Shipments continued to exceed slaughter, showing how demand, outstripping supply, is pushing US prices sharply higher. Shipments, for example for the period ending July 30, totalled 688,400. Domestic consumption in the area of 20-40,000 hides should be added to the total. This compares to weekly slaughter approximating 639,000 during the period.
Should the economic recovery continue, and even if supplies get back to more normal levels, it could be just a matter of time before prices resume their ‘normal’ pattern. It should be remembered that the world  contains a great many more people, cars and leather furniture than it did seven years ago.
While not on fire, cows are still fully firm and we think that advances of $1 or so across the whole sector is on the cards. Look for advances in bulls, small packers and low grades as well. As in the case of steers, the cow sector is also priced  disproportionately to steers than the historical norm.
Doctors tell us that it’s good to be thin, but by the same token, it can also contribute to ill health if carried to an extreme. To relate this to the hide market, from a seller’s point of view, it’s good to have ‘skinny’ or very small inventories as this contributes to a
condition where buyers are always trying to buy what small supplies are available. While sellers consider themselves too skinny in supply, they hope to grow fat by waiting for higher prices to come.
This causes us to wonder what would happen to the market once supplies resume their
normal levels. Yes, packers love to hype that the kill is off 5% this year, but it was off early in the year as well when prices were falling and it certainly hasn’t reached cataclysmic proportions by any means.
We find demand very concentrated and thin. A number of exporters will admit that they have not had widespread interest amongst their customers. Yes, they can get higher prices, but only by a relatively few
tanners. This is not uncommon as prices rise in a normal
fashion, but even more so as they increase from day to day as seen of late.
The market can be visualized by looking at a pyramid. At the bottom of the pyramid, tanner demand is widespread but as prices rise and get near a top, like a pyramid, demand becomes thinner and eventually stops until prices retreat.
Our projection is for this to occur around the time of the Shanghai leather fair during the first week in September. We think that as processors, traders and packers head off to China and other Asian destinations for face-to-face meetings in the week(s) before the Shanghai event, they will find even more resistance to higher prices. If we’re right, this could lead to
a market peak and possible
limited downturn in and around the fair.
We all know that a market doesn’t go in a straight line forever and all bull markets (and bearish ones as well) eventually turn. While we don’t foresee this happening in the coming week, we sense the top can’t be too far away. To quote an old axiom, perhaps ‘the time to sell is when everyone wants to buy!’