What happened this week: The week after the show in Bologna was a pretty strange one indeed. Although we have seen a large volume of interest, from China in particular, we can’t really say that all of this business was concluded in the end.

We can’t explain why because, fundamentally, the conditions were reasonably good. Activity in the US market was quite impressive and prices were steady at least if not a fraction higher and this is normally the exact type of market in which we have an easy time placing our material in the Far East. Quite the reverse was true this week, as after a large volume of interest only an average number of sales were concluded. Most of the interest was again focused on dairy cows while prices for bulls were considered to be around $1-2 too high. The very weak US$ was no great help either. Maybe the whispers and rumours of Italian companies connected with the leather industry being involved in a huge money laundering scandal had an effect. It might also simply have been due to the domestic problems in China which kept buyers on the sidelines.

Despite fundamentally positive conditions it seems that a lot of the problems in the market have still not been sorted out and a number of players are dealing with individual problems such as the continued FMD restrictions on hides from the UK being shipped to China, the increased kill in Europe that will last from now until the end of November, the vegetable tanners in low gear, and certain origins and hide grades in an over-supply situation. This is maintaining the high level of uncertainty and risk aversion and, despite the corrected price levels, sellers are still not happy to keep unsold inventory and wait for better times. With tanners’ inherent fear, they are taking their chances and trying to drive the market further in their favour. This time of the year traditionally favours the buyers and this also describes the present situation. However, with prices having reached pretty attractive levels, the downside risk can’t be too big. We are at the beginning of a new production cycle and without any more turmoil in the financial markets the situation should straighten itself out by the end of the year as it usually does.

Very little news was actually heard from the leather markets. There was neither particularly good news nor particularly bad and it’s only tanners that are continuing to complain about their profitability. Even though the retail markets in   Europe and the USA seem to have remained pretty flat this still seems to be being easily offset by the impressive double-digit growth rates in the emerging markets. So, it seems that we are still dealing with structural rather than actual market problems. The numbers sold during the week were still able to fetch steady money with the exception of low grades where we had to accept moderately lower prices for the first time in a year. The rest was just slightly down due to currency reasons.

The kill: Another week of reasonably cold nights and the first nights of frost have taken more cattle off the fields. The slaughter of cows has increased again with further rising weights. We are not impressed by the kill of bulls where the numbers are hardly meeting the weekly programmes of shipments. It seems that there is still a good backlog of animals and we believe that the present situation will continue.

What do we expect:  We have to watch the situation in Italy with care as we believe this is going to be very important. Whether this week’s interest from China can be converted into sales next week will also be of great relevance. And finally the developments in US$ will also have an effect. There is little option to call the market until then as weak to steady prices should struggle to hold their present levels. 

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