What happened this week: The market continues to display a great deal of uncertainty. Activity increased a bit after the elections in the USA, but at the end nobody can be happy as the downward trend of the USD continued also after Mr. Bushs victory and increases the pressure on prices in the €-zone. With more interest at least more sales were generated and just from the volumes selling pressure did not increase any further. However, margins remain especially under pressure due to the currency developments. Revenues in € are either directly under pressure selling to the overseas markets or indirectly when hides are sold to tanners exporting leather themselves. One has to wonder how long the European industries can handle and manage the massive disadvantages arising from the currency relations not only against the USD, but also to the pegged currencies especially the Chinese RNB. With many companies forward covers are expiring at the end of the year and new calculations on the present exchange levels will not be competitive at all. Many tanneries in Europe with a high proportion of exports try to

defend themselves with purchases in USD, but the production costs remain still in the local currency and it does not seem, that the reduced import prices can compensate for this. However, time will tell. In the meantime the market remains strangulated by the situation and with every Cent of increase of the € European hides get less competitive. As far as market activity was concerned sales were effected as well as in Asia as well as in Europe. Surprising was, that the main interest from Asia was not for the traditional dairy cows, but much more for ox/heifers and bulls. We don’t quite understand the reason, because they are not the cheapest buy at the moment and it must be related to the demand for better qualities or to a change in the article structures. Cows were again dominated by the Italian market and without great enthusiasm further purchases were made. Prices did not fall substantially anymore, but a bit here and a bit there was enough again to lower returns and to question how much abattoir prices need to be adjusted again. No final conclusions with the abattoirs have been made yet, but as usual butchers are fiercely denying the

reality and fight for their own fortune to prevent abattoir price from the general market pressure. The outcome is still open and by the end of next week we will know more about it. The leather business seems still not to be on the levels one should expect at this time of the year, despite a moderate increase one can sense.   The kill: Slaughter numbers remain on the seasonal higher levels. It seems, that we can still expect some further increases and for the rest of the month we can expect high levels. We still wonder if and when there will be the expected numbers of bulls which should still arrive at the abattoir before the end of the year.   What do we expect? With the level the USD has reached the pressure on hide prices will persist. The kill remains high and the demand is at best steady in the standard categories. Consequently there is no room for higher asking levels. If further price concessions need to be made – in particular for cows – will depend on individual inventory positions as well as physical shipping volumes to the Far East. Delays in incoming L/Cs will quickly increase the pressure on sellers to move product and this would mean jumping into the lions cage at this time of the year.