Extracts from the SauerReport

The US$2/kg level lasted for another 60 days (May-June) until slaughter improved somewhat and prices started to decrease. Presently they are around US$1.65, approximately 20-25% above pre-meat export crisis levels. These fluctuations have caused considerable distress in the local tanning industry which has had to confront financial, commercial and labour implications of all sorts. It is hoped that the worst is over but the hope that Argentina will be able to follow Brazil and Uruguay in increasing hide availability has evaporated.

In Brazil, official figures show that the country doubled its leather exports between 2000 and 2005. In value this means from US$760 million to $1.4 billion. A remarkable achievement which is partly thanks to the export promotion programmes carried out by APEX.

News from the Shanghai leather fair speaks about price increases of about 5% for French bovine hides and up to 10% for calfskins. A report at the end of the first day said good interest, all prices firm, no big orders yet. Presently the high US hide prices are also having a strong influence on domestic Chinese hide prices, although prices might ease a little when the killing season starts in late October.

Implementation of the long awaited amendment to the Custom Book Practice is still not in sight. This is a real problem for export-orientated tanners. They are working in the dark. It is noted that China's hide purchases in the US have been far more modest in the second half of this year. All still to do with the Custom Book story which made tanners buy far ahead during the first part of the year.

In fact, an increased demand for quick shipments to China has been noticed in order to benefit from the customs books before they expire and import duties and VAT become payable. Sources state that more than half of the existing custom books must have expired by now. There is still no official news from the Chinese government about further developments.

The export business has been slow during the summer and it is expected that new export orders will be late this year. Domestic leather business has been average but considering the substantial increase of Chinese tanners' capacities, business in general has translated into a substantial increase of leather consumption in real terms. The European Union is still debating what anti-dumping duty should finally be applied to Chinese (and Vietnamese) shoe imports.

According to figures published by the Chinese Customs Office, the export of leather garments reduced by 21% in volume and 25% in value during June when compared with last year. Does this give some indication about the global reduction in popularity of leather clothing? Or did the Chinese lose part of their market to other countries (India, Pakistan, etc)?

European hide prices showed small increases over the summer. In Italy, tanners who needed to buy had to pay the asking price. At the end of July, Italian calfskin prices increased another 10 cents due to strong demand from the shoe industry but ox and steerhide prices remained unchanged over the past month (and longer). Earlier in the year, the kill was low because of the low prices for the animals offered to farmers but now it is because of reduced meat demand and increased cheap meat imports.

Raw hide prices in Spain have not changed over the holiday period. Tanners have started working at the same capacity as in July which, as some say, is not bad. At the end of July, a big tannery in Alcanena, Portugal, was reported to be experiencing serious payment problems. Hides were being offered at the same prices or slightly below those seen earlier in the summer. Wet-blue hides from Russia are now also getting too expensive, according to buyers in Italy. And in spite of the high prices, offers are even hard to get. One of the biggest, if not the biggest tannery in Russia, simply says it has nothing to offer at present.

The problems are the same: limited supplies of raw hides, firm prices, increased production costs for tanners and leather product manufacturers due to higher energy and transport prices. Finished leather prices remain under downward pressure as desired by the world's retail moguls.

In the US, decent sales were reported in early August but the most remarkable fact was the slaughter total in one week fell to around 600,000. This means the lowest figure for August in 10-15 years! At the end of August, one major wet-blue hide producer in the US reduced many of his prices by one dollar. In raw hides business, volume remained limited at the end of the month. Steer hide prices were steady or slightly higher. Cow hide, bull, kip and small packer prices were mostly higher than in early August. For cow hides, there was more strength in the North than in the South where, because of the drought, the kill had been quite severe and numbers of hides available were, therefore, bigger than in the North.

The US Department of Agriculture announced it will start to limit BSE testing to only 40,000 per year. It will be interesting to see how US meat buyers, who have already banned US beef in the past and are now in the process of re-opening the borders again, will react to this news. On a slaughter figure of over half a million per week, the number of 40,000 per year does not sound like a terrible lot!

At the end of July, UK heavy weights were softer in price due to the holidays and the weaker US dollar again. Lighter weights showed a more positive trend and were reasonably well sold for September already. At the abattoirs, prices remained solid as a rock. The general feeling is the market still seems strong enough (except for heavy weights maybe) to get through the summer holiday period without major price decreases.

In India, there has been good demand for cow lining from Hong Kong/China where this product has now found a permanent market. Buffalo upholstery trade has been brisker again but tanners in Southern India are now competing with their colleagues from the north (Uttar Pradesh and Agra/Kanpur) on the domestic raw hide market which pushes prices up. Buffalo lights have also shown good business. Goat and sheepskin trade slowed due to the summer holidays in Europe but continued on a limited basis with buyers in the Far East.

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