What happened this week: Week by week we are finding it more difficult to asses the real market situation. If it is based on the small window of our business the situation still remains pretty regular with a decent volume of sales and some tailwinds from the currency market. Since this is only one perspective, which doesn’t seem to represent the whole market, one has to be more cautious about the overall situation. We can’t deny that the stories and information we are getting from the markets around us are by no means as balanced. Everyday during the week we heard further news that markets in Europe are declining and once again it is pretty difficult to separate gossip from the facts and truth. However, one thing can be said for sure. Whatever the type of hide and/or origin, if one focuses solely on the European customer base, it is becoming increasingly difficult to balance the supply and demand and some sellers seem to be losing their nerve as the end of the year comes into view. As a consequence one was again hearing of pretty low prices mainly from the UK, Ireland, France and Italy which, in the majority, focus their sales on a European customer base.

As long as new options pop up daily from somewhere and tanners continue to be given the impression that there is an endless and abundant supply, the bargain hunting season will continue. Buyers in Europe set new low levels daily with their bids, although it is difficult to figure out how many of them were actually accepted. One can still speak of a two-tier market. The regular programmes with long-term relations are still running in a completely stable way with the price adjustments made according to the market trend. This customer base is also pretty busy and enjoying the tremendous relief that the lower price levels reached in euro terms over the past months have provided. One also has the impression that this circle has made it back to a better profitability level. Meanwhile, the non-regulars obviously do not have regular orders and are trying to keep their productions running with the cheapest they can get. In many cases one gets the feeling that they are rather enjoying gambling on fishing around when they purchase rather than seriously covering production needs.

In Asia the situation is similar. Regular accounts also continued to buy constantly this week and are following the shipping schedules tightly. The more irregular ones — mainly in the south of China and/or trader business — have almost disappeared and are struggling to meet their obligations. Cash seems to be pretty tight and effluent issues are also still a factor.

So, the market still remains divided and the excess demand we saw a year ago has disappeared. This has brought the market back into balance and raw material prices down to more realistic levels — which is certainly better for everyone. That we are now seeing buyers trying to overshoot, as sellers did before, is completely normal. The market psychologies still remain in place.

Sales were also pretty decent again this week and the short comeback of the US$ helped. Interest was again focused on dairy cows, but a few bulls also moved. Prices for males don’t make happy reading and still need a further correction at the abattoirs.

The kill: At seasonal and good levels which we expect to continue for another week before slowing down.

What do we expect: It is hard to believe that the market is going to move much until the New Year. Buyers will continue to bid aggressively trying to secure as much cheap material as possible for the first quarter. The falling kill will quickly lift some of the pressure. However, it still might take into 2008 until this is reflected in the market but it might be best to hold the market steady for a while to in order to regain confidence and give everyone a breather.

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