What happened this week: Well, our market outlook last week proved to be quite incorrect. If there was anything right in our forecast it was that activity was largely limited to the Asian customer base, but the expectation that the volume of interest would be low was far from true. Seemingly, a group of tanners had missed the party in the USA and had not participated in the purchasing wave of the previous weeks. Since (asking) prices in the USA have gone up and not all grades are available in abundant supply and in the shipping periods some of the buyers would like, some have turned their attention back to the European the supply base.

As a consequence we saw a reasonable amount of bids, not only for cows but also for bulls and ox/heifers. With the rising US$ a lot of bids turned out to be acceptable and so a good number of hides were sold considering the time of the year. European tanners were caught by surprise on some grades when they returned from their holidays to find that the stocks they had accumulated over the summer were not as high as might have been expected. Although all this may give the impression that the market is entirely positive and several players might see this as the ‘turn-around’ whilst bull-market riders may already be sniffing their turn again, we are not overly excited. Prices are not advancing and most of the sales have (fortunately) just cleared with the help of the currency market over for the last six to eight weeks. This applied predominantly for lighter weight dairy steers and ox/heifers which had lost the support of the US market in the spring and summer. The only exception might be dairy cows which have been selling at more or less steady levels all the way through.

The uncertainties in the financial markets could deliver further surprises as far as payments are concerned while a sustained trend of the firmer US$ would support prices in Europe after the reopening over the next weeks. In any case the situation has become much more fragile, sensitive and volatile temporarily and it might take a few weeks until the clear consequences (if there are any for the hide market) can be clearly analysed. A clear picture about the consequences of the stock market declines and the high level of uncertainty on the consumer market will only be realised when the Western world is back to work and the normal shopping cycle has started again. So far purchasing activity has not shown any significant concerns and tanners and producers seem to expect a normal order season and prefer to secure raw material at a certain price level prior to their trips to the Shanghai Fair. Prices were steady during the week and only the firmer US$ made bids from the Orient for dairy steers and ox/heifers attractive.  

The kill: The next error we made. The kill was lower rather than higher and the gradual increase we expected did not take place. Most likely this is due to the final fluctuations of the holiday sales. Official slaughter statistics for June were almost unchanged vs. a year ago. Weights for males remain on the higher side of the seasonal expectations.

What do we expect: The next weeks will be pretty interesting. If more tanners are open to buy they will not find too many hides around and this would certainly support the market. If this week’s interest does not spill into the next one most likely not much will happen until or after the Shanghai Fair. However, it does not seem that the market is prepared for higher prices yet and prefers to be better protected against lower ones.

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