What happened this week: These are exciting times. Drama in the financial markets continues and it is starting to spill over into the hide market in a big way. The situation is starting to get out of control at the moment. The media and politicians are getting excited about the possible impact of the present problems in the financial markets and the ‘R’ word (recession) is being used more and more frequently. This, and the daily news about further problems in the banking system, is adding to existing fears and people are becoming less and less willing to make decisions. This is weighing heavily on purchasing decisions no matter both at a private and corporate level. This is particularly true in Europe and is weighing heavily on market activity; trading is at very low levels.

The upholstery and automotive businesses are still the hardest hit and more and more stories about production cuts are circulating. This is having more of an impact on the prestigious hides in the very heavy end which have only limited use in the industry and have been dominated by a few buyers, who now need to pull out, for a long time. Production is currently running on only modestly reduced levels but, looking towards the end of the year, some people are afraid that some tanneries intend to close down by mid-December at the latest and are not expecting to reopen before mid-January because of production cuts in the automotive industry.

 If this is not enough, the cash squeeze is also starting to have an impact. Reduced insurance covers demand better cash positions, with quicker payments and without exceeding credit cover limits. In most cases this is not possible, and many suppliers are not only encountering reduced sales, but are also having to watch their exposures carefully. In the end, only a few tanners in Europe are running at the speed one would expect for this time of the year, which is generally high season.

The situation in Asia is a bit better and a bit different. Business seems to be better and, having been a pain in the neck for so long, the firmer US$ is helping the Europeans. European hides presently look attractive and Asian buyers are taking advantage of this. We believe that a fair part of the business in Asia is presently being done with Europe. Interest exists across the board, but mainly still for male hides for shoe upper leather. The real question centres on when the US market will react in order to stop losing more business.

Dairy cows are still more difficult, but at present price levels there is increasing interest. Everyone is still trying to hit the bottom and, with the constant weaker trend, buyers are tempted to wait longer. However, at least a few were willing to take the chance to replenish their inventories at present levels and to keep doing so if the market falls further. This has always been the right policy. As a seller, one either has to take interest where it is available, or to keep stock until better times. The aggregated number of sales was satisfying and this is more than we could have expected at the beginning of the week.

The kill: There has been a good jump in slaughter numbers all of a sudden and it looks as though this will continue in the weeks to come.

What we expect: There are no expectations at the moment. Every week we have to start from scratch again and there is no reason why it should be any different next week. Once again, a lot will depend on the news from the financial markets and the psychological reactions among consumers. Business and production will never fall to zero, so everyone needs to fight for a fair portion of the existing and present production and market demand.

Share this story: