What happened this week: We are pretty pleased with the market activity this week. Overseas buyers were budgeting their January/February shipments and have arrived earlier in the market than we actually expected. With the US$ taking a break from its descent and with a bit of patience, Friday afternoon offered a good opportunity to cover the week’s exposure on the US$ and supported calculations which had been being hammered so much with the constant decline of the greenback during November.

While most experts are of the opinion that the rebound is just a short dip in the decline and expect the US$ to hit €1.50 soon, it might also be that with all the negative forecasts and the media attention the market does what it usual does when the masses all run in one direction — it turns the opposite way. Assuming that this were still the case in December and the greenback finished the year closer to €1.40 than to €1.50, it would offer support to the European market towards the end of the year.

Anyway, at present there is a big difference between the market activity in Europe and the sales potential overseas. While, in almost all cases, European tanners seem to have already closed their books for 2007 and are not yet even thinking about their raw material procurement for 2008, Asian tanners are obviously already planning well into the first quarter of next year. This probably also reflects the business situation a little. Whilst in many cases European tanners have been almost paralysed by reduced order volumes and major difficulties with profitability — even in direct relation to the currency market — it seems the order position of many tanners in Asia is significantly better.

Tanners in China that are selling their finished product back into the domestic market seem to have a particularly healthy and strong order book and the appreciation of the RNB is certainly also helping them. Most of the interest this week was again focused on dairy cows and some isolated sales for ox/heifers and some medium weight bull hides. With the proper timing in the currency market, prices were again able to generate steady asking levels. Most of the interest came from upholstery and leathergoods tanners that have been busy for almost the entire month of November anyway.

In Europe the situation is completely different, in particular for tanners using extra heavy material, and who are convinced that the market is going to remain in their favour endlessly and think prices will continue to fall until hides will be free of charge. Consequently they are bidding aggressively, below fair market values. Although they might find one or two victims, they should remember that when supply erodes and the market turns, the situation could change quickly. However, this trade remains stuck in short-term thinking.  

The kill: The kill remains reasonably steady although it was slightly lower than in the weeks before. Under normal conditions the kill for the next two weeks should increase moderately as the pipeline for beef should now be filled for the Christmas season. Let’s enjoy the last busy production weeks before the end of the year and then prepare for the sharp reductions expected in the first weeks in the New Year.

What do we expect: For the coming weeks a lot will now depend on the further trend in the currency markets under the assumption that the US$ can extend its gains and the market slide can be stopped. Cows look pretty steady now anyway and bulls should gain some support from the currency market and should have better opportunities against their competition from the USA. Heavy material is going to remain a big battle. In general some of the market pressure has been lifted by currency support and next week will show us the real trend.

Share this story: