What happened this week: The market was relatively quiet due to the holiday on Wednesday and the abattoir buying period. Trading was reasonable on the overseas export side while local business was quiet with most people waiting for the outcome of the abattoir buying first. Most of the interest was again on bulls while cows where quiet due to most of the Asian countries being on holidays and Italy trying to depress the market by the utmost. Prices are bouncing all over the place which large discrepancies between bid and ask as well as between the various origins. We would consider the market to be another 3-5 % down on previous sales. In total we would call it a fair confusion in the market. Abattoir prices – as usual – came not down by anything close to what we would call adequate and the declines where around 5-8 % only and so the margin erosion continues. This is probably half of what it should have been. Political games continue to influence the market and do not allow market reactions to take place as the market would require. The disorder is also supported by inappropriate bear market behaviours from some tanners who try to get rid of their frustrations by

terrorizing their suppliers. However, this is nothing new in this type of market and seems to belong to the game. Positively can be remarked, that at least European side leather tanners have booked good leather orders over the last weeks and need hides due to low level inventories. They try to take full advantage of the market by buying only hand to mouth in the hope that next week and the week after hides will be cheaper again. Whatever is bought has to be shipped the next morning. Latest news from the auto sector were mixed and mainly German car manufacturers enjoy better business than expected while others report production cuts. For leather consumption things look quite steady in our part of the world. Furniture leather remains problematic with sliding finished product prices due to production overcapacities in the market. Mainly the mid/lower end is suffering severely. Over the next weeks further trade shows will be held and might give us some more information about the near future for furniture leather consumption. This weekend the Paris Leather Show celebrates its revival and with quite a few top quality tanners showing we might get an impression there about

this specific market segment. All in all this wee only added to the total confusion and did not help at all to clear things up.   The kill:  Due to the holiday on Wednesday the kill was reduced but not more than the missing production day. For the coming weeks high levels will continue. What worries us a bit are the light average weights on bull which are unusual for this time of the year. We have no explanation for this. What do we expect? Although it might sound strange, but we are still not too pessimistic. Price structures between markets are not in order and this makes live difficult, but on the other hand we feel that the market is in much better equation than what many people think. With all the difficulties but hides leave quickly the warehouse and if this continues overhanging quantities will erode faster than expected. Consequently also the price pressure will ease. This needs however, first a settlement between the prices between the markets and this is not going to happen in the next days and will depress our margins. So the next weeks will not be easy to handle the business, but we maintain our position that things should settle in the next 4-6 weeks and the correction phase will be over.