Extracts from the SauerReport

His arguments were as follows:

a) Consumption is very low.

b) interest rates are up and people pay more for debts/mortgages.

c) warm winter further reduced consumption of leather footwear and apparel. d) fashion does not require high quality only a nice look. e) what-ever the big fashion house propose in their shop windows will be sold if it is cheap. f) classic styles and classic mentalities cannot be marketed anymore.

In Kenya the RVF Rift Valley Fever has seriously affected exporters. This epidemic started in Kenya and has spread to Tanzania. The slaughter rate reduced since people were afraid to eat meat after hundreds of fatalities.. Now, people have begun eating meat again and there is a slow flow of hides and skins coming onto the market.

The shortage of hides has caused an increase of prices in the local market and the people who are booking fresh orders are asking for high prices (US$1.35 per kg for wet-salted hides) whereas the exporters still have orders booked at US$1.15 per kg.

In Tanzania, a huge price increase was reported for wet-salted hides (from about US$1.10-1.30). If true it puts these hides close to the price level of Kenya or Uganda while the quality is definitely not up to the levels of those hides.

In Kenya there are new proposals to restrict exports of raw hides and skins with a view to improve employment opportunities by opening or reopening the tanneries.

It is rumoured that the duty on the export of raw hides will increase from 20- 40%. This will come into force not only in Kenya but in Tanzania as well as Uganda.

In the meantime the market keeps firming. There are Turkish people in the country constantly asking for material (mostly w/s hides). This increases local prices now that shippers find another country willing to buy.

However, certain shippers are wary of the Turks. They don't know them and worry about their reliability, payments, regularity in the long run etc. A new market can always bring surprises (but one should not forget they can also be positive).

In Spain doubleface merino or merino first grade is now being offered to Türkiye at e12 cif but there is no interest. It is generally accepted that the stock of Spanish doubleface skins (good and bad) in Spanish warehouses is well over one million skins. Traders do not want to see the auction prices drop too much and downgrade the value of their own stocks. But how long can they remain without selling?

Up to e14 were paid for many of these skins. Following the standard calculation of expenses etc, these skins should bring e16 to be sold without a loss. Despite this offers of e12 are refused. In theory these existing stocks represent a loss of e4-5 million. There is little enthusiasm to buy even more at the auction so the number of buyers is strongly reduced. And these buyers use this present situation to bid the skins down even further. Eight euros have been mentioned and could be even less in a few months time. What do the guys with the big stocks do then?

The quality problem is still the same due to the warm winter. Few skins are suitable for doubleface while the lambskins for nappa are floppy and thin (and out of season now). The crossing of many breeds has also helped to reduce the previous known qualities.

Upon return from their holidays Chinese buyers have not jumped on Australian hides but take a careful attitude also watching the maybe 'toppy' US hide market. This cannot be said about low grades for which there is tremendous demand like everywhere in the world. These prices have exploded.

The Argentine hide market is quite firm, more so in heavy hides than lighter ones which is normal for this time of the year. Slaughter prospects for this year are difficult to gauge since the government intervention on the cattle market and meat prices continues and is still an unresolved issue.

Therefore, more and more cattle ranching land is being transferred to agricultural use, where soya and maize yields are extremely profitable. This trend will affect Argentina's capacity to hold its present cattle population of 55 million head.

Brazilian tanners have big orders and few problems in selling everything they have. But ever higher raw material prices and a weak dollar make it next to impossible to do so profitably.

Interest since the Anpic leather fair has been slow and Mexican tanners are more occupied with organising their shipments of pending business than with new business. Domestic hide prices are high but may have reached their top. The overall situation is not bad, however, and in spite of the sometimes higher dollar, tanners need the hides to fulfill their orders. Prospects are said to be good.

Official national organisations in Vietnam say leather and footwear exports increased by 23.6% to US$660 million in the first two months of this year. The increases are based on better sales to Europe. This is strange since Vietnam is supposed to be suffering from the punitive anti-dumping duties set up by the EU against China but also Vietnam. Does this mean the measure had no effect at all?

The Russian tanning industry is said to be booming. Wet-blue production is expanding fast and the need to import raw hides of qualities which the country does not produce becomes more and more obvious.

Over in Croatia there are some Turkish buyers in the country looking for lamb and also cows. Some cow hide business in the region was concluded. No changes in prices on calf and baby beef hides have been reported. Italy is very calm and possibly waiting for prices to drop.

In Saudi Arabia, business shows slight improvements with more demand for garment nappa. Also shoe leathers and all types of bovine hides are doing quite well now. Doubleface skins are called bad business. A number of sheepskin prices have come back a lot from levels where they were for a long time.

The Egyptian market is very unstable. Raw hide traders are practicing a price challenge among themselves. Some of them are supported by tanners who are against wet-blue hide exports. They are driving for increased prices to prove their point of view (create wet-blue export prices that nobody abroad will pay).

Consequently market activity is practically paralysed. Most of the tanneries are waiting to see whether to buy raw hides at such uneconomic prices or to wait and see the outcome of this action. Others believe the artificial price increases will not last for long and the market will restore its stability in about two to three weeks.

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