it is still not clear what final effects this is going to have on the hide and skin trade.
Shipments to China at least will be blocked for much longer than seemed possible even last week. How the European Commission is going to react remains to be seen. With this happening right at the beginning of the kill season, it is not only going to have an effect on the hide market, but also, and to an even greater extent, on the market for lamb and sheepskins, which are seeing something of a rebound in interest and prices.
All this could have a greater effect on the markets than one might expect today. If the situation does not settle very soon and the reason for the second outbreak is not clarified, the balance in the market, in Europe at least, could be seriously affected.
The kill: Still rising, but not by much anymore. Cold and rainy weather and the increased prices for animal feed are seeing more cattle in the abattoirs. In particular the kill for males is pretty good and numbers are already at levels that we might have expected for October. Kill statistics for July showed a whopping 15% increase versus a year ago, which explains the decent supply levels during the summer.
What do we expect: While the market for females is in good order and not much movement can be expected, the market for bulls still needs to sort itself out one way or another. It remains to be seen if the optimists or pessimists are right. We tend to belong to the section that expects a further, moderate correction until the prices for males stimulate enough demand to absorb present stocks.
