What happened this week: We find it extremely difficult this week to bring our thoughts in order. We find a lot of contradicting information and impressions this week and it would be too easy just to follow the herd in the general depression. Prices were lower this week on all categories as sales are only possible if one follows whole or in part customers ideas. We decided to follow regular buyers in part and generated a very respectable volume of sales. At the end we had to take about 2-5 % below asking levels and this was enough so far to sell whatever we wanted to move. All of the sales went to regular European customers. Some grades such as medium weight males can independently of the price still not find enough homes but these are fortunately the minority productions. Reports from the GDS were superficially bad and depressed. Insisting and reading in between the lines the results were not so bad anymore. Less sandals than expected and more full shoes were seen and also boots were plentiful. New colours and variations  were promising and balanced many collections showing more textiles and less leather. The reduced attendance from overseas due to the terrorist attack was in part

compensated by more interest from Eastern bloc countries which become more and more a stable factor of consumption and increasing volumes. Some voices also displayed positive opinions about domestic footwear demand in mainland China for the coming year. Around the hide trade, however concerns for the short term are growing. Several markets in Europe show signs of unsold stock and the increasing kill bolsters supply additionally. Problematic is also the wide spread of prices all over what requires in our view adjustments and corrections to bring several origins back into line. With the general market tone, corrections will be more on the downside rather than on the upside possible. Although we feel that leather business with many good name tanners is stabilizing if not being much better now, it seems that many tanners try now push markets back as much as possible to balance their first half years losses in the coming month. Those who have secured their leather sales and prices already seem to have ideas of about 10 % below today as being an adequate level to replenish their stocks or to cover against their leather contracts. Very clear and

obvious is the sharp decline in the top quality end. Luxury has a bad time (stock markets), the reduced expectations for the US consumer market, and reduced demand from the aircraft industry can not be compensated by eventual better sales in the East. The kill:  The kill continues to increase. Bad and very wet weather increases the offer of cattle and we expect this to continue.  What do we expect? Anything else than a further correction would be a surprise. The news is that this will be more on bulls than on cows, or better said more on expensive hides than on cheap ones. The spread which had been widened over the past years will in our view narrow again and might return to levels which we had in the mid 90’s. North German cows seem to be more adequately priced and may move more in sympathy than in a real market need. South German cows may react more pronounced due to the above mentioned restructuring of prices. All price movements, have however to be seen in the international price context in will consequently be influenced by the reaction of the other markets. Watching a bit further ahead we would not be surprised if this is the final lap of the long term correction since May.