What happened this week: The week was a very small step further into normality. Interest started to become a bit more regular and in particular for cows a lot of sniffing around was seen. With a number of regular clients sales for dairy cows were concluded. Also this week it was the lucky hand in the currency market and the final decision if a sale came out right or wrong. However,  in general selling prices are still not satisfying, although a bit of the massive price pressure seen in the last weeks 2004 has been lifted and buyers are not seriously considering anymore to bid the market further down. Some – and obviously mainly hide suppliers – in the trade are gaining confidence for a market turn around, but their only argument is the lower kill of the first week of January. At least for the moment tanners do not seem to be pretty much impressed by the reports about the slaughter and indeed one should have learned from 2004. The tanning industry in general is today much more in the position to substitute origins and with little prospect for rising leather prices until the next change of the season disposition of the tanning industry to pay more for their raw materials is still pretty limited. Only a real

and substantial global shortage of raw material could change the attitudes. So, far the leather market and prices are the dominating factors and the hide market has remained pretty unimpressed by most of the changes on the supply side.  Without a recovery of leather prices we find it difficult to foresee any potential for a significant increase in raw material values in the short term. From the tanning industry still very little news are delivered. Shoe and better quality leathers seem still to be in reasonable demand, while upholstery is still not producing much positive news, while here price is the dominant problem. One could have the impression, that 2005 is not really going to change very much in the leather business. The fundamentals remain the same and the focus – at least for the European beef and hide industry - will move much more to the changes in this part of the pipeline. The restructuring which started already in 2004 is accelerating now and will alter many of the traditional structures. For the global industry as such it will not mean very much eventually and definitely not for the movement of the markets. The industrialisation of the industry, larger and more

specialized productions will certainly change more, than anything else. For the short term business we think, that the decisive point is going to be the inventory and order situation of the Asian furniture tanners. Whatever the situation will be it will come to the surface in the next 4-6 weeks and this will also guide us the directions for the time until spring/early summer. The kill: The production shock of the first week was a bit eased in the second. The kill returned to more realistic levels, although still well below normal with plants remaining closed for entire days. So it will still take at least another week, to refill the pipeline of fresh hides to a normal level. It seems, that the kill is going to remain now steady for some weeks and we have to get used again to a generally lower supply.  What do we expect? We think, that also in the next week the market activity will continue to normalize. Some Asian tanners should still take some purchasing decisions and also the Mediterranean tanning industry is due to show up for some business. We don’t think, that this will have much effect on prices yet, but the downward pressure with the present USD exchange rate is gone and stability has been gained. Higher prices? We remain sceptic at this stage.