What happened this week: The week was pretty much the ‘non event’ we had expected. Although more people are slowly returning from their holidays and communications are starting up again, sales activity was rather spotty and coincidental sales dominated the week rather than interest of any substantial solidity. Nobody was particularly surprised by this. With the large round of activity seen in mid-August most overseas buyers must have sated their demand for September at least and most clients out in the Far East will certainly now wait for the visits and budgets of their clients for the coming six to nine months whilst also trying to gather a better feel for the raw material market from the show in Shanghai.

The general uncertainty in the financial markets and the possible consequences for the consumer markets in the Western world will also be playing an important role in them not committing too much without having more security about how consumers will react to the situation and going to act later this year. Opinions couldn’t be spread more broadly and it seems that the situation in the different global consumer markets is also still far from being uniform. Consequently we are facing a temporary slowdown in activity and the market players are either still in the process of sorting things out after their holidays or waiting for further insight from the market before making further decisions. Under normal circumstances we would expect this to last for most of September.

The exception of the week is that there is still fundamental demand for dairy cows without any aggressive bidding or enquiring and the market is still absorbing whatever is offered in low grades or economical hides. Average or higher prices materials are still having the most difficult time and it seems that in furniture upholstery in particular the demand is not enough to consume the production – at least not at the finished leather prices needed. Extra heavy hides still seem to be the most problematic segment mainly due to their limited outlet potential overseas. Also other higher price materials such as calf are facing stiff price resistance these days.

If this is just a seasonal issue or whether it is an indication of a fundamental market change after the strong performance of luxury goods and better quality raw material seen over the past two years remains to be seen and it might be too early to judge. The fact is, however, that the higher priced raw materials which are still dominated by European tanners have been the worst performers in the market since the change in spring this year. Due to the limited market activity and the upcoming show in Shanghai price movements are still extremely limited in their extent and so the few hides traded were sold almost at asking levels and with the strong volatility of the currency it was more of a gamble on the currency market to reach asking levels in € terms rather than buyers accepting what they were initially looking for. However, the variations are not worth mentioning.

The kill: The kill is now starting to increase. The colder weather and the end of the school holidays were reflected in the weekly numbers and the slaughter is slowly moving at what could be called a seasonal average. We expect further modest gains in the weeks to come.

What do we expect: Everything is now focused on the meeting in Shanghai. Expectations are running high. Buyers and sellers hope and believe that their price expectations for the market will be justified and will find support from the event. Emotions always play an important role in the market and this might be the case again this time but, fundamentally, we do not believe that the market is going to change much yet.

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