Things take their course and there is no stopping the inevitable. Unfortunately, it remains the case that many in this industry find it difficult times and again to deal with the simple facts and accept them. At this moment, this is relatively easy, because the supply of raw material for some types and time is simply already significantly greater than the demand from the leather industry. The bad luck that often comes in these situations is the unpredictability, such as the Russian invasion of Ukraine and the extremely rigid decisions of the Chinese government to contain the pandemic. However, it must also be clearly stated that the situation was not much better even before the specifics and even without the events, the same market trend would probably have been triggered. May be it would not have become so intense and pronounced. Nevertheless, the situation is as it is now, and this means that at the beginning of the summer season we will have to struggle with considerable difficulties to pass on the raw material produced to the industry in sufficient quantities. The consequence is simply described: Falling prices! This is in itself neither now nor in the past anything unusual. We have already had similar situations, and the last time was in 2008 and 2020. This time, too, the markets will eventually return to equilibrium, only this time we are almost certainly dealing with a much more difficult path. The last few times, the market was saved each time by a strong flare-up of demand from China. Both times, the economic situation in China was stable and there was healthy liquidity available to supply cheap raw materials against the rest of the world. This time, the situation may be a little different. Perhaps the government is providing sufficient funds to the leather industry, but China is no longer the place with the most favorable production conditions and maximum reliability

for the supply of consumer goods. The supply chains and logistics are extremely disrupted and cannot be easily fixed within a short period of time. In addition, there is the question of how the domestic Chinese supply chains and transport routes can be repaired and, above all, how the Chinese consumer will react to the changed conditions. All of this is unclear and the uncertainty kept Chinese buyers from returning to the market and absorbing the surplus of raw materials. On top of that, of course, the timing is also really bad. We are facing the summer months in the northern hemisphere and during that time both the production of leather is low and the desire to hold larger stocks of raw material. So, in any case, there is a need to bridge the time until the end of summer in some way. Unfortunately, it seems that some of our local market participants have not yet fully realized the difficulty of the situation. Instead of reducing the prices at the abattoirs fast and clearly around as briskly as possible to generate stability built a competitive base, the courage is missing once more the realization also fast into appropriate action to convert. Business this week was very slow and only a few random deals in new markets were possible. The desire to shift production from China to other countries is more than evident, and some producers have to test other raw materials for potential new and interested customers first. Prices are softening, but only after the real conclusion of prices at the slaughterhouses will it be possible to find a level, and whether this will allow sales of the total volume of production, remains to be proven.

The kill

The kill continued to change little. The statistics for the first quarter show a decrease of the numbers in Germany of about 11%. This is slightly more than we expected, but certainly a result of the sharp rise in prices for live cattle and beef. We do not expect to see any significant changes in the next few weeks.