Reflections on The Week

Siege Mentality In European Cattle Hide Market

Activity continued to be restrained across much of Europe on cattle hides this week, mostly for the same reasons as have been nagging the trade for several months. The only real shift of late has been the coming of summer and its impact on impending European tannery shutdowns. This has gradually modified buying and selling strategies in subtle but significant ways.

A firm tone persisted in most hide categories as the shortage of raw materials once again became a key topic of discussion. And for good reason. With the normal summer closure of tanneries in southern Europe now only three weeks away, negotiations were underway to contract packer hides with delivery times spanning into September. The prices were mainly steady but the affect on the rest of the market was generally firmer.

In fact a major producer in France was said to have sold some categories even into October this week. Other local suppliers were solicited with inquiries but mostly held out in order to digest what was going on. The need for hides was also evident in other western and northern European countries, most of which had relatively lively interest for the few hides available. Abattoir prices, at least for the week, did not appear to budge and slaughter levels across most of Europe remained below normal. With hide weights reaching their lightest averages of the year, equations for dealers became even more complicated than usual.

Another factor contributing to global market firmness was the very large U.S. cattle hide export sales total from one week ago which was released yesterday. 691,900 raw hides plus 181,900 wet blues meant a grand total of 873,800 U.S.A. cattle hides were reported sold abroad for the period. While the actual sales numbers seem inflated to some, others explain that traveling packers and traders during the last several weeks put off reporting their sales until they returned home last week. Whatever the case, the impressive number supports the firm trend seen in the North America as well as in Europe and elsewhere around the globe.

The fact that over 50% of the hides listed in the above report are destined for China underscores just how much China continues to drive the market. The seemingly unquenchable appetite displayed by the Chinese has also served to augment the shortage of available hides needed to fuel whatever business is going on in Europe. European hide exporters reported decent interest from China this week, too. Although some exporters had already booked enough containerized sales beforehand to bridge the local European holiday closures, others took advantage of the spill over interest this week, mostly at more money than previous sales, and extended their sales postures accordingly.

It now appears that the tone and price of better quality European hides will remain tight in the weeks to come. Under-bought tanners are going to have to face unfavorable levels on most selections well into summer. Only certain female categories and lower quality selections are seen as vulnerable to the lull typically experienced in July and August.

Upcoming European Trade Show Events

Leather and Shoes	Kiev, Ukraine	July 20-23
Pure London	London, UK	Aug. 1-3
Moda Footwear	Birmingham, UK	Aug. 8-10
Leather and Fur	Kiev, Ukraine	Sep. 14-17
Le Cuir	Paris, France	Sep. 14-16
MIPEL-MICAM	Milan, Italy	Sep. 19-22
Modacalzado-Iber.	Madrid, Spain	Sep 24-26
Lineapelle	Bologna, Italy	Oct. 12-14
Tanning Tech	Bologna, Italy	Oct. 12-14
SIMAC	Bologna, Italy	Oct. 12-14

This Week's Currency Corner: U.S. Dollar, Euro And Pound

	USD-EUR	EUR-GBP	USD-GBP
Friday, June 25	1.231	1.215	1.495
Monday, June 28	1.233	1.222	1.506
Tuesday, June 29	1.219	1.235	1.506
Wednesday, June 30	1.228	1.221	1.499
Thursday, July 1	1.233	1.215	1.498

Industry News Bullets

UK- Leather And Footwear Among Culprits In Sales Drop

In the latest high street report for June, sales have fallen slightly overall. “Footwear and leather goods were the worst hit,” said CBI adviser Ian McCafferty.

Netherlands- Troostwijk Hosting Leather Machinery Auction

Amsterdam-based auction company, Troostwijk, is running an online auction for tannery finishing machinery formerly used at Finilux BV of Waalwijk. The auction ends September 8. Visit: www.troostwijkauctions.com for details.

Belgium- Indian Leather Business Hurt By Euro-Crisis

Indians are bracing for a serious negative impact based on the current Euro crisis. A stronger rupee makes indian products less competitive while EU austerity measures will likely curtail consumer spending. EU consumers currently buy 62-65% of all Indian leather exports.

Germany- Demand Favoring Luxury Cars

According to a news report, rising demand for luxury cars has prompted Mercedes-Benz, Audi and BMW to hire temporary workers and additional shifts. All three of these companies reported double digit gains in May.

Italy- Huge U.S. Weekly Exports Dominated By China

China accounted for 57% of last week’s 691,900 U.S. raw cattle hides sales. The only European participation was from Germany with 1,700 pieces and Italy with 400. Italy did manage a respectable 20,700 wet blue hide purchases out of the 181,900 piece overall total.

Germany- Adidas Signs With Pou Sheng In China

Adidas signed an agreement with Pou Sheng International to help in its efforts to localize design, production and sales of its high-end Reebok sports brand.

Raw Hide Markets Across Europe

UK, Irish Ox/Heifers Fully Steady-To-Firm

More follow up business mainly between the Chinese and the English shored up the market for UK and, to some extent, Irish ox/heifer hides this week. Although the interest was not particularly robust, it was solid and not limited to Asian clientele only. By the end of the week it appeared as though at least as many hides were sold as produced.

Butchers felt a bit more of the ‘trickle up’ and were able to hold pat with stand on prices for yet another week. This was more easily achieved this week than last with the additional interest filtering in. Slaughter levels were also less than satisfactory, which also helped abattoirs resist any down bids.

As has been the case more often than not during the last year or so, China provided the key support this week, paying nearly $80.00 CNF on the top end for UK 36 and ups. We received reports that both $79.00 and $79.50 were done in multi-container deals. Irish 36’s saw moderate action at $75.00 CNF main Chinese port. Others held for $76.00.

Other business uncovered this week saw UK 31’s selling also to China at $75.00 CNF.

The ground work for the above prices was laid by increases seen most recently in North America on various fleshed Texas and branded steer selections. Sales this week concluded to Chinese tanners eclipsed $80.00 with a top on normal seasonal averages of $81.00 CNF. This was significant because tanners there had vowed not to pay more than $80.00 a month or more ago when they targeted their next price point of $75.00, a level that never came to pass.

Back in Europe, sales were more difficult and the market a bit thin. However, we heard that producers were able to sell lighter weight averages locally for decent money. UK 26’s were dealt in one instance at GBP 1.35 per kilo ex yard. Irish 31’s brought 1.25 delivered Italy in another sale, which was fully steady on the top end of our price guide.

Forecast: The drama with the above sales is that they are still not deemed profitable for the processors, though close when calculating the related abattoir cost. However, just as tanners are having to choose between operating at a slight loss or not operating at all, the processors are faced with a similar plight. Given that abattoirs are not going to let up on their levels for at least the next couple of weeks or so, at least processors are now in a position to press for more money at the tannery level. Are they going to get it? We anticipate that minor advances could be forthcoming, at least in Sino trade.

European Cow Market Stuck In Narrow Range

Female Hides Report

Click on chart to view underlying data.

Trading was generally mixed this week in what was deemed a very complicated and confusing scene. We understand that some of the larger cow tanners in Italy concluded programs with abattoirs on heavier cow averages covering the month of September. While we were not privy to the exact prices paid, we were told that the level was essentially ‘steady’ for the wholesale market. This could mean approximately EUR 1.35 on good volume for French 32+, as well as for North German or Dutch 25 and ups.

This left other sellers to contemplate how to manage their own sales. Several with whom we spoke today mainly refrained from participating. However we noted that everyone had at least some tannery inquiries to consider. The interest appeared to be balanced between European and Chinese customers. Asian appetite was less elastic than what few pockets of business sellers were able to put together within Europe.

While Chinese bids came in for medium weight averages at $56.00 to $58.00, there were more interesting truckload deals to be had within Europe itself. For example, we heard that a choice French production of 32 and ups sold for as high as EUR 1.55 delivered North Italy. The same producer claimed he sold his lights for EUR 1.65 NIT. A competitor says the market is 10 cents less.

We also heard that a small quantity of South German 30-39 kilo cows sold to EUR 1.50 delivered tannery.

The Brazilian wet blue TR 1 market continued unmoved during the last five trading days. Offerings seen at mainly USD $1.30 were bid at between $1.20 and $1.25 and were mainly rejected.

There was also interest in North American plump cows, both branded and native for delivery after the holidays. Italian bids on fleshed native cows weighing 48/52 lbs. placed in the low $50.00 area CIF were countered at several dollars higher. Similarly, bids were seen on 50/52 lb. fleshed U.S. branded cows at $46.00 and also countered accordingly. It was not known if any of this business was ultimately written.

Forecast: Despite the activity noted above, popular opinion is that cows, in general, are still vulnerable to eventual declines. Although cow tanners are reported to be low on stocks, their business is also suffering. Facing lousy or no profit margins, most are expected to continue to buy only hand-to-mouth in hopes of creating some form of downward price momentum. We feel, too, that some concessions may be made on the part of sellers, something we feel is quietly happening even now, but that the process may be slow and begrudging.

Veal Skin Lacks Motivation

The veal skin market was extremely quiet this week. Sellers had postured themselves quite well heading into the weekly trading period and generally did not need to offer. As such they simply allowed any demand to come to the surface on its own.

As it turned out there were not many bids to respond to, especially of the caliber that would motivate sellers to book additional quantities beyond their already elevated price points. It was also interesting to note this week that equivalent weight average North American Provimi kip skins were also dormant for a second week in a row. There was no activity reported this week and no export sales reported for last week.

Given the dearth of activity in this niche category this week, we are maintaining our price guide levels from those of last week.

Forecast: We sense that prices have reached a plateau on a relatively high plain for the moment. Tanners do not find it in their best interest to press the level upward by bidding against themselves without legitimate offers placed in front of them. Producers, for their part, are busy processing orders and salting material which they feel they can easily sell if they wanted to. The conclusion is that a stalemate is in progress.

Bull Hides Press On

Male Hides Report

Click on chart to view underlying data.

Prices continued to bump the ceiling of what tanners feel compelled to pay even if in a number of situations these levels are already unprofitable. However, producers were undaunted by any resistance.

Monthly auctions were inconclusive in some countries but certain abattoirs made their deals with automotive tanners which locked in firm levels for the producers but also ensured much needed and desirable source product for car upholstery. In one such case a substantial abattoir is said to have committed his male hide production through September.

Again, other negotiations did not appear to be set in writing as of today but we did hear a few prices where industry players said business either was concluded or could be done. South German 40 and 50 and ups were pegged at EUR 2.05 with initial producer indications as much as 5-10 cents more. North German 40-49 kilo bull hides could be sold for EUR 1.70 according to one report and EUR 1.75 as pegged by another. A French dealer said he sold his heavy bulls at EUR 1.75, also delivered.

Although the better European bull hide selections have been totally out of reach of the Chinese market for months, there is still a subtle support on male hides in general based on persistently good auto upholstery and shoe business in China. This has shored up demand for lesser steer-type selections and European ox/heifer hides at more affordable prices. Europeans also continue to contribute to the firming trend seen in U.S.A. fleshed heavy native steer hides which are now asking between $84.00 and $85.00 delivered European tannery. Bids of $82.00 were rejected this week.

Forecast: The relentless firmness in bull hides has been the backbone of the entire bovine complex ever since they hit rock bottom 14 months ago. Where as further increases from this point on will be hard to forge without serious finished leather concessions by car makers, we fail to see any let up in the related raw hide market.

Looking Ahead (Commentary)

Fishing For Customers

I have never been a great fisherman, although in my younger years I used to enjoy outsmarting a pike or a trout. There were different approaches, techniques and equipment one used for various types of fish in their diverse habitats. Although I could catch an array of different types of fish using a simple hook and worm, my chances of success were greatly enhanced if I seriously studied the habits of one specific quarry and applied that knowledge accordingly.

That “quarry”, that specific variety one might wish to capture is analogous to what we in hide and leather business would call our “target market.” A trout fishing specialist might be the equivalent to a certain niche leather salesman who is aiming only at a narrow spectrum of the entire leather world. He might be the top end veal skin leather guy who is only ‘fishing’ in small, isolated streams for an elusive, but very prized customer.

Fishing professionals will offer hundreds of ideas how to catch a trout, for example, but they are all connected to one basic principle: you have to think like a trout. This is the key to sales of any kind. What is the nature of your customer? What type of environment does he thrive in? When does he tend to “feed” or want to have his buying appetite satisfied?

We are living in a very sensitive consumer environment today. Are you aware of what times your customer is most likely in his office and not in a sales meeting? If you don’t know his pattern, ask him. Tanners also don’t want to buy hides if they are in the middle of sorting leather for their own customers. Most customers don’t want to be bothered when they are eating lunch or preoccupied with routine management duties. The notion here is to know your customer’s environment and be sensitive to it.

Knowing the personal “hot buttons” a customer may have is also crucial to successful angling in the hide or leather business. In other words, these are specific manias or focus areas a customer may obsess over. One tanner might fuss over having very uniform hide weights and really scrutinize how tight the weight range of his product is coming into his plant, but he might not be so keen on grain quality. The next guy might be just the opposite, fighting tooth and nail for the best grain he can obtain, but quite willing and able to accept a wide range of weights in his hide deliveries.

I had a customer who hated salt in his shipments and he complained bitterly if there was too much salt included on his pallets and among his hides. After fighting what I felt were a few frivolous salt claims, I finally told the source plant to stop putting salt on the hides (which they were doing in order to ensure no hair slip) and the customer has been fine ever since. The hides were exactly the same in both cases.

In today’s extremely stressful market with margins so pinched for everyone, even the slightest difference might just make the difference in customer loyalty and happiness. Knowing and tending to the specific nature of your customer might just be what keeps him coming back to you instead of your competitor. Everyone is saying that there are too many players in the current environment and that attrition is going to put the most expendable operators out of business. Now is the time to take a fresh look at each of your individual accounts. Tending to each customer’s specific desires may not even cost you more money, but it takes a thoughtful and insightful approach.

So think more like your customer. And happy fishing!

Craig Roalson (editor)

Hidenet.com

A Reminder to our Readers

All the price charts we print are intended to be used solely for a basis of helping illustrate trends in the market. The actual prices seen in them do not reflect qualitative variation from one origin to another. Hidenet.com recognizes that there is a variety of factors which determines different prices for similarly described merchandise.