What happened this week: The uncertainties in the market are growing and the various reports circulating are adding nicely to the speculation. There is a bit of truth in much of information and gossip being spread around, but many of these reports — at least as far as we are concerned — are sending out the wrong impression. There are many small issues, but with the market being as emotional as it is at the moment every opinion or rumour can find a willing believer. Basically we are still in a situation driven by fear rather than anything else and as Italy failed to deliver any news to the public again, uncertainty remains hovering over the market.

The US$ continued its fall from record low to record low and this did not support sales to Asia either and in such a market environment those with a vested interest found it easy to nurture the state of fear which has been growing  for some time by merely starting a few well-placed rumours and bids. As far as the ‘normal’ market conditions were concerned it was a reasonably normal trading week. Despite the current situation we still saw a reasonable amount of interest and, when people were willing to suffer the pain of another 1.5 % loss in the US$ value, sales at steady or moderately discounted prices were still possible to achieve in adequate quantities.

Most of the sales and enquiries came in for dairy cows, heifers and low grades. In addition to the general confusion we still found the stories about large inventories of heavy bulls irritating. The fact that some people are sitting on salted stock is nothing new and the fact that salted hides are difficult to place in Europe is not a new development either, but the total quantity in the European mix isn’t really the big burden. There is a stable customer base for this product and at times when the kill is low this extra material is absorbed, while in times of normal supply they have to wait until they are needed again. We see much more a problem with the lighter weights, which require a regular outlet in Asia as the regular supply of salted material can’t be absorbed by local markets unless it is substantially cheaper than the market from overseas.

This is quite difficult to achieve due to the old-fashioned price structure we still see in European slaughterhouses, which have not recognised the changing realities of the global markets. Why should they when there is also a customer base that hasn’t taken too much notice of the developments in the global price structure since the first quarter of 2007? And so the market is still struggling to find a balance with inventory positions being as unevenly spread as the prices of the various markets around the globe. The sharp variation of the US$ vs. a lot of other currencies in exporting countries is adding to the general volatility and the market spreads and making the process of a market settlement even more difficult. The week ended on the same note as the one before: one of distress and volatility.

The kill: With the weather getting colder the kill has risen moderately. Nothing substantial, but we have finally reached a level which can be considered adequate for the season and enough to secure a normal product flow. With the weather conditions further deteriorating we should see pretty much of the same in the weeks to come.

What do we expect: The dust hasn’t settled yet and confidence hasn’t returned, although most leather producing centres are reporting more activity and production. While the market last year was driven by excessive optimism we are now facing excessive concern. Until these current problems are wiped out we will continue to see a market driven by emotion and which will remain difficult. Prices will remain under moderate pressure and isolated positions will set the levels for another week.

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