What happened this week: Not much as far as the general trading activity was concerned. The stories of the week came from England and the USA and only one of these directly affected with the hide market. While England shocked the world with another outbreak of the Foot and Mouth disease, the financial community has been deeply affected by the subprime crisis and the potential influences on global stock markets, interest rates and consumer spending. So far it doesn’t seem that tanners around the world have felt any of effects of either situation as Europeans are relaxing during their vacations and Asian tanners continue to buy what they consider they need. Consequently the weekly activity was limited to spotty trades with Asian clients.

A few dairy cows and some ox/heifers was the result when the curtain was drawn on Friday afternoon. Again with a little bit of luck in the currency timing most sales ended at almost unchanged levels vs. the previous weeks. The absence of the regular buyers of bulls and the unattractive bids coming from Asia made it another week when it was impossible to generate any sales in this market segment.  

The key question discussed between the few people available is the potential influence of the FMD outbreak in the UK as, for the moment at least, access to one of the cheaper origins is restricted. We do not think that this is going to change much. The disease doesn’t seem to have spread any further and the supply base is too small to have any significant global impact. On top of this we are in the vacation period and – subject to no further infections being reported – FMD is not going to interrupt the normal slaughter cycle for long. Hides which are stuck today due to import bans can either be wet-blued or will be made available to the local tanning industry.

Far more interesting could be the general trend of the global economy. There is no real reason to believe that the situation on the financial markets should influence the global consumer market too much, but China is trying to slow the economy down and if the problems in the subprime market depress the financial markets further, combined with higher energy and food prices, it could quickly become a problem for consumer products in general. Well, August is not a good time to worry about this and one will know more after the end of the holiday season and the return to normal operations. So far the leather market hasn’t shown any serious reaction and leather goods are still benefiting from the positive situation and outlook in the global economy. So far the demand for raw material has not been influenced and the balance of supply and demand is still intact. When the prices are right the tanning industry has been willing, and in the position to, absorb almost all the available raw materials which clearly reflects an industry that has few concerns about the market potential for leather next season.

The kill: Just passing the summer season at the steady levels seen for the last few weeks. With holidaymakers slowly returning and school holidays ending region by region the kill should gradually rise from next week onwards. There are still fewer than normal cows in the slaughter mix and bulls are fortunately on the heavy side of the seasonal range.

What do we expect: Next week should also be quiet and activity should be limited to the Asian markets. If the turmoil on the financial markets persists the normal reaction of the market would be increasing caution. With the large volumes of sales from the USA in the past weeks, the immediate appetite should be sated and so we expect little activity for the next weeks. With little activity and the market in a temporary state of balance major price movement can’t be expected before the end of the month.

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