A positive start to the new year

1 February 2004




Despite an often sluggish 2003, the US/Mexican hide trade concluded last year with a very strong December. It is important to note, for the Mexicans, the official holiday season kicked off on December 19. So, for most US hide trading companies, considering this shortened month, the volume of material traded exceeded that of entire months earlier in the year. Perhaps this was truly a simple precursor to what was to come just a few short weeks later. Without question, the week of January 5 proved to be one of the best first weeks in my twelve years of experience trading cattlehides into Mexico. This can be attributed to three key reasons. Firstly, the discovery of BSE or mad cow disease in the United States was announced on December 23. At this point, the US/Mexican border was already closed for the holiday season. However, Mexican health and customs authorities immediately advised bovine hide byproducts, such as cattlehides, would continue to be allowed for import into Mexico. Of course, this was a great relief for Mexican tanners, as the USA continues to be their largest supplier of cattlehides. Although the cattle slaughter is currently still off by approximately 10%, the decreased number of cattle hides available for purchase does not directly affect the Mexican business. This 10% reduction affects primarily big packer material. Very few Mexican tanneries import exclusively big packer material due to the price. Lower grade hides continue to be available. Nonetheless, Mexican tanners do feel the increasing need to protect their inventories. In the case of the current BSE scenario this may change. Secondly, increased confidence in the US economy has translated south of the border. Towards the end of 2003, the strength being felt in the US, both economically and politically, was also becoming evident in Mexico. This renewed confidence also benefited Mexico. In fact, by the year end, the Mexican stock market reflected even greater percentage gains in 2003 than all major US indices. Finally, renewed economic and political confidence levels would naturally affect the currency in a positive manner. The Mexican peso hovered at levels between 11.30 and 11.50 to the dollar towards end of 2003. At the start of 2004, this level had decreased to 10.90, with opening levels decreasing daily. This 5% decrease has obviously allowed Mexican tanners to both immediately liquidate truckloads at the border and, without hesitation, to contract aggressively strong quantities for January and February shipment. Anpic is just a few weeks away. Traditionally, leading up to this very important event, January and February are strong months. Given what has taken place this first week of the year so far, it will be very interesting to see how the next few months pan out. Indeed, the balance of the 2004 hide-trading year continues to evolve. Ana Veloso Barrett Hides Inc



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