What happened this week: Despite all problems and concerning news the trade starts to regain very slowly the normal pattern of activity and production again. Not in all markets nor for all products, but the premium tanners gain speed. However, this has not yet reached the mainstream. The general mood remains consequently damped. Mostly the upholstery business is lagging. The trend seen over the past years, that the production cycle is starting later and later after the holidays has been even accelerated with the shift of production to China. For the raw material markets and mainly for those suppliers who are not tied into regular supply chains these periods of uncertainty and interruptions are difficult to digest and are weighing on the general mood. When in the past markets were substantially influenced by psychology this is fading more and more today. Short term direction can still be changed and short term movements created, but if one looks into the history of 2004 neither excitement

(BSE in the USA) nor pessimism or uncertainty (this summer) have had major impacts on the prices. Despite all variations, if one looks at the real volatility of prices over the past nine month we have rarely had a period in history were real revenues have been so stable as this year. What doesn’t fit anymore are the prices at the abattoirs which rose steadily over the year and do not reflect anymore the market reality.  In general  has been globally the balance between raw material supply and demand intact – at a given price level, but it remains the question if part of it was created by the production overcapacity built in China. It can be assumed, that we will soon know more about it. At the moment the decision is put on hold until tanners will  in the near future know if they can fill their drums with orders or not and decide how they are going to handle the results. Until then – and this could mean even mid October – the market will continue to be driven by uncertainties and individual decisions. Sales during the week have been further

Increasing. However, this almost without the Far East. Standard clients in Europe and again the Middle East were the driving forces behind the sales. Prices were more or less steady, but below asking levels. Cow sales were quiet due to the absence of Chinese and Italian buying. Isolated trades were more coincidental rather than planned and also slightly reduced levels had to accepted.   The kill: The kill improved again a bit during the week. After the lower level the week before. Prices for live cattle are attractive for farmers at the moment and in view of the changes in the subsidy policy the attraction to cash in before the weather deteriorates might be the reason. What do we expect? Everyone awaits the return of the Asian cow buyers. Although tanners feel, that waiting might save some money the attempt to hit the bottom has failed many times. We still think, that the price range valid for 2004 is still intact and business will recover when we have adjusted again to the lower levels of the range. Until mid October, however the air should be clean again.