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THE SAUER REPORT

World View
Since years Nr 1 on Google under Hides, Skins, Prices, Markets, Indexes. 9W 791 H 26MAY DELIDR 9W 791 H 26MAY DELIDR 0625 0755 INR 4435/0625 0755 INR 4435/-

INDIA: A new report by CLE (Council for Leather Exports) shows that in the current financial year the sector is expected to grow by 15-20%. The previous year (20122013) showed a meagre 2.5% export growth in USD from 4.874 billion to 4.996 billion. In Indian Rupees however exports were up 16%. The biggest sector of the industry is footwear which makes up 41.1% worth 2 billion USD.

Next are leather goods 23,59%, finished leather 21,82%, leather garments 11,28% and saddlery 2,17%. Footwear and leather garments showed each a 2% drop in growth last year. Finished leather saw growth increase by 6% to 1.09 billion USD and leather goods by 8% to 1.18 billion USD. In Rupees however all sectors saw growth double. Major export markets are: Germany 12.6%, UK 11.96%, USA 10.5%, Hong Kong 8.82%, Italy 8.77%, France 6.39%, Spain 5.34%, Netherlands 3.79%, China 2.48%, UAE 2.53%, Belgium 1.86% and Australia 1.48%. Apart from the United Kingdom and Denmark exports to Europe were dwindling. Better results were obtained in the USA, Asian and the Middle East.

21 May: UNITED STATES: Hide prices slowly eroded further over the last days. On average we can say they lost a dollar per week during in May. But sales and especially the reporting of sales do not always take place the same day everywhere. Hence also the price movements should be looked at over a couple of days and not strictly from one day to the next. Best thing is to look at the price graphs in this report which show a smoother development over period of time. Worth looking at is that over the weekend prices of many of the usual steer selections in the heaviest categories have moved upwards, not downwards! Maybe this is because they have become scarcer this time of the year while there are still buyers for this weight ranges who are now competiting to get the last ones left? Over all we cannot deny that buyers have gained strength last week. And in a good number of cases it is now them who, when pacing a bid tell sellers to - take it or leave it as has been the slogan of sellers for over a year. The times-they-are-a-changing a certain Bob Dylan sang. The kill keeps increasing while at the same time buyers are cautious (why buy a lot if tomorrow prices could be lower?) and their orders are down. All this supports buyers in their efforts to talk the market down further. USDA news: Cattle slaughter and beef production in the US during the first quarter of

2013 was down on the same time last year, with lower volumes in February and March more than offsetting a relatively high January (US Department of Agriculture). Beef production reached 2.8 million tonnes cwt through the quarter, 2% lower than last year, on the back of a 3% drop in adult cattle slaughter, to 7.645 million head. Interestingly, this is more beef than Australia produces in one year, illustrating the magnitude of the US beef and cattle industry. Most cattle categories recorded a decline in slaughter compared with last year, including steers, heifers, bulls and beef cows. Dairy cows were the exception, with slaughter slightly higher for the quarter.

AUSTRALIA: The Australian lamb and sheepskin market was briefly down after Chinese New Year but has recovered quickly due to ongoing demand for good dense wool skin in China and Russia. Chinese tanners and traders seemed to join forces to push the market down in April and then all stressed when they succeeded. Dense wool lambs fell only marginally but open lower grades were down 40-60%. Low kill levels and a resurgent demand have pushed prices back up in AUDollar terms. Some USD prices are still lower due to currency movement. Merino/Sheep prices are also recovering from the April correction. Prices are still lower than in March but talk of corrections has now past and normal sales negotiations are the norm.

BRAZIL: The CICB national raw hide index jumped higher to 2.13 BRL/kg. Prices increased especially in the states of Sao Paulo, Mato Grosso do Sul and Mato Grosso. The index price is now 36 cts per kilo higher than the same week last year.

PORTUGAL: Local hide tanners have plenty of work for the moment and it seems it will remain so till at least the end of June. Although most of them complain they are not making any profits, they still have to buy the raw material needed to fulfill their orders. For this reason and also because of the low kill,

traders do not see any downward movement in the near future.

ISRAEL: In Israel local skin prices are firm and steady. However life is hard for the exporters since the Israeli currency is getting stronger against the USD so they get less for their skins.

GERMANY AND NW EUROPE: Another difficult week to sell hides. The main problem is caused by the fact there is only one market for the abattoirs but two markets for the hide sellers. Selling top quality heavy bulls for the car leather industry is still a rather easy business for Germay and other countries who produce similar qualities/selections. Demand for this remains bigger than supply and prices are stable and firm (maybe a few cents to play with but no more). This is the market the abattoirs base their prices on but then they apply the same price setting strategy to their other hides as well. And those do not sell at the prices one needs based on abattoir price calculations. These hides are out of line with other origins and no longer competitive. The difference could by now be 5-10%. What can be still be sold are low grades (for which prices are not really fixed and can always be negotiated) and a few cows provided prices are reduced by 1 or 2 USD. Helping sales to Asia is the strengthening USD but negative are the many payment problems sellers are facing. These late payments could work their way back from the retailer/wholesaler/product maker/tanner all the way to the raw hide seller. The kill in Germany is low for male types (which produce the hides most in demand) but high for cows. In general the trade is still waiting for the German/European abattoirs to join the - outside Europe - club of lower prices because without this happening it is very unlikely if not impossible that things will get better.

THE SAUER INDEXES: The general movements in the world are clearly visible in the

latest index figures: sheep down, goats up, hides down but upholstery selections less than other selections.

17 May: UNITED STATES: Hide prices slide slowly further and sellers are kind of giving up the fight to keep them high. However, it is important to note that the sliding prices did not chase buyers away collectively. They keep buying at the lower prices as the USDA sales prove. This means that demand is still there and that tanners need hides. Logically they are trying to bid lower and lower but by the end of the day they also need the hides. The increasing kill may help to push prices down further and while they keep sliding tanners will limit their purchasing volumes down. But still life and business continue. What I fail to understand are the numerous stories about the massive and exploding cow kills. Looking at the weekly federal cow slaughter figures published by USDA (see the 52 week column in this report) it does not at all look that much out of the ordinary. Weekly differences are in the 2000 head region. Total cow kill more than 2 months ago on 9th March was 123,725, now it is 125,725 all cows included. 2000 hides is just a couple of containers. Does that really change the world?

IRAN: The low kill and the good demand for nappa prevent prices from coming down to the old levels. Till now they are still workable. Exports increased but growing demand from the local market leads to more skins being wanted within the country. They are further processed to crust and finished leather and used in the local leather product manufacturing sector. (trade sanctions revive local industries!) In the future this may lead to measures which limit exports of pickled and wetblue.

HOLIDAYS: This weekend will be another holiday weekend in many countries in Europe and outside. Whitsunday and monday. This is the last holiday weekend before the European summer. It will not interrupt the publication of this report.

GREECE: The recession continues and retail sales keep falling. The lamb skin market is softer and prices are down. The hide market is stable at still the same price since many months. The pig skin market is firm also.

MEXICO: Awaiting the the opening of their leather fair ANPIC in Leon next week (22-24 May), the industry and prices hold steady. There is plenty of work thus demand while the kills are low. Packers see no need (yet)to reduce prices no matter what is happening elsewhere in the world. At ANPIC 450 exhibitors will show their goods to an expected 6000 visitors.

INDIA: A new report by CLE (Council for Leather Exports) shows that in the current financial year the sector is expected to grow by 15-20%. The previous year (2012-2013) showed a meagre 2.5% export growth in USD from 4.874 billion to 4.996 billion. In Indian Rupees however exports were up 16%. The biggest sector of the industry is footwear which makes up 41.1% worth 2 billion USD. Next are leather goods 23,59%, finished leather 21,82%, leather garments 11,28% and saddlery 2,17%. Footwear and leather garments showed each a 2% drop in growth last year. Finished leather saw growth increase by 6% to 1.09 billion USD and leather goods by 8% to 1.18 billion USD. In Rupees however all sectors saw growth double. Major export markets are: Germany 12.6%, UK 11.96%, USA 10.5%, Hong Kong 8.82%, Italy 8.77%, France 6.39%, Spain 5.34%, Netherlands 3.79%, China 2.48%, UAE 2.53%, Belgium 1.86% and Australia 1.48%. Apart from the United Kingdom and Denmark exports to Europe were dwindling. Better results were obtained in the USA, Asian and the Middle East.

WORLD BEEF PRODUCTION: The estimate made for this year at 57.5 million tons has not changed from predictions made 7 months ago in October last year. What has changed is where it all comes from (which is where the hides are produced). A big downward revision is made for India. Higher figures are now forecast for USA, Brazil, Australia, Russia and to a lesser extent for Argentina, Europe and China. Higher beef production due to bigger slaughter (more hides!)is only mentioned for Australia and Russia. The other positive changes are made for other reasons which are of no importance the leather industry. Keep in mind beef production is not the same as hide production. The aim of the meat industry is to produce more beef with less animals (heavier animals for instance like is the strategy in the US). Less animals means bad luck for leather of course.

CHINA: End this month (29-31 May) will bring us the Shoes and Leather show in Guangzhou.

RETAIL BUSINESS: A recent global retail forecast for clothing and footwear tells us this year will be challenging and show less growth than last year. Retailers will discount heavily to encourage spending. With less growth forecast it will not be surprising if total demand for leather would come down from last year (as is already said). Less demand for leather does not necessarily bring prices down if hide and skins availability comes down as well. As long as demand is bigger than supply, prices will be firm. Whatever that demand is.

CASH AND FINANCE: There are people who believe that cash/credit problems could become the main factor to rule the market. Apart from all the financial problems and limitations we already know, we should also consider the fact that because of the approaching summer holiday breaks, a number of buyers will not be eager to take deliveries (of hides, leather , etc.) in order to stall payments. Not receiving payments in time could be the final blow for those already tight.

FRANCE: The situation in France is very difficult. Abattoirs may be in a better sold forward position than their colleagues in other countries. They stick to their hide prices while the traders selling them to the tanners are told to reduce and follow the rest of the global trend. At a certain moment the limit will be passed. In a global industry one or two countries cannot totally ignore the rest of the world (even with their own good reasons). Buyers will simply turn their back on them and go elsewhere if alternative products are available to them.

COMPANY NEWS: Hong Kong: Shoe maker YUE YUEN which produces some 300 million pairs of athletic and leisure footwear for almost all the major shoe brands every year, issued a profit warning for Q1 this year. Higher production costs are among the main reasons to ring the bell. The company is good for 20% of global production of this sportive footwear.

16 May: TURKEY: Skins: Very important for Turkey is the show in Moscow this week and many tanners are attending for their Double Face business. Still, the market seems depressed and is suffering for hard cash. It is too early for the next seasons orders also. As usual, double face lamb kills are limited. The skins are expensive but the good season is passing by. Tanners are waiting for the UK new season skin prices and have no idea how it is going to be. If the Chinese will start buying like last year, prices will be high. Too high for Turkey anyway. Current new prices are around 10.00-10.50 USD but no bids or any interest as yet. West African hair sheep crust is still enjoying good business for suede and shoe upper leather but cash is as always the usual headache. Hides: As reported earlier payments are very slow and for this reason tanners are not agressive in their selling activities. They prefer to keep their sales at minimum levels to avoid getting caught-up with bounced cheques and drafts.

Good volumes of leather for uppers and linings are imported from Asian countries due to lower prices there than the local production.

UNITED KINGDOM: The new season lamb skin trade has not taken off and is still in its annual testing period. While first indications were at 12.15 USD they have now dropped to 10.00-10.25 USD. Skins are not coming in before June and will measure 6.5/6.75 sqft which means they are of interest to the Turkish market. The Turkish business takes place mostly in July/August. These first skins are too small for the Chinese who get into the market end September/October when the lambs turn into hoggets and measure 7.5/7.75 sqft.

HIDE TRADE IN GENERAL: The US hide market is soft without showing daily decreases (there are also a few increases). Its all going slow and smooth. Europe and Australia are slowly starting to follow. This is probably forced upon sellers by their Chinese customers who always want to see all prices come down when the US comes down. Looking at what happened these last ten days I think we can say wetsalted hides prices in general are on average 2 USD off their recent highs. It counts for the US, for the United Kingdom, for France, Germany, Netherlands, Australia and probably for other countries as well. The reduction of 2 dollars appears in many places but not (yet) everywhere. Not in Scandinavia for instance. Whether further reductions are on the way is not yet sure at all. The possibilities for tanners to push for further reductions are not the same everyhwere. The big Chinese tanners may have stocks to stay out of the market for a while. What is often forgotten is that they also have their domestic supply which can be good quality stuff as well and reduce the immediate need for foreign material. Not for always but for some time. European tanners do not have stocks (no doubt there are a few exceptions) and less possibilities to delay buying when material is needed. Together with the low kills in Europe this reduces the chances of big reductions.

UNITED STATES: Bids and business continue. In what volumes is hard to say and we

have to wait for the USD figures tonight. Bids are usually 2 or 3 dollars below asking prices but what can you expect in a softer market. Sellers look at all bids. Some are bluntly refused if too low. Others are negotiated and deals concluded about a dollar below asking prices are multiple. Sellers do not have the same idea either about what the lowest price should be. Heavy Texas Steers have both been refused and accepted at 96 dollars fob for instance. There are traders who want to unload long positions and others who try to cover sales of a few weeks back. Not helping sellers is the increasing kill. Meat packers are in the black figures again and review their production plans to kill a few more while it is profitable. One kill estimate has been raised to 646,000 for this week.

Last minute news: Here are the new USDA figures for the week ending 9 May, just hot from the press. They show that despite the softer market and lower prices, business has not disappeared! As a matter of fact sales of raw hides to all major buyers (China, Korea, Taiwan, Mexico) are higher than the previous week. Although the week ending 2 May was a holiday week, it is encouraging to see that while prices dropped further since then, sales volumes did not really seem to suffer and came back. In the wetblue sector China showed the highest sales figure since 31 January and that of course has nothing to do with May holidays. Mexico showed a very modest wetble sales number. Sales to Italy can never be compared with other dates since its purchases are always tremendously irregular. In short: Sales have not suffered as much as many (including your editor) had expected. U.S. EXPORT SALES FOR WEEK ENDING 5/9/2013 Hides and Skins: Net sales of 425,600 pieces reported for delivery in 2013 were up 17 percent from the previous week, but down 1 percent from the prior 4-week average. Whole cattle hide sales of 423,500 pieces were primarily for China (265,200 pieces, including 3,200 pieces switched from South Korea and decreases of 14,600 pieces), South Korea (52,400 pieces, including 2,100 pieces switched from China), Thailand (30,100 pieces), Mexico (27,200 pieces), and Taiwan (26,500 pieces). Shipments of 460,500 pieces were up 26 percent from the previous week and 3 percent from the prior 4-week average. Whole cattle exports of 456,200 pieces were primarily to China (328,000 pieces), South Korea (73,700 pieces), Mexico (14,000 pieces), Taiwan (13,200 pieces), and Vietnam (10,600 pieces). Net sales of 120,500 wet blues for 2013 were primarily for China (59,500 unsplit and 5,400 grain splits), Italy (24,000 unsplit), the Dominican Republic (8,600 grain splits and

2,500 unsplit), and Mexico (8,200 grain splits and 200 unsplit). Decreases were reported for South Korea (200 unsplit). Shipments of 146,200 hides were primarily to Italy (43,900 unsplit), China (28,800 unsplit and 5,400 grain splits), Mexico (17,600 grain splits and 3,000 unsplit), and the Dominican Republic (6,200 unsplit and 5,000 grain splits). Net sales of splits totaling 460,600 pounds were for Italy (400,700 pounds), China (84,000 pounds), Hong Kong (51,900 pounds), and South Korea (10,300 pounds). Decreases were reported for Taiwan (86,200 pounds). Shipments of 394,200 pounds were to Italy (247,700 pounds) and South Korea (146,500 pounds).

BRAZIL: The worlds biggest meat packer JBS reportedly slaughtered 4.4 million animals in Q1. An increase of 17.7% over Q1 2012.

INDIA: Goat - Arrivals are at the same level as 2 weeks ago. Dealers have reduced prices by 1.00 Rs but buyers want to see a reduction of 2.00 Rs. It was just reported that yesterday an agreement was reached for a reduction of 1.50 Rs. Business was then done in 4/6 sqft skins tr1 and 2. The buyers were shoe manufacturers. Some might still be able to obtain the wanted 2.00 Rs reduction if for small quantities. Good demand remains for 5/8 sqft in low grades and some business was done at unchanged to slightly lower prices. Buyers of veg tanned suede suitable skins are pressing for a 2.00 Rs reduction on previous sales but there is no agreement yet. The shoe suede business is slow and here buyers are looking for 3.00 Rs price drop while sellers dont want to go any further than 2.00 Rs. In view of the meagre supplies presently the desired reductions seem rather difficult. Superior linings 5/8 sqft sold at 0.50 Rs less.The price for standard linings in full chrome and veg.tann is down by half a Rupee also while buyers keep fighting for a bigger decrease. A number of sellers prefer to wait instead of accepting another drop in price. Some movement in mesh leathers in small volume at 0.50-1.00 Rs less. Sheep: The resin nappa business with North India keeps moving at practically unchanged prices and in mixed selection package deals. Dealers still refuse to sell the high grades separately. The approaching summer increases the number of low grades and thus increases production costs. Full chrome natural low grades sell steadily to leather product manufacturers in North India at unchanged prices.

Cow hides: Buyers up North show good interest in high grade finished kips at unchanged prices. Sellers tried hard for more but without success. Beige cow linings find good demand with shoe makers at mostly about steady prices. Buyers however point to the softer US hide market and find they should pay less also. But the overseas market changes had no effect yet. Buyers remark that sellers are quick to increase when overseas market prices move higher but slow when elsewhere prices come down. Cowcalf: Terracotta low grades sell at steady prices. Buffalo and buff lights: Good business at steady prices. Buffcalf: Off season with increasing numbers of low grades. Prices sliding accordingly. EXPORT BUSINESS Goat: Demand for finished goat leather disappointing and business only patchy. Italian buyers are not heard very much and it is thought they are more active in other countries at presenrt. Some demand for dyed suede 4/6 sqft 0.5/0.6 mm. Enquiries from the Far East for shoe suede are also called rather slow. It is felt prices must to lowered to arouse interest. Full chrome standard linings show steady prices but overseas buyers feel they will be able to get 0.02/0.03 EUR off before the holidays start and they will disappear. Sheep: Very little demand from Japan for the high grades. Rejects are wanted but these are mostly sold out. Customs are difficult again also. The rules ask for exports of finished leathers only and these natural selections do not comply. Cow linings: Sales reported to Spain and the Far East. New offers are 5 cents higher based, as sellers say, on the higher raw prices. Buffcalf: A small quantity of polished finsihed leather TR1/2/3 was sold to the United Kingdom. There is business with China in milled finished leather at steady prices. Raw hides and skins: Goat skin prices down 10 Rs in North and South. Sheep skins remain the same in the South but dropped 5 to 10 Rs in the North because of the summer skins. Hides are 10 Rs up. Buffalo and buff lights firm and steady. Calfskins are 5 to 7 Rs lower because of the off-season arrivals.

NEW ZEALAND: Skin offers are still very scarce, and buyers, although they generally do not have a lot of business, are getting scared about the shortage of material and the

difficult months ahead in this respect. Some tanners are trying to find products which are for resale to secure the material they need. At the end of April, compared with last years figures, the lamb kill is 14% ahead, and the sheep kill 23% ahead. Prices: no business reported. Difficult to assess, given the poor volume of transactions, if any...

ZAMBIA: Wetblue offers received today are a tiny bit cheaper than at the start of this year.

COMPANY NEWS: Italy: Luxury footwear and accessory maker SALVATORE FERRAGAMO booked good results in Q1. Footwear sales were up 8% and leather goods up 13%. Sales improved in all parts of the world: China + 20%, Europe + 10%, North America + 19%, Japan + 4%, Central and South America + 13%. -United States - Footwear brand SKECHERS which just got out of its toning shoes problem, reported a 28.6% increase in sales for Q1 to reach 451.6 million USD.

SRED]15 May: AUSTRALIA: Because of what hide traders are paying to the abattoirs their margins are minimal and the possibility to lower prices is nil. They are still far sold forward also which reduces the need. However in order to stay a bit in line with the US market and/or to show some goodwill towards customers they may use the possibility created by the exchange rate to sell a bit cheaper. But 2 dollars is the maximum space there, they say. And on that basis, hides kept selling this week. The lamb skin market is weak but good qualtity skins with dense wool still find buyers. The biggest problems are for the lesser qualities.

Over all skin supply is steady but facing subdued demand. Prices remained steady this week.

KENYA: The hide market remains firm and prices have not changed. The same counts for goats which continue to enjoy good demand and for sheep which see interest dwindling. For all products no change in prices over the last ten days.

CENTRAL AMERICA: Hide prices are the same as last month. Continuing strong demand from Asia and Italy resulted in exporters being oversold for the next two months as they say.

UNITED STATES: More offers appearing, bigger volumes. Prices lower than previous offer lists and no higher than latest concluded deals. Sellers in Asia are looking for volume bids and pushing for LC openings. To say it short: sellers did not gain any points yet this week. With a new kill estimate received for the week we are now looking at: 633,500-638,000 head. The cow kill seriously increased. Between early March and 20 April the dairy cow kill increased by 3.9% and the beef cows kill by 10.6%. Almost half of the increase is thanks to slaughter cow imports from Canada. The country sent 98,675 slaughter cows to the US beween 1 January and 20 April.

SWEDEN: Hide prices in Sweden are higher today than a month ago. Low kill, competition among traders and currency being the reason. Cows for export are very rare

since better prices can be obtained on the home market.

POLAND: Hide prices increased from 5 to 10 cents over the last four weeks.

FINLAND: More demand than supply kept hide prices firm or moved them even higher this last month.

COMPANY NEWS: Germany - Sports goods giant PUMA is changing track with the help of a new CEO. It seems the company moved too far away from its sports goods origins to lifestyle and leisure products. The result has been a 2/+% decline in sales. Its rival ADIDAS is reportedly doing better. Italy - Luxury shoe and leather goods maker TODs reported its Q1 sales were down 3.7% from Q1 2012 at 253.5 million EUR. Sales abroad were very positive but the Italian home market is where the bad news comes from.

14 May: UNITED STATES: The softer trend of the US hide market has not changed. But there are no extreme price differences either. Since end last week we see some lower prices (but never much lower), some stable prices and some higher prices (especially on cows). Although sellers are no longer ruling the game, they manage to keep the damage under control. Quietly unloading long positions without alarming the market is an art. Till now all steep price falls could be avoided. What we are seeing is a very slow and gradual decline (and not even for all selections). On the buyers side there are still always those who need hides quickly and must buy but most are agressively bidding lower or staying on the sidelines alltogether. There are no report of really low bids having been accepted however.

The basic idea for steer selections is that if you want to sell today you need to take something off your last concluded price in order to succeed and book. The kill keeps increasing not only because of the usual seasonal reasons but also because meat packers have been able to improve their margins and even get back in the black which logically makes them slaugher a few more animals. Still, dont forget, we are still below last years levels. The first kill estimate for this week is 638,000 head.

EUROPE: One cannot say that Europe is quick to follow the softer hide market tone which started in the USA. The reasons are not new. Europe is the lucky producer of a number of top quality hides and calfskins. Their advantage is that these qualities cannot be found outside Europe and that there are never enough of them to satisfy all demand. Thus those people who need them conclude it is better to buy them when they are available than to miss out on the supply one anyway needs. Prices are of second importance here. And all that demand at the abattoir doors does not give the abattoirs the impression they have to drop their prices. Who would? However, at the same time, these sellers prefer to entirely ignore that there is little demand for all the other qualities which make by far the majority of the total production. That problem is for the traders and tanners to deal with, who in doing that, or in trying to do that, have hardly any results. The bulk mass standard leather production remains the big problem for all. As one trader put it correctly: if your product is so so and your customers are low profile too, then there is no chance you can follow the market of today. Asian buyers who know they can interchange standard quality hides from various producing countries in the world, see the American prices coming down and want to see the same in Europe. Difficult though!

GERMANY: Germany is exactly in the situation as described under Europe in our World View section. The low kill works against the abattoirs being ready to drop their prices. On top of that we see traders fighting among each other to get the hides they need. The car leather tanners have fixed their leather prices with the car manufacturers in January. But since March they are again operating in the red since raw prices never

stopped increasing. However, it is impossible for them to go back to the car makers and ask for more money every three months. Over all we indeed see hardly any changes in the sales prices offered while the sales results are very limited.

SOUTH AFRICA: The hide market in South Africa remains very firm. No matter what happens elsewhere. Raw hide prices are staying steady at high levels. Tanners are desperate for lower prices but it is just not happening, mostly because the supply constraints still exist. Wet blue prices are up by USD 2/5 per pce across the board.

BRAZIL: The CICB national hide index for week 19 is up again to 2.08 BRL/kg.

SMALL SKINS: Traders believe that European lambskins in raw will continue to decline by 10% to 20% because the raw prices are over valued. Prices of finished lambskin leather is likely to remain the same. Price of goatskins may enjoy some increases where they are being used to replace bovine or ovine leathers for some specific items. The big brands have calmed down their pressured demand which, as a pundit says, may give us the opportunity to work in a more professional way.

PAKISTAN: According to leather industry officials the tanners are facing a shortage of hides and skins because of the huge exports, legal and illegal, of live animals to places like Iran, Afghanistan and others. The present shortage of raw material could cost the leather industry millions of jobs, the

same sources report. It also pushed meat prices up inside Pakistan. They are asking the government to take measures to stop live exports and the smuggling.

CHINA: The Environment Protection Ministry has announced new stricter rules for effluent treatment in the leather industry as from next year. The building of new tanneries will also have to face much stricter conditions. If all this goes on as such, a Chinese tanner said, production costs could increase by as much as 30% and put much pressure on exports. It is unlikely however that such progress can still be stopped in the 21st century. Fortunatly for China and the Chinese people! And for the leather industry elsewhere which already has been living with very strict rules and regulations since many years. These new laws will reduce the unfair competition we are still seeing today.

UZBEKISTAN: Cattle hide prices are same as beforebut sheep skins are moving up.

EUROPEAN COW HIDES TO CHINA: Several English, German, French and probably others have concluded contracts for cows with Chinese buyers at prices 1 or 2 to 2.50 dollars lower. That means below the almost fixed price of the last weeks of 85 dollars (basis UK cows) delivered. Even lower bids have been received but not booked. It seems all parties are happy with these deals. The Chinese have bought cheaper as is almost a religious must for them if the US market is down and the sellers see this contracts as protecting their previous contracts at higher prices. They will want the lc's for the older costlier contracts first before they intend to ship the latest cheaper ones. So will other European hide types now follow downwards? For that they need to be in demand first! It was almost only cows that China wanted.

COMPANY NEWS:

United States - A federal judge has approved a 40 million USD settlement by shoe company SKECHERS USA to pay in customer refunds to resolve what court has described as unfounded advertising claims. They said that Skecher toning shoes would make you fitter and lose weight.

10 May: UNITED STATES: After the one day Ascension Day holiday yesterday, the changing situation over the last 48 hours becomes very clear. None of the trading Gods denies any longer that the US hide market is down. The question now is, how much and how far will it go. Buyers are no longer ashamed to bid 4 or even more dollars down but we have no reports that such low bids have been accepted. A good sign is also that although we are in the slow tanning season in Asia, demand remains. Remarkable figures plenty this week. First of all, all light weight steer selections are below 100 dollars fob again! More remarkable figures you can find in our USDA based sales tables: For instance over the last four weeks, sales were down every week while slaughter was up every week. The perfect argument for a softer market! However one exporter told me that we should take this into account also: quote - in the slaughter last week there were 17,000 less steers and heifers and this week it may be 635,000 with 20,000 less steers and heifers. In other words we are slaughtering a plethora of cows. It also affects the availability of offers from the beef packers and the steer heifer slaughter is not as voluminous as it appears - unquote. Sales of raw hides and of wetblue hides to China for the week in question were not that bad at all. Total global wetblue sales at 140,200 were not bad either. Remarkable is the sales figure of just 25,900 hides to Korea which makes it the lowest figure of the last 12 months! Sales to Mexico remained very decent for both raw and wetblue. The number of raw hides sold is effectively the highest since 14 February. Looking now at all these figures once again we must admit sales are down but not everywhere and it is not at all dramatic. And now we are ever more curious to see what this week will bring.

U.S. EXPORT SALES FOR WEEK ENDING 5/2/2013 Hides and Skins: Net sales of 363,600 pieces reported for delivery in 2013 were down 2 percent from the previous week and 10 percent from the prior 4-week average. Whole cattle hide sales of 363,000 pieces were primarily for China (256,700 pieces), Mexico (27,100 pieces), South Korea (25,900 pieces), Taiwan (16,500 pieces), and Vietnam (9,700 pieces). Shipments of 366,400 pieces were down 24 percent from the previous week and 19 percent from the prior 4-week average. Whole cattle exports of 363,400 pieces were primarily to China (243,900 pieces), South Korea (75,600 pieces), Mexico (12,900 pieces), Thailand (10,300 pieces), and Taiwan (6,900 pieces). Net sales of 140,200 wet blues for 2013 were primarily for Mexico (48,500 grain splits and 1,300 unsplit), Italy (44,600 unsplit), China (27,000 unsplit), and Taiwan (5,300 unsplit). Shipments of 115,700 hides were primarily to Italy (28,600 unsplit), China (28,000 unsplit), Mexico (20,600 grain splits and 3,300 unsplit), and Vietnam (9,800 unsplit). No sales of splits reported for the week. Shipments of 45,000 pounds were to Italy.

KENYA: Exporters who do not have the capital to put up a tannery or have access to the existing tanneries and still want to export raw hides will have to pay the 80% export duty. Insiders report however that nobody ever paid the 80% but find other ways. Even then the price remains a big problem since Chinese buyers do not want to pay more than 1.55 USD/kg which is at least 10 cents short of what it needs. Goat skin prices are steady but most sheep skins came down.

BRAZIL: Figures of the Dept. of Foreign Trade show that hide and skins exports in April were worth 217 million USD which makes it the highest recorded figure ever! It is 23.8% over the April 2012 result, 19.2% over the accumulated January/April 2012 results and 13.3% over the March 2013 result. (Keep in mind however that the wetblue price per sqft is this year 10 cents higher than last year - the editor) --

UNITED KINGDOM: Going around the UK hide trade, there does not seem to be any stock being held. There still is competition for supply and, while everyone is trying to get abattoir prices down, which has been accepted (2 GBP) in a number of places, there are some instances of steady prices elsewhere and even increases! On the sales side Italy is the only thing keeping the UK/Ireland trade afloat. Tanners still need hides there. China remains deadly quiet (except for cows). The only bids for ox/heifers received this week are 7 USD/pce down from asking prices and not workable. Even if abattoir prices do come down 1 or 2 Pounds those bids are still impossible. The strong GBP against the USD means a dollar price is worth even less in GBP terms today so there is pressure there too. Based on todays abattoir based levels there is no business it seems. To sell hides one needs to reduce prices. An estimated 3p/kg reduction would sell everything but would one need to reduce prices then again next week? And the week after, a trader says?

PAKISTAN: For the period July 2012 till March 2013 leather industry exports rose from 408.1 million USD to 417.2 million USD. But the only winner in the sector is the leather garment industry which saw exports increase from 263.1 to 285.5 million USD. Glove exports dropped by 7.2% from 132.5 to 123.0 million USD while all other leather products combined faced a drop of 30.4 % from 12.6 to 8.8 million USD. Already several times we have heard about cries for help from the leather industry to the government.

FRANCE: French hide traders hang on to their prices but are extremely cautious since they know the situation can change any moment. There are at one or two who no longer want to take any risks and who have accepted somewhat lower prices.

MEXICO: Influenced by the lasting drought the kills are down especially in the Northern and North Central parts of the country and this pushed hide prices higher. In Southern parts of Mexico prices remained unchanged. The leather industry promotion efforts by the government, as reported on earlier, are said to have led to the plans of a big Chinese automotive leather tanner to build a plant in Mexico. If this is really what the Mexican tanners wanted is not clear but doubtful!

COMPANY NEWS: United States - Comfort shoe company PHOENIX FOOTWEAR (Trotters and SoftWalk brands) reported a 7.9% sales increase for Q1 to 6.7 million USD.

8 May: AUSTRALIA: The hide market domestically will remain very firm with very limited potential in the state of Victoria for any reduction. One should not count on lower hide prices in Australia, an exporter firmly states. A lot of tanners are indeed adopting the wait and see for 10 days approach he says, but they are waiting for nothing. The well sold forward positions plus the very high domestic prices will see to that, the same exporter states. (Still the Australian market cannot operate totally isolated from the rest of the world if things change there - editors comment). So we shall see. Not quite in line with the above (maybe because not concerning the same State) is the official news from the MLA about last weeks kill in Queensland of a record 85,000/+ cattle. The high kill is said to continue for the rest of this month. The lamb kill during the first 15 weeks of this year has been 33000 animals more per week than in the same period last year.

UNITED STATES: It looks like we are in the classical - who gives in first - situation. There are not many offers around and where we do see them they show the same prices or a dollar down.

All the tricks of the game are being used. Sellers are trying to convince buyers they are in no need to sell and therefore do not bother to produce offer lists. Then at the same time they are inviting bids for their consideration. This strategy does not sound very convincing. Not to me at least. But maybe it works. Buyers are bidding down hard or pretend they are in no need of hides anyway. And of course they are pointing at the increasing kill figure (which nobody can deny). The kill estimates for the week now run from 625,000 to 628,000 head but a higher figure should not be excluded an analyst says. The final figure for last week was 624,000. There is nothing else we can do but wait to see who proves the strongest.

ARGENTINA: Crust prices have been updated but there does not seem to be much logic in the changes. There are higher as well as lower prices. Anyway Argentinian tanners are known to be quite secretive about their prices.

GERMANY: Offerlists by exporters issued yesterday do not show any lower prices than a month ago. To the contrary most prices for Asia are 2 Dollars up. Again the same question: does the softer US hide market just pass by? Or are the Europeans still not up to date or do not want to acknowledge this reality or do they deny it? As written earlier this week. It is very well possible that the European hide prices will not follow the American market. On the other hand, we all know the attitude of the Chinese. They have always said : if the US comes down, the others have to come down as well and we shall not buy till that is the case. We are watching!

UNITED KINGDOM: The first offers of new season double face lamb skins are appearing on the market. Usually the first price indications are very speculative since the skins will only come into existence mid/end June.

The hide market stays where it is. We heard of bids from China on cow hides which were just 1 dollar below prices booked 2 weeks ago, but those bids have not yet been accepted. One would excpect they would be quickly booked by sellers if one would start from the idea that the whole world hide market is softer, led by the USA. But that may not be the case.

OFFICE CLOSED: No updates tomorrow due Ascension Day holidays.

SPAIN: The delayed hide auction in Burgos finally took place and surprise surprise, this one shows lower prices than last month for 3 out of the usual four selections offered. Is it because the news from the US market eventually got through? The lamb skin market is down also except for Lechales which are in very strong demand.

7 May: UNITED STATES: Nothing changes since last week. It cannot be denied that hide prices are generally 1 or 2 dollars down from their tops by now but not much happened since and there are still a few selections which manage to sell at better prices also. Some say the May holidays lead to less trade last week. This is very possible of course but the effect cannot be very big. For much longer holidays we all agree that buyers stay alert with their mobile phones switched on and do not hesitate to act if something interesting presents itself. It is more likely that buyers used this little holiday as an excuse to stay out of the market to see if prices dropped further. Traders seem more prepared to listen to buyers ideas and negotiate than the meat packers which creates sometimes amazing price differences for the same material. In short, we are still waiting for the definite breakthrough which is still not visible. Are we moving further down? Are we staying here where we are now? Are we going back up? The latter seems to be the least likely on short term but cannot be considered impossible. The new USDA sales figures which will be published on thursday and cover the week

ending last thursday will hopefully tell us more. The BBQ kill season is coming up which will result in more hides. A first kill estimate for this week mentions 628,000 head.

EUROPE: The impression of a softer market worldwide, May holidays last week in many countries and the same again this week with Ascension Day holiday on thursday (please note this office will be closed also) does not make us count on a great business week. Major hide supplier France is closed for national holidays on wednesday and on thursday. Many people will build a bridge on friday to create a 5 day holiday! In the meantime the European abattoirs have been tough in their pricing and although under strong pressure and although lower prices are expected (some say an inevitable must), we have not heard of many lower prices at the abattoir doors yet. The weakening US dollar does not promote sales from Europe to Asia either. After having spoken to a number of other European countries today, I cannot (a bit to my surprise) say that the European markets are following the US market with a softer trend. In many places European prices remained the same and here and there even better prices could still be realized. Are the US and the European markets growing apart? If so, the factor which could cause this is most probably the supply side. While in the US the kill is moving upwards, in Europe the kills are low. And there are a number of European selections for which there are no American alternatives either (calfskins, top quality bull hides for the car leather industry, cows which still find their way to China). And as an Italian trader said, whatever the price, tanners here have no stocks and need hides to work on. Other sources say the kills in June and July are expected to remain very limited this year. Hence maybe we shall not see the same softness in Europe as we see in the USA. To be continued.

ITALY: Contrary to the global softer trend, prices for domestic Italian hides still went up. Till this weekend at least.

Calfskin prices follow the very firm trend in France and are up 10 cents. So are ox/heifers under 33 kos. Ox/heifers and bulls above 33 kos and for all cow hides, prices increased by 5 cents. Is the Italian domestic hide market going its own way or is just reacting late to the present developments and shall we see prices retract this week? Heavy bulls have already halted further increases and are considered stable now. Cow still sell easily to China. The hot summer and the summer holidays are approaching rapidly and no seller wants to be stuck with hides in his warehouse one may presume. Thus it is interesting to see how traders are going to deal with it. The risk that the market drops is a reality they need to count with. And if it happens the world will not wait to see if it suits the Italian traders and abattoirs.

NEW ZEALAND: The lamb skin market is dead, with almost no offer since the Hong Kong fair. The product is just not there, due to the kill stop.

This situation is very unusual, but related to the drought that forced the suppliers to kill massively in February/March and to the small kill outlook for this year. There will be a shortage of skins because there will not be a significant kill until Jan/Feb 2014, so it is believed prices should remain stable or even increase.

SPAIN: The hide auction in Burgos initially scheduled for 3 May will be celebrated today 7th May due to labor problems and strikes last week. It seems they have now solved their problems and started to kill again. The meat sector in Spain is not flourishing as one can imagine when hearing this news. A lot of big and small slaughterhouses are living for export markets, mainly European Union members and fellow countries like Portugal, Italy, France, Belgium and the Netherlands. Due to similar economic problems in those countries, export markets are not flourishing either.

MALAWI: More hides were sold at the prices in the report. Interest comes from Hong Kong and Greece. Goat skin prices remain unchanged.

BRAZIL: The official CICB national raw hide price index remains unchanged for week 18 at 2.06 BRL/kg.

VIETNAM: According to the national footwear association, the industry has secured good orders for the rest of this year. In Q1 exports increased by 16.1% compared to Q1 last year and reached a value of 1.73 billion USD. The plan is to expand business with the USA and Japan while efforts were mainly aimed at Europe till now. The US will abolish an import duty of 14.3% which will make a big difference. Japan has already showed interest last year by sending over trade delegations. Orders have already been switched from other countries to Vietnam by Japanese buyers.

GERMAN CAR SALES: Car sales in Europe (incl. Germany) this year have been very disappointing as we already know. However sales of German luxury cars in the world are booming. Mercedes reports a monthly all time high growth figure of 11.7% for April. Audi and BMW also show very good results. The difference between luxury cars and 'normal' cars is amazing. BMW makes a 5200 USD profit on every car sold while GM brand Opel (Vauxhall in the UK) loses close to 2000 USD on every car they sell.

BELGIUM: The hides which remained unsold at the Brussels hide auction a week ago, have meanwhile found new owners. Prices were the same as at the previous auction a month ago and for a few lots even better prices could be obtained.

THE SAUER INDEXES: Maybe to the surprise of many (including my own) the stubborness of European hide prices to decline has outwitted the softer prices in the US and pushed the upholstery hide index even a bit higher. The general global hide index is only 0.1 point down. Keep in mind also that these figures cover the movements of the last two weeks. The first week of those two, there was no sign of lower prices anywhere yet.

UNITED KINGDOM: At least one abattoir increased its prices instead of lowering them as most people expected. The GBP gained 3-4% on both Dollar and EURO while sales have not really been influenced. This means European and Asian tanners were prepared to pay that bit more that was needed to get the hides. The lamb skin market is weaker again.

: 3 May: UNITED STATES: There is nothing to add to our comments of yesterday so we shall not waste your time. We just have to wait to see who gives in first, buyers or sellers. An upward correction for the kill this week to 632,000 head may give an extra point to buyers in the present psychological warfare. There are some new unclear movements in the prices of branded cows while those for dairies and native cows are down on the low side of the going price range.

UNITED KINGDOM: Italian tanners have bought at prices 1 to 2 pence below those of last week. Buyers and sellers agree that the market is somewhat down.

Today is the big day for abattoir prices. Negotiations should be finalized for the prices of this week (already late and in some cases postponed till today by certain abattoirs fearing they will come down and benefitting from a few extra days of the high prices?) and for others they need to be set for the whole month of May. General consensus is they must come down. Next week we shall know whether it worked that way or not.

BANGLASDESH: Bangladesh is now practically non stop in the news on many news channels and websites and always for the wrong reasons. Factory fires, buildings collapsing, bad treatment of workers, environmental disasters, etc. Still the export promotion council reports that for the period July 2012 - March 2013 leather exports increased 23.5% in value to 688.1 million USD. Within the total amount, finished leather went up 15% to 273.3 million USD and footwear gained 19.4% to 311.5 million USD. What else can we conclude from these figures than that all the horror stories do not chase away the product buyers. They shout the situation there must change but they keep on buying a

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