What happened this week: It was a week of mixed emotions. In general lost the demand some of its steam and in particular the main and driving forces of the past weeks, i.e. Asia and Italy changed to a lower gear. Market activity and daily work however did not dry up completely and the demand for reasonably priced light weights remained very strong and how we finished before the summer holidays we continue now. Italy, India and China are still showing strong interest for these types of materials. This is on one side good and confirming the solid performance of the leather demand for leathergoods, handbags and shoe upper leathers on the other side the bad news are that the supply base is getting mmore and more limited. If this situation is going to persist tanners will eventually either have to change their raw material sources or to speak with their clients if they can use other, heavier and larger raw materials as well. Just looking a year back there was plenty of demand for the heavy end while the 15 kg down market was almost completely neglected. In the standard items many were busy to analyse were the European market for bulls is heading. While there is a strong attempt to push the extra heavy end of the

quality market even higher many started at the same time to question if this has any justification and reward in the present leather business and if this could not run into a dead end eventually. For the moment are the structural changes in the continental European beef market the trigger for several political and strategical moves from the main market players and we do not think, that the present market volatility can be justified by the market as such. The present price spread between South German hides and the rest has at least created the return of ‘hide coctails’ as this is usually the case in such a market environment. It is, however, pretty unlikely, that this is going to last for long since the trade is too familiar with the situation in the meantime. For the moment tensions are high in this segment. Interesting is the rising interest for standard bullhides from the Middle and Far East. For one reason or another there must be more interest for better quality leathers of higher substance or a shortage of the standard material which should be normally used. Quite a few loads could be placed what has also lifted the sales pressure into the standard customer base a bit. Against all forecasts is also the USD exchange

rate the friend of the exporter again. Some of the price reductions which have or had to be taken can be balanced by these kind of windfall profits. A bit of the focus on dairy cows was consequently moved this week with Italy and Asia asking but not buying much. It was less a price issue, but more likely a break after the reasonable activity of the previous weeks. On can at least have the impression, that the inventory position is extended and with a normal level of leather business replenishment could be regular in the near future. The kill: Again nothing special to report. The kill continues the seasonal pattern and is gradually rising, but in small steps. As one could expect the process of consolidation is favouring the large enterprises and the kill is concentrating more on the big slaughter plants. . What do we expect? Despite the turbulences in the South German market we feel, that the market is in a decent equilibrium at the moment. What is sold is also shipped and what is sold outside the regular delivery programs is almost always quickly asked for shipment. However, the hides to meet theses requests are available and there is no shortage with the only possible exception of light material. So, no reason to expect changes.