Extracts from the SauerReport

Regarding Foot and Mouth disease in Brazil, a Brazilian publication states that de-boned beef can again be transported from Mato Grosso do Sul to São Paulo and that slaughter is set to increase again. This is, of course, a far cry from other countries re-opening their borders for Brazilian meat but it is a step in the right direction. It is estimated that FMD could cost the Brazilian meat export trade between US$400-500 million this year. We can be assured the Brazilian government will do everything to get things back to normal as soon as possible. In the meantime certain suppliers have increased their wet-blue hide prices (by about 5%) but the same hides can still be bought on the spot in Europe for less. There is also plenty of good quality wet-blue from Eastern Europe available from around 94 cents. And these have no humps and no brands!

Although tanners in China who produce mass volumes of furniture leather for export markets depend for more than 50% on large Brazilian wet-blue hides, the present FMD problems do not really worry them too much. Demand is not strong in the sector and there are still plenty of stocks available to satisfy their needs.

A number of shoe leather buyers set off to Bologna from China which reconfirms the good demand for shoe leather material noted at Lineapelle but also points out the price problem. The Chinese are not prepared to pay more than $2.20 per foot for the best kip skin leathers which are impossible to find at this price. Chinese domestic kip skin prices have gone sky high and reached their highest level in three years. Importing off the regular trail is financially attractive but more and more tricky. Recently Chinese sources reported the sentence of one very big leather 'smuggler' from Guangdong. Some say it concerns a death sentence. Although this is not confirmed it is a strong enough story to make others think twice.

Contrary to the mostly positive news heard from Lineapelle, only disappointing reports have been heard about Tanning Tech along with suggestions that it be held only every other year. It is said there were fewer machines, smaller stands and less visitors. It was already known that big names in the chemical sector no longer exhibit while others reduced the size of their stands. This is not without risk for Lineapelle since many tanners only go to Bologna for the machines.

If there are none or far fewer machines to be seen they might change their minds and stay at home. The existence of all leather fairs in Bologna is also threatened by the exorbitant hotel prices during the exhibition period and the traffic jams which also made people decide to call it a day.

The lamb kill in Spain is very low now and skin prices unchanged. Many tanners were present at Lineapelle in the hope that they might improve their order situation. At present it is even difficult to plan one single week's production ahead for many of them. Fortunately, a lucky few are doing very well.

While hide prices in Argentina are still unchanged, those for splits have increased and are now considered very firm. However, unless a miracle happens at Lineapelle it is strongly believed that hide prices will soon fall (apart from whatever influence the FMD in Brazil may have on Argentinian prices).

Quotations are now 5% above their free market value because of the special agreement between the government and the tanners' council made 90 days ago. This agreement is now expiring and the rules of supply and demand will take their place.

The provisional closure of the Yoma tannery has also affected the market. The 7,000-8,000 hides the tannery was working on a daily basis are now absorbed by other tanners. It is still unknown if Yoma will ever re-open and, if so, at what speed and volume.

Rwanda is feeling the increased demand for goatskins and if buyers want the goods they have to pay the price otherwise the shipper withdraws. Sheepskin prices are weaker but still sell at a reasonable price in wet-blue in Europe. Hides are stable.

Hide prices reduced in Kenya and Uganda which places them among the few countries in the world where hide prices did come down. Not surprising however. All in the trade will agree this should have happened many weeks ago when the Chinese stopped buying. It is, therefore, no more than a late correction. Sheepskin prices came down as well while goatskins remain very firm.

Nigerian wet-blue and crust prices have hardly changed over the summer months. The quality of the raw skins is low now for seasonal reasons. The better skins should soon start to come and the best time to judge the raw values will be in January/February. In Italy we notice more demand for Nigerian goats and a decreasing demand for sheepskins.

Hide prices in France have now reached levels where it proves extremely difficult for the trade to conclude new business. Demand for French hides (Europe's biggest hide producer) as a product remains strong. Selling is not the main problem but finding hides at the abattoirs at the right price is.

Why do European hide prices not come down? The answer might be found in Italy. Upholstery tanners there are doing better now since they are making qualities for which there is demand but which cannot yet be produced in the right price/quality relation by the Chinese. And price alone is not enough in this case.

Other reasons are the improved dollar-euro relationship since the summer holidays and the fact that we are right in the middle of the upholstery leather season. In short: time, quality and exchange rate are in Italy's favour. The exchange rate, especially, plays an important role.

Contrary to what we have seen for many months in Italy, the upholstery sector is now doing better again. Shoe and fashion leather makers (leathergoods) are also in the market for hides. Garment leather production in Italy remains in the doldrums and that may remain so for another year it is said.

We all remember the BSE crisis where many families changed from eating beef to eating fish or poultry. This time we have a poultry disease which according to the media couuld become a very serious problem. It would be logical to presume that now people are moving away from poultry to eat more beef (or fish) instead. If so, we should see slaughter and hide availability increase and maybe an influence on prices as well. Not impossible and something to watch!

Recent shoe fairs in Mexico brought satisfactory results and a more positive attitude. Tanners are now eagerly watching where bargains can be found and paying special attention to the prices of American cow hides which could come down further any day (but could increase as well).

Asian business is not really showing any new developments. Volume keeps moving to China but not as before and the country remains disappointing for many. Also Korea looked less present on the market but improved in the last two weeks. Hide prices everywhere remain more or less stable. The weaker tone for cows persists but without really showing lower prices again. For light hide types, kip and calf demand remains strong and in certain cases demand outstrips supply. Those who believed this would lead to higher prices were proved wrong in most cases. Higher prices are only possible in exceptional cases, mostly quality related. For standard items it is still a dream. The sheep and lambskin trade still did not take off but prices in New Zealand improved. Goats remain hot stuff.

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