Extracts from TheSauerReport

Together it tends to push prices up while there is still next to no chance to obtain higher prices for finished leather. Hence while hide sellers may be forced to increase their sale asking prices, chances of actually obtaining more still seem poor today. But who knows? It could be that speculative buying only pushes raw stocks from the abattoirs to the traders and tanners warehouses. Good for the abattoirs though and maybe time will tell if they were good speculations!
The upholstery business is in its slow period as the winter shoe season is coming to an end. European tanners are preparing for what will most likely
be longer than usual summer holidays.
European hide sellers to Asia are hampered by the low dollar. European abattoirs do not want to see hides staying in the warehouses through the warm summer months.
The American hide market is now definitely firmer but for reasons that are not always  clear. The big question now is how long will it hold. Is it temporary or are we on a steady way back up? There must be hide sellers around who have less confidence than their colleagues. It was also said this week that the market was more set by the smaller than by the biggest buyers.
So why suddenly there is action in America is not really clear. Fact is that the market is presently no longer operating at the very bottom of things but a little bit above. It could stay there a while, rise further or drop back.
USDA export sales figures for last week are again enormous although below the million/plus figures of the two previous weeks. While many have always had doubts about the correctness of these figures, your editor definitely one of them, it cannot be denied that a lot of hides were sold during the past three weeks.
Shipment figures, far less sensitive to hanky panky reporting than sales figures, have averaged over 700,000 for raw and wet-blue together these last weeks, which is higher than the average slaughter during the same
period. The conclusion can only be that more hides have left the country than were added and thus stocks have declined. A fair explanation for higher prices.
Although the world press almost unanimously only writes about the 40% reduced car sales in America and the horror stories about General Motors, Chrysler and Ford, we should not forget that car sales in all of Europe combined are about the same in absolute figures as those in the US and that the reduction in sales on the European side of the ocean is just as serious. Car sales in Europe dropped for the twelfth month in a row.
Continuously rising unemployment almost everywhere is the biggest concern. More people with less money means less people prepared to buy our leather goods. It is as simple as that.
Why then does the hide market go up? There are some explanations which each answer part of the question:
• over the past six months
tanners tried to have as little stocks as possible. This means that even the smallest increase in demand and orders immediately creates a need for raw material and usually quick deliveries. Not a strong negotiation position for a buyer.
• lower kills
• speculation
• when things started rapidly to go wrong last fall, a lot of activity came to an abrupt stop: a shock reaction. Now we are past that initial shock, we know the problems and have started to work ourselves out of the mess, thus engines are slowly starting up again, activity increases and we are back to item one in this listing.
The biggest slaughterhouses in New Zealand are now closed. The lamb kill is almost complete (90-95%) while the sheep kill is already over and done with. Shippers are having serious problems shipping pending contracts and we have to wait seven months before the next big slaughter period takes off.
Argentina is six weeks away from mid term elections and the country is at a standstill with rampant inflation (average 25-30%) unemployment increasing to over 12%, negative growth, and 30-35% export and import decreases compared to 2008.
The drought unfortunately continues and there have been no rains so far this autumn which means that the recent grain harvest showed an average of 30-35% yield decrease and the new wheat sowing cannot start due to lack of soil
humidity. 
Argentina may face the incredible situation where next year it will have to import wheat and possibly meat as well. The cattle population has shrunk to 48-49 million head and the sacrifice of cows and light animals continues because of the drought coupled with the totally unattractive fixed official meat prices which make the ranching business uneconomic.
Next year’s slaughter is estimated at a maximum 10-11 million, down from 13-14 million. However, this may not be a problem for the tanning
industry if leather demand doesn’t increase considerably. Even on a global basis 3-4 million hides less will only make a difference of between 1-2%.
At present Argentine tanneries are working at approximately 70% capacity. Wet-salted hide stocks are at an all time record high and some raw hide exports from Argentina are reaching foreign markets again in a regular manner. For quite a few decades we have hardly seen any raw exports at all.
The leather industry in Kenya, which nearly collapsed in the mid-1990s, is facing a fresh challenge due to the shrinking international market, says Mr Njoka, chairman of the Tanners Association of Kenya. The global crisis has hit the leather industry hard. Tanneries are working below capacity after the markets in China, India, Hong Kong and Italy went down.
This was a major blow for a sector that was put on a recovery path following the introduction of fierce duties on the export of raw hides and skins.
Players in the industry now say that the international market for leather has shrunk, forcing more redundancies and the scaling down of production.
Njoka said they want the government to push up the duty to 60% and seal loopholes used by unscrupulous traders to sell raw skins across the borders.

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