What happened this week: The two-tier market continues with the situation for upholstery and automotive hides still proving very problematic. The situation in Northern Italy is deteriorating almost by the day and upholstery tanners in other European markets are not reporting anything much more positive. Orders are missing and there is no indication that things will improve anytime soon. As a result, it is very difficult to find and set a market level for cows today.

Prices are fixed by a few individual sales and there is still a notable difference between the levels talked about in Europe and the levels quoted in Asia. However, the major problem continues to be that sales in Europe only involve small quantities, so they do not really offer any market reflection other than to confirm that the upholstery leather business in Europe is in an absolutely appalling state. All hopes must now be focused on the return of the Asian tanners and in particular on Chinese domestic production and demand, which seems to be the only consumer market left that offers any hope. Considering that the production cycle in Europe is already entering the final cycle, we cannot expect much more for this season, which ends around May or June.

The situation for side leather is certainly better. Despite the fact that Italian tanners are also depressed in this segment and other tanneries are cautious and are feeling the effects of the global crisis, many are still confirming an acceptable production and order levels. These can enjoy the lower raw material costs while upholstery tanners, at best, can enjoy a decline in the average cost of their stocks.

There is no room for any positive news at present. Neither a positive outlook for shoes and leathergoods in the British media or a report about one of the largest German shoe retailers expecting growth for 2009 is actually being acknowledged. People continue to be depressed and maintain a negative outlook even when they know better. This is similar to the situation a year ago when nobody wanted to listen to the warning signals and everyone was determined to be positive and expect only good things.

However, no one can ignore the large stocks of cowhides scattered around Europe as well as the negative outlook for upholstery hides. This makes it even more difficult to understand why processors are still rushing to pay for overpriced hides at the abattoir doors. Some will never learn and, while groups marketing their own hides are dumping material into the tanneries, there are still some dreamers around who believe that it is important to own more (cow) hides these days.

On the other hand, it is also true that the number of speculative buyers is increasing; only their ideas are so low that they are neither workable nor reasonable as far as calculations are concerned. However, who knows what could still happen if larger stocks need to be liquidated one day for whatever reason and the vultures find their victims.

Sales were sporadic again this week and mainly focused on shoe upper hides. It is worth mentioning that, because of the sharply reduced kill, the market is now facing the paradox of salted stocks pressing on the market while there are now not enough fresh bulls to satisfy the existing supply programmes. Prices were still reasonably steady but we have absolutely no idea where the cow market stands today; there is too little activity.

The kill: The kill for males has collapsed. 

What we expect: We expect the market to be steady for males in the coming week, while there will still be trouble for cows. Prices for cows today are fixed on single deals and these can be miles apart so we cannot consider them to be fully reliable.

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