BRAZIL

Nothing new is practically really going on in Brazil. We had another week in a row, with many people taking free time or vacations also, same as in Europe.

The main customer is taking his vacations. They are not going to buy anything right now. On the contrary, the strategy is to see how long can the patient agonize. Showing weakness right now is the worst of things. Showing eagerness for selling anything at any price is a sign of weakness. Those who can, should avoid it, for sure.

But the market is big, although we all say all the time is rather small, but more like an expression we use. Yes, regarding the big players of the market, it is small. But there is still space and small and medium players are still a lot.

Some of them are taking the opportunity to propose some starting business at this point, since they cannot wait due to their need, but also they are going to make their choice among everyone, for those who have a less proud attitude towards their prices…

Everybody knows the market is down and prices are lower than they were some days, or weeks ago. So, still asking for the same prices as before is something becoming a little bit ridiculous at this point. Most tanners are already working on a realistic basis.

The worst is to know that when the market is going down, or believe it’s going down, sales don’t happen. Either it must start going up again or reach the bottom as fast as possible in order to make the market come back again. The problem is that this happened in a bad moment. It’s the interval of the year…and we are only going to see what happens after the second session starts again…

Regarding the episode with IFC in the leather market, let me clarify that what I referred was regarding their appearance and disappearance in the leather market. It doesn’t have anything to do with their activity in the meat business, which by the way, it was reduced this week due to a hold on beef exports to the US.

This clarification was needed as I had some people asking me about the IFC case.

Another clarification is that their situation was not caused because they dealt mostly with a particular customer with whom few suppliers would do it, but because of lack of planning and wishful thinking that getting into the leather market would be only a question of doing it. The lack of professionalism was the main reason of the resulting failure in this case.

Calcados Maide closed their shoe production plant, in the south. This was a very traditional shoe factory of Brazil.At the same time, some senators and deputies are saying they will vote or promote or whatever it is they are going to do, to take action regarding the unfavorable situation that the foreign exchange rate brings to everyone in the country that exports anything. Somebody should do something really quick before we have to compare this as to giving medicine to an already dead patient….

Doha, a dangerous result for some bigger emerging countries.

If we take the right word for emerging means something that is on the movement of getting out from something, usually water. Something like that. Well, it is not the case of many countries, including Brazil. Brazil is stuck already for many years in a row. There is nothing emerging here. The only emerging thing around here is the lack of management of the country, and why not also say, the lack of shame for certain attitudes from the government. Anyway, it’s very noble to take proud positions on negotiations, however sometimes is not so smart. We cannot forget that those who are mostly criticized by this government, like Americans and Europeans, are the main buyers of the world for anything we sell/produce/export. And if our representatives stop and think about it for a minute, they wouldn’t take so proud attitudes regarding negotiations. After all these countries are the main buyers for everything world wide.

It is true that there is also the same consumption elsewhere, however it is so much spread worldwide, and also you would have to also count that other countries will not have the very same idea as well.

When countries sit at a table for negotiating the future of their own trading, that speech of union and having same targets and bla bla bla, is put aside, and the interests which everyone is there to defend speak louder than anything else.

All the countries that compound the G20 have their own interests to defend on their own behalf, and they will do it anyway. So, if you take a firm position on anything, don`t expect that another country will stand beside or behind you.

According to the representative of Brazil “everyone lost”. Maybe under this prospective. Most probably what will happen is that he lost, and Brazil lost. The buyers will certainly gather some other countries and obtain the same they asked from him. They just have to negotiate loans and conveniences. That’s all…

I am not saying you should bend yourself, but not to exaggerate pretending you are what you are not, or having the power you don’t have…and also don’t pretend you have that much influence among Mercosur countries, and count that everyone is going to defend your point t of view, because you don’t and this has a small chance to happen(or do you think the other countries of the block will do it for free ?).

Dollar rate ends the week at R$ 1.56 (no comments…).

Prices of the week:

Wet blue, whole hides, machine flayed, full substance, average 48/52 ft, average 24 kg

Selection TR1 at around $ 1.35/ft CFR.

Selection TR2 at around $ 1.25/ft CFR.

or

Selection TR1/TR2 70/30% or 80/20% at around $ 1.28/ft CFR.

Lower grades than these were not available for months now, but it`s more likely there is going to be some offer ahead.

The crust leather for upholstery, in substance 0.9/1.1 mm, in sizes varying from 48 to 56 ft:

$ 1.32/ft CFR for selection TR1

$ 1.15/ft CFR for selection TR2

Lower grades than these are not available. It`s either consumed domestically or sold months ahead. But now it might be available again.

The automotive upholstery leather, in substances 1.1/1.3 to 1.2/1.4 mm, stucco and buffed, at:

$ 1.50/ft CFR for selection TR1

$ 1.40/ft CFR for selection TR2

$ 1.25/ft CFR for selection TR2 + TR3

ARGENTINA

In Argentina the week didn’t bring any news regarding selling prices, as even raw material costing less (again), other costs are maintained or are even higher, but we can see that a certain pressure already started from the outside.

All tanneries are already within the spirit of the “north hemisphere vacation mood”, and are already reducing productions.Therefore the demand for raw material was controlled and nothing happened to make any kind of pressure even if the slaughter level is a bit below the expected for this time of the year.

Traditional buyers are going on vacation, and leaving behind some problems like inflation, unfavorable exchange rate, higher costs, etc. All these are problems that are still going to be there when they come back…

However, for the benefit of the Argentinean tanners, the situation in the country is easier than in Brazil, where you have such a big number of tanneries that makes demand difficult to reduce as fast as in Argentina.

In Argentina, the crust leather for automotive upholstery, in substance 1.1/1.3 to 1.2/1.4 mm, has been sold at levels like:

$ 1.58 – 1.62/ft CFR for material that can either be stucco and buffed for the most requiring customers, but usually sold for full grain type of leather.

And at $ 1.48 – 1.52/ft CFR for a medium grade, stucco and buffed.

For upholstery crust leather, we can find prices from $ 1.20 up to 1.45/ft CFR, depending on selection, region, substance, etc.

For shoes, in substance 1.2/1.4 mm, natural/not dyed, prices have been:

TR1 – $ 2.20/ft CFR

TR2 - $ 1.85

TR3 - $ 1.65

Everything below is considering fresh and salted, no bulls. Range weight for salted is 14-19 kg and for fresh hides is -/24 kg.

Also the conversion was made considering the Dollar rate of Friday in Buenos Aires at $ 3.04 for this week.

Please note in some items we calculated the average price, so it might happen someone is paying more for same.

1) Buenos Aires / Mendoza

2) Cordoba / Santa Fe / San Juan

Pay attention in what the most experienced do…

The raise of grains worldwide had brought a problem for the beef industry everywhere. Many cattle breeders have changed, and some are changing their activity for planting seeds, instead.It seems it’s cheaper for doing it, for those who have the land, and this is bringing more difficult for maintaining prices of live cattle paid by the packers everywhere.

JBS, who doesn’t need to be introduced, is intending to buy more packers worldwide. Their vision is that the demand for meat will grow (with which I fully agree), and also that price of meat will increase sooner or later (with which we are obliged to agree for the obvious reason that the lack of meat will cause this).

We all know world population is growing and the cattle is not, or is barely doing it, so the most obvious conclusion is that this is going to happen.

Let us not forget that all of us depend directly on the development of this situation.

There is one phrase that has the right definition about this situation, which is also a situation that the leather market and business is already experiencing for a while already: Tomorrow the winner will be the one that can lose money for a longer period of time…