What happened this week: In many ways we were very exact in our predictions. Trade slowed down this week with the only exception of the regular clients which were taking their normal volumes. Fortunately enough we enjoy in the difficult times the steady demand from the successful and constant clientele we deal with on a long term basis. To agree on prices was here and there a bit difficult with the massive price pressure deriving from the weak USD until Thursday and the weaker overseas markets. However, at the end sales were concluded, prices were not sufficient, but in view of the situation with most customers it would not be fair to complain  with the arguments they have in hand. Margins are massively eroding as once again abattoir prices for May were falling only fractionally and the decline in the avg. revenues left with us. Due to the low kill negotiations with butchers were very difficult again, took longer than ever and at the end the trade had to give in to get something finalized eventually. Not very clever in view of the problems. The second quarter has never been much fun and so is this one. For the first time in about two months we had almost no interest from

Asia for dairy cows. Mainly because we had to ask higher prices in view of the ever declining USD. Hopefully the USD falls back a bit because we still sense reasonable demand if prices could be decently below the USD 50,00 mark. Some business we were still able to generate in Asia in low grades. Prices were also here not very attractive (again the USD), but still better than nothing and keeping the customer in the present environment. The rest of sales were just coincidences across the board. Adding the numbers also this week couldn’t be called as bad as the present mood in the market. However, we start to share the worries about the situation in China. The domestic trade in leather and leather products seem to be more and more hindered by the SARS situation and the problems seem now to get more serious by the day. We always considered the domestic consumption in
China as a very important factor for the global leather demand and if the situation doesn’t improve shortly the effects have to be considered seriously. A temporary slowdown wouldn’t worry too much, but when the delivery and money cycle will be really disrupted, it would be ignorant not to consider the problems for the hide market – in particular in  the USA and Australia.

Their  rising concerns can be seen by falling prices and a substantial increase in the offers made to Europe. Also not really a good time in the year to start this. Car companies display optimism, but the hard facts of sales are in most cases not really promising anymore. So, despite the few good clients enjoying good orders, falling raw material prices and rising profits the overall tone remains concerned. We also feel slowdowns in payments, what is not promising before the summer already. The kill: Slightly better this week, but not really worth to mention. A bit positive is the fact, that live cattle prices have been falling and some experts speak of reasonable cattle availability for the second half. What do we expect?  The pressure will persist as long as the situation in Asia doesn’t improve. It will also be interesting to see when tanners are going to realize, that hide prices have become attractive and in the long run we are starting to enter the lower end of the price cycle. At least we are now reaching safer ground and the reduction potential is decreasing. Fort the short term however,   - also in view of the upcoming holiday period - the erosion of prices will continue and any rebound has to come from activity in Asia or vastly changing conditions on the currency markets – a firmer USD.