Extracts from the SauerReport

The funny thing is, however, that such news about improvements is heard more from foreigners than from the Italians themselves. Many of them deny any improvement in their business at all.

Sampling of new designs for the shoe and leathergoods sector is plenty but still has to turn into real trade. Also here, interest is concentrated on the better qualities.

Worldwide, cow hides remain stable to firm while male hide types continue to show weakness in the USA (until May 13). This weakness is expected to hold a lid on further expansion of prices in Europe. It makes sense, of course. Once European or other hide prices get too close or bypass US prices, buyer interest will quickly switch again. There was no sign of any firmness in America until May 13. Cow hide prices there seem to have stabilised and did not rise further.

The ten new EU countries are being watched closely by the meat packers as they may bring change in their business. Cattle from major producing countries such as Poland may start moving around and also influence the meat trade and thus the hide trade. This might not be tomorrow but it might eventually change hide characteristics (animal types, quality, weight, size) in certain origins in the future.

Demand for lambskins of Central European origins (Bulgaria, Greece) is low and prices dropped. This could have to do with the limited purchasing activity by Türkiye.

At the recent Brussels hide auction, all selections increased by 5-10% in price and all were sold.

Asia is still showing a preference for low grades. The importance of price above quality may cause a structural change in traditional price differences between first and second qualities of raw material.

It seems the trade is less prepared to pay the same premiums for better qualities than we have been used to for many years. Of course, there will always be specific types of hides or skins (calf, top suede skins, heavy bulls from certain origins etc) for which there are no alternatives and which will justify a premium for a long time to come. But for the majority of material, it may turn into a more permanent kind of downgrading of traditional premium prices (as between different slaughter places in specific countries, and between natives and butt branded etc).

This also explains the strong demand for splits, low grades and other lower priced raw material. Logically, these prices have been firm and still are. However, we also see that even splits and low grades have a ceiling and must operate within a range set by the final leather (product) prices. Many believe these ceilings have been reached and no more gains in even better prices are to be expected.

As a matter of fact certain origins, mainly North and South American, already had to accept a few cents less here and there. Sharp drops are not expected, however. Demand is good enough to guarantee maximum price levels for some time to come. The continuing problems with tax and customs authorities in China are another reason why demand from that side of the globe had temporarily quieted down. Some buyers wanted to stay out of sight for a while which helped to take the top off certain split prices for the moment.

When Lineapelle opened, there were lots of people and long queues to register. Many non-Italian tanners were told they could not register to get in. Visiting foreign tanners have now joined the list of those not welcome at Lineapelle and were refused after having been standing in the queue for over 30 minutes. Not the best way to make friends with foreign visitors (who could be potential buyers of wet-blue or crust from Italian tanners). However this trade is not quickly discouraged and most if not all worked their way in by changing 'profession' one way or another, with help from friends inside or by entering through the SIMAC fair. It seems the organisers realised they had possibly gone too far and later in the afternoon restrictions were eased.

Uganda is increasing export tax on raw to 30% and China may no longer allow or put new restrictions on imports from east Africa as from July.

The shortage of cash in Europe limits possibilities for many players to buy the present raw new season lambs. Only for the better qualities such as south African and Spanish entrefino do we note buying activity for next winter's production. For baby goats, there is no interest at all while some sellers hold big stocks of these skins. Türkiye is taking it easy on the buying side.

Talks about financial problems in Italy are increasing. Shoe manufacturers not paying the tanners forces this group into a precarious situation. Rumours say three important tanneries in Ponte a Egola (Italy's sole/veg leather centre) may close down between now and the summer holidays.

In Argentina, a shortage of heavy hides pushed prices up by 10 cents per kilo. Light hides do not show any significant price changes. Neither do crust and leather prices.

The European Union published its latest figures on the Union's (EU-15) animal population earlier this week.

Cattle population continues to fall slowly, down 1.4% from 2002. Total is estimated at 77.4 million or 6% of the world population (1.37 billion according to FAO). Changes range from -3.4% in Finland and Denmark to +8.9% in Greece.

Cattle production in the EU-15 came down as well. A fall of 1.2% for 2004 is estimated. Production will then be just over 26 million head. These are the animals that actually reach the slaughterhouse which means for the leather industry: 26 million hides!

Sheep production is down also. In 2004, it is expected to drop by another 1.2% to 62.5 million. This reflects the situation in the three main producing countries Spain, UK and France.

Goat production will decrease only marginally to 7.7 million head this year. The largest producing country in the EU, however, which is Greece, predicts a rise of 1.1%. Greece produces 56% of all EU goat! Pig production, which looked to increase since early 2002, did not continue on that road. A fall of 1% is expected this year. The largest decreases are expected in Ireland -5.9% and Netherlands -4.4%. Increases are foreseen for Finland +3% and Germany +1.1%. Total EU production for 2004 is set at 202.5 million.

Ron Sauer

ronsauer@wanadoo.fr

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