What happened this week: 2008 has been one with a really a slow start. Those with expectations — or better put hopes — of more activity this week were basically disappointed. Hardly any movement was seen in Europe and the customer base in the Orient was not in any rush to make decisions. The weakening US$ also provided no argument for selling, so, the curtains were drawn on a quiet week this Friday.

Trading was limited to isolated sales, mainly for dairy cows and low grades again, with some other bits and pieces on the sidelines. The biggest trouble that remains is the weak tone within almost all of the markets that compete with our bull hides more than the standard volumes, as they can’t just be placed at present, while the number of salted hides being offered around the trade is rising constantly. The hopes of many that with the declining kill the market would settle have not come to fruition so far. With many offers still around from the UK and Ireland as well as from south eastern Europe and the USA, German males are still on the high side of the price list and are not finding the support they need from the market to clear all productions. While most people claim to be well-sold across the board, we tend to believe that this is no longer the case and stocks are starting to build again. The pressure on females is certainly lower, but at the end of the day it is not really important what is lying in the yards when you feel that the product hasn’t got much prospect of moving in the short-term.

Traditionally, in winter the trade isn’t too bothered about the situation and we still have some months to go before temperatures rise and the kill falls, but sometimes it comes more quickly than one would like. Anyway, for the moment we are still in the interim period between the Western and the Eastern holidays so one shouldn’t expect too much and, under normal circumstances, the market always gets a lot busier between Chinese New Year and the Hong Kong leather fair.

But, busy or not, the key issue today is price and the leather and raw material market is pretty well-capped. Virtually no-one is really betting on a decent rise in raw material prices in the short-term and if one market or product becomes too expensive, tanners are still finding enough material and alternatives at the price levels they intend paying. There are still very few arguments why this should change and the split market is a good example of the fact that just because something is cheap does not necessarily mean demand will rise immediately. So, if mainstream hides don’t float, one has time to look for others and there are plenty of other choices in this trade where the situation is not too jammed. Sheep and lambs are selling much more easily — as long as they are large, carry wool and do not exceed a certain price level. This sounds a bit like hides, but it is not as difficult to place material and less money is involved. As already mentioned above, sales remained limited this week and stayed at prices which depend more on a lucky hand in the currency market rather than on marketing.

The kill: Slowly picking up, but not really impressive. Beef exports to Russia seem to be bringing a bit more interest into the market in Germany and its surrounding countries, but it will not really offer any long-term boost to beef sales. 

What do we expect: We still have to wait for a change. With further uncertainties about financial issues in Europe and the current low gear in the market, we don’t see or expect any support for a move upwards, while in terms of the possibility of a move downwards, sellers are probably not yet squeezed enough to seriously consider further reductions, which they consider to have already been pretty significant over the last six months. So, it seems to us that the female market looks steady while males look weaker.

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