What happened this week: This week was entirely political. With our expectation that the market would be very quiet and with the idea that prices would sidestep we  met  only half of the truth. While the cow market indeed levelled out with larger sales to Italy being reported, we saw the bull market plunging. A crucial combination between tanners trying to push the market down by the maximum, good slaughter for males and consequently fully sufficient supplies prior to the holidays and various hide processors expecting cash-flow problems if they don’t sell and deliver immediately created a highly explosive mixture which sent the market price gossip for bulls down by abt. 10 % over the week. The situation shows again the problem of the  fresh hide supplies. With no buffers available, oversupplies create immediate logistical pressures on some suppliers which they need to resolve by the price and so the opposite of what we see when kill is not enough. After all the turmoil we have now to justify things in the abattoir buying round. Purchasing prices have to fall by a minimum 25-30 % to reach levels workable under the present

conditions. Our regular readers know very well that we favour for a long time significant price reductions to return to workable levels for the trade. Now we get the double dosis. Tanners and some suppliers try to crash the market for short sighted reasons (s.a.). The consequences are not only positive and one can see already that the problems are now already spilling over into the leather buyers with everything coming to a hold. Will still believe that a moderate monthly decline over the summer to reach the bottom in September would have been more adequate. At present purchases are delayed all over the world as everyone tries to hit the bottom and tanners are fully convinced that they come back from their holidays seeing prices again lower to cover than all their needs at convenient levels. This could in many cases turn out to be a mistake. With the decline we have seen now, European hides are in international terms one , if not the cheapest product and will invite sooner or later buyers form other parts of the world. Subject we don’t see a market in further freefall like during the financial crisis 1997/98 what has no justification yet. We saw this week

again Asian interest what we understand as a preparation for new imports. We would not be surprised if from August on the dairy cow sales into Korea and China will be a factor again.   The kill: Quite active and here mainly on males. The percentage of bulls in the total slaughter has reached well above 60 %. It seems that due to good export business and beef demand farmers take the chance to get rid of bulls which we will miss than later in the year. Another explanation for the present supply and market situation. Over the next 2-3 weeks most of the country is going on holidays what should have its effect on the kill.  What do we expect? Next week we will finally know the new purchasing prices and consequently if expectations will be met. If we get close to the desired levels we expect a good round of buying as several tanners have indicated their interest to cover hides at lower levels. The business will be mainly focussed on bulls.  For the rest of the market we do not expect any major price movements anymore. With the firm US$ European hides look attractive now and will find their buyers within the seasonal frames. We think the market is now entering the final lap of the correction.