What happened this week: During the vacation time it is always very difficult to write reports.  As we expected, that activity was very low during the week and just further bargain hunting was recognised. Some bits and pieces were again sold, and the buyers came almost as usual from Asia.  Isolated sales of dairy cows were the only activity seen during the week.  In our case just some interest for sheepskins was in the position to create at least the impression that not everything was dormant.  The rest was again many mails asking for cheap material or bids which continue to be about 5% below acceptable levels.  Towards the end of the week, and this applies mainly for this Friday, the focus of interest moved away from hides and more again to general financial issues.  The continuously rising oil price and the sharp drop in the value of the US dollar triggered more concerns about the general market development in the second half of this year, than we have seen for quite a while. At least those who take a more long-term view on market developments begin

to wonder, if there could be more threat to prices and demand than what people are willing to accept for the moment.  At least in Europe it seems, that many of the traders remain more impressed by the demand for hides from China in the first half of 2004 and at least for the moment the lower kill has got more influence than any concerns about demand.  We think this could become quite risky eventually.  The month of August, not offering a real market place and a clear picture about demand and leather business has often been misguiding.  We said that already many times, but need to repeat, that without the results of the exhibitions in September it will be difficult to conclude which will be the long-term trend for the business and prices in the second half of the year.  We are still concerned, that many tanners, definitely not all, are buying presently just to fill productions but not to generate acceptable margins.  The purchasing power and the stiff competition due to the rising capacity in China is not allowing many to increase leather prices.  The higher oil price will not only reduce many family budgets, but also increase

the cost of chemicals and energy for the companies in the second half of 2004. Assuming that tanners can not increase their prices for leather and raw material prices do not adjust, we will have a tough time ahead and we have to wonder how the leather industry is going to react.  We can not think about any alternatives which would have a positive result for the raw material market.  Another news of the week was the official announcement of an old established Dutch tannery, that they will cease production by the end of this year. The erosion of the European tanning industry continues and should not be ignored. The kill: Nothing new this week.  The hot weather, holidays and reduced interest for beef continue to depress all slaughter numbers.  So, low weights and few hides. What do we expect? The main issue next week will be to find the right prices and the abattoirs.  The reduced value of the US dollar, low weights and little activity should make clear that abattoir prices basically have to come down.  Butchers will have a different opinion.  The selling market will not see any mentionable changes, due to a lack of activity.