What happened this week: We are heading towards the holidays and it seems, that in Europe most are quite happy to have a break insight, because the first half of the year proved to be extremely difficult. Constant price pressure, the lacklustre consumer market caused for many operators in the field a difficult trading environment. Same applies also for many tanners and only a selected number of specialty and/or quality producers enjoyed the lower raw material price levels being able to hold their leather prices reasonably stable. The ongoing shift of production to China and the Eastern bloc is also reflecting and still a number of tanners fail to accept, that increasing volumes of raw materials find their homes eastbound. This shift has not only its influence on the daily price levels, but is also changing the established market rhythms in Europe. With less influence on holiday seasons and a lead time of shipments around 6-8 weeks the old market and trading patterns apply now to a lesser degree and other parameters, such as currency fluctuations and logistics get more into the

foreground and become increasingly influential. This were also again the determining factors in the past week. Asian demand remains intact, but price levels had reached their limits, despite the firm trend in the USA. Tanners can not follow the market anymore at least unless they can not obtain increased leather prices for the next season. At present levels they try to overcome the situation by buying again cheaper alternatives – as long their customer will accept the results eventually. The weak USD is now showing its effects and has increased asking prices for dairy cows by another USD 1-2,00 per pcs. which is at least for the time not being obtainable. So, despite underlying interest or even uncovered positions by some tanneries one had to bite the dust and to accept unchanged prices or to hope for better times to come. So, at the end the seller has to digest at present lower € revenues or to speculate for higher prices later in the summer. Sales in general were enough to compensate for the lower kill and with the addition of the renewal of the regular contracts in Europe sales numbers were

acceptable. So, the situation remains, that business in general is not even bad, but margins remain to be depressed and have to be corrected in the abattoir price levels eventually or in higher selling prices following a general increase in leather prices. However, this can – if at all - not be expected before September when in many cases new leather prices have to be negotiated. The kill: No change. For the next 6-8 weeks the kill will be running on the seasonal low levels. In some categories such as high quality heavy cows the shortfall is already difficult to manage, because for the moment most tanneries are still operating in full and want their supplies before the holiday shut down. What do we expect? No changes. The market is in tight control. Generally inventory levels are low and consequently price pressure deriving from desperate sellers or overstocked buyers can not be expected. Tanners are not willing or in the immediate need to lift their buying prices at the moment and sellers aren’t forced to move much either, so the currency might be the only trigger for adjustments in € terms – at least for cows.