Artifical market fluctuations

The 'sizzle' of which I fondly spoke about in the last issue has just about fizzled from the Mexican hide trade. For what is certainly supposed to be the absolute best season of the year for the leather industry in Mexico, has truly left much to be desired during the past month. This situation is due to various reasons but primarily to an unlikely and very unfortunate game in which certain highly important and key producers, such as the big packers, are currently involved. And of course, it is only natural for hide processors, both large and small, to follow suit, to keep up in the footsteps of the almighty and all-knowing big packers. With November and, at most, two weeks in December remaining this year, it is highly doubtful the Mexican leather business will pick up dramatically, or at least with enough significance to end a difficult 2003 on a positive note for both cattle hide producers and leather tanners as well. Firstly, in early October, one of the three big packers chose to withdraw their weekly offering list one day after they had initially made them available to the international market. The following week, that very same big packer made available a similar offering list, however with one exception. All the same, in fact identical, selections and likewise quantities, were now exactly US$5/pc higher than the prior week's offering list. Was the overwhelming demand from the combined Asian, European and South American continents for USA cattle hides enough to justify such a move? Or, perhaps, did the recent Shanghai Leather Fair in September create an excess for orders that would cause this great demand in all selections of big packer cattlehides? According to market reports, both recent hides sales and export numbers do not indicate this. In fact, sources reflect quite the opposite, a deep quiet in the markets. And, this case is true on a global basis, not just in localised, perhaps depressed areas. In fact, on the flipside, rumours tell of various hide producers throughout Europe stockpiling their hides due to very poor sales. Secondly, the Mexican currency, which had strengthened earlier in the year, following the ousting of Saddam Hussein by allied forces in Iraq, suffered an unexpected devaluation of around 7%, which not only overcame the tanners by surprise but obviously caused a hiccup in the ability to pay for current hide shipments. Coupling this factor with increased hide prices, whether realistic or simply artificial, would equally create a very complicated scenario for both Mexican tanners and USA producers wishing to export their hides into Mexico as well. It is necessary to point out the currency devaluation came about as a result of a negative international credit rating issued against Mexico. Naturally this type of rating would bear a significant impact on the desire of foreign capital investing in Mexico. The fact is the country is exactly halfway through the tenure of the Fox government and little, if any at all change or improvements have been achieved. Both the party as a whole and the president himself are under great scrutiny creating doubt regarding their effectiveness. During my visit to Leon in the last week of October, one prominent tanner, a consistent customer for us, very clearly indicated to me most tanners in Leon had already purchased hides for the remainder of the year in early September, anticipating the same move cattle hide producers try to play at this time of year, time and time again. He simply said: 'Artificial market fluctuations don't affect us any more. We've learned to play with the big packers.' As to the currency fluctuation: 'We are accustomed to the volatility of the peso. This alone will not hinder us from purchasing additional product even if it is in excess of what our needs may require at the moment. However, just because we are a developing country does not mean we are not important to USA producers. Just look at the influence China plays in the industry.' Is there any doubt these guys will just not allow themselves to be taken advantage of? Ana M Veloso Barrett Hides Inc