What happened this week: A pretty strange week has come to an end. Around the globe a number of holidays were taking place. The month of Ramadan drew to a close and in China most people and enterprises took their October holiday. Holidays took place in other Asian countries and even in Germany people had the Friday off work. At present, hardly anyone is focusing on the hide and skin markets; people are fixated by the financial markets and are simply waiting for the next incident to take place. People have stopped counting the rising number of bailouts designed to prevent further financial collapse.

Financial strife has been fairly regional in the past, for example the crises seen in South America, South East Asia and Russia during the last few decades. It has now become global and anything could happen anywhere in the world. Not knowing whether the bank that is lending you money or holding your deposits will still exist tomorrow is not a good basis for managing your business or making decisions about consumption.

‘Big ticket’ items have been badly hit and furniture and cars linked to the leather pipeline are suffering dramatically. Car sales are suffering all over the place and the news we are getting from upholstery manufacturers is not encouraging either. It comes as no surprise that people are postponing purchases under the present conditions.

In such circumstances, we were not expecting anything this week and this was confirmed in the first half of the week. In the second half, a sudden flurry of interest was seen and some business was even completed. The steady US steer market and the sharp gain of the US$ made a big difference here. With a final exchange rate close to 1.37, the weekly rise was almost 4% and offered a number of opportunities for sales.

To our surprise, Chinese buyers were present even though it was anticipated they would be on holiday. Unfortunately, the interest was again almost entirely focused on the ‘usual suspects’: ox/heifers and bulls. Interest for dairy cows remained almost nonexistent with one exception and the market is still searching for a new base and a return of interest. With the sharp drop in prices for Brazilian hides and the serious crises in Italy or, more accurately, in the furniture trade in general, it is hard to predict change for the better any time soon. Today it is less a question of price than of fundamental demand.

Another surprise was the round of inquiries for heavy bulls received towards the end of the week. These hides have presented a big problem because of the downturn in the car industry and the real reasons behind this increased demand are still unclear. There may be some political buying around or it could just be the usual sniffing around that happens in this type of market situation. Sales were insufficient again this week again, at least where the high kill of cows is concerned, and prices were fortunately stable again with the help of the US$.

The kill: The kill was lower again this week and the holiday on Friday did not help. We find that hide weights are still well below average for this time of year. It may be that worsening weather conditions will support the kill in the upcoming weeks as we are now heading towards peak killing season for the year.

What we expect: We still cannot trace any indication of a clear trend and without a recovery in the upholstery hides business it will soon be difficult to lay a real floor under the market. If the US$ extends its gains it could offer more cushioning. However, without more stability in the financial markets a change for the better will be difficult. The general shortage of cash is still a very heavy threat to market conditions.

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