What happened this week: As we expected turned the business activity very quiet this week. As usual in times of uncertainty and the period of the abattoir buying none of the European players – neither seller nor buyer – is willing to take decisions and so trading fell into agony, because also the Asian tanners were not seen due to their Lunar New Year holidays. So, all trading we are able to report was some sporadic buying of low grades by export traders to mix their ‘market cocktails’. In addition some side leather tanners also sniffed around and so also some ox/heifers and lighter weight bulls changed hands. However, volume was limited. There was also some more interest for dairy cows, but prices were not particularly tempting and so we preferred to wait. The program buyers for bulls are waiting for the outcome of the abattoir buying what is again like pulling teeth. While processor adjusted their bids to the present market levels and sales revenues butchers - as usual – are

not willing to accept the present need of adjustments and refuse the levels intended to pay. Nothing unusual, but this time pretty difficult as processors still suffer from the inflated levels paid in January and the market adjustments from the declining USD values. The butchers feel extremely comfortable in their position due to the low slaughter numbers and the pessimistic outlook for the coming weeks. So, presently the key question is: What is worse, the kill or the leather business – at least in Europe. One way or the other, one has to admit, that the situation in Europe concerning leather business is not particularly good. It seems, that we are sliding rapidly deeper into the process of restructuring of the leather business in Europe and the result of the shift of production towards Eastern Europe and Asia. The weak USD is also weighing on the export business and revenues, what was the positive part of the business of many tanneries. So, only those tanneries which have really invested into quality and marketing to develop their niches are indeed still running successfully.

However, this the minority. So, we can only hope, that the change of the leather season is going to support the leather demand in Europe, no matter what the final decision on Iraq is going to be.  The kill: Another sharp reduction took place during the week. Supplies are getting tight again to fulfil the running –just-in-time’ programs. For the coming weeks we have very little hope, that numbers are going to increase again. Before mid March at least we are not too optimistic. What do we expect? The coming weeks will be tricky. Most of the players have been or are prepared for price declines. Strictly subject, this is not going to happen, due to the decline in the slaughter, it will be very difficult for the players to change their minds. We continue to believe, that market prices are not going to move very much, even though the sentiment has changed. Due to the reduced kill and the firmer trend on the overseas markets a lot of the fear and pressure has been lifted for the moment. However, one should not forget, that the currency and business outlook in Europe, plus the Iraq conflict are still against a real turn to the better.