What happened this week: We could have copied most of last week's report into this week's. If we wanted to be whimsical we could say that the weather is too beautiful to bother about business and enjoying the best days of the year is much better than bothering about hides, skins and leather.

Well, we can't really assume the weather is the same all over so there must be more to this. The fact is that this week sales activity was down to the minimum. Traders only did what needed to be done and the few sales that did take place were like pulling teeth.

Tanners are still trying to drive prices lower, which is not reflected at the abattoirs. Falling hide weights and the low kill do not allow much flexibility on selling prices and this adds to the market situation, which could not be more typical of the time of year.

Discussions and negotiations are dominated by buyers' and sellers' opinions that are more contrasting than ever, with tanners convinced that the raw materials market should relieve the pressure they are presently facing from the finished leather market. With pretty little activity noted in Europe most of the interest was focused on other developments. At the beginning of the week the extended rally of the US dollar made the headlines and provided hope of support for the hide market.

Levels above $1.50 to the euro are still no reason to celebrate for tanners or for raw material exporters, but the equation has shifted a bit with a gain of almost 5% over the last two weeks.

Also of interest were the export sales figures from the US, which were released on Thursday with more than 900,000 hides sold for export over the week. There is little confidence in the reporting any more and the timing of the declaration can be questioned, but the trend is certainly correct. In the end one has to believe that with the sharp fall of the dollar and reasonable price levels for the hides, the US has certainly sold a lot of hides in the first three months of this year. This would also explain why there is little activity now.

Tanners with leather orders in hand have been able to convince sellers to sell far ahead and so they were able to hedge their leather calculations for a long period (a season). Since this is only something for the really big players, the others need now to decide what this possible scenario could mean for them.

The situation in China outside the big players remains difficult. Tanners feel the pain of rising costs and falling export demand. Operations are also being hurt by tight environmental controls that the government is imposing in view of the Olympics. This is taking the form of spot controls, but there is also a large number of reports about tightening controls of raw material imports for polluting industries.

As far sales were concerned prices were steady for the limited numbers and for the few export sales fractional gains were made on the currency. We would however say that the quantities were not market representative.

The kill:  Still on the decline in particular for heavy weights. With a holiday on Monday supply remains not really a market problem. Good weather is capping any expectations for a change.

What we expect: We don’t expect much for the near future. Following the normal cycles we should expect the next flurry of business more towards the end of May or even early June. The situation in China remains open to the impact of the preparations for the Olympic Games. Production sites close to the events will probably be less active with consequences for demand. For prices we still don’t expect changes, other than external influences (currency). 

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