What happened this week: As far as business is concerned the week has continued the pattern of the previous ones with steady and normal trading activity but little excitement. Tanners are busy mainly filling short term production needs after receipts of finished orders and colour instructions. We have little faith in substantial improvements in the leather business, at least in upholstery leathers. On the positive side, at least the Cologne leather fair has finally generated several furniture leather orders and isolated purchases of cows as a consequence. As pressure on finished leather prices continues, production activity may increase slightly. We are still trapped by price restrictions and tanners are buying hides at prices which fit their calculations. So far they are not forced to buy raw material in order to fill productions at an uneconomical cost. Consequently, tanners are not only confident that they will find sufficient access to raw material but also that the price remains a more determining factor than production. Sales this week focused once again on cows. Some activity has been noted in the Far East and Italy at recently observed levels. In Asia fractional advances were obtainable with the help of a stable dairy cow market in the USA. Asian tanners are currently also preparing for their holidays and closing their books in the run-up. The main news of the week has certainly been the announcement of one of the leading German contract tanners that they will cease their beamhouse production in the coming months and focus on their finished product division. Consequently, the speed of the restructuring process among European tanners has been accelerated. EU bureaucracy, EU-laws and local environmental policies are demanding reviews of long term strategies. This tightening of conditions is, as usual, first being introduced in the North of Europe but it is only a question of time before changes take place in other parts as well. The rest of the market has been fairly quiet and the only activity worth mentioning has been in low grades again among heifers and lighter material. With the start of winter production, the traditional timeframe for the calf and kips demand is now in. From what one can gather there is a fair chance for a reasonable season in this segment.

The kill: The kill continues at normal seasonal levels. German cattle count in November 2004 is showing the expected reduction of 4% in the cattle herd with a 12% reduction in bulls, which we feel is going to extend into December and the first quarter of this year. This is not a very bright outlook for the kill in the near future. Cows are down by 2%, in line with higher milk production per capita.  

What do we expect? The market at the moment is still in balance with no obvious trigger to move prices in either direction. As long as the kill stays at present levels, the demand will be easily covered and we believe there are still enough salted inventories capable of filling short term gaps shall any appear. With the dollar keeping to present levels the downward pressure also remains very limited. Consequently, we do not expect a significant shift in prices.

Type	Weight range	Avg. green weight	Salted weight	Avg. weight salted	Price per kg green weight	Trend
Ox/heifers	15/24.5 kg	22,0/23.5 kg	13/22 kg	20/21 kg	€ 1.45	Steady
	25/29.5 kg	27.5/28.5 kg	22/27 kg	25/26 kg	€ 1.35	Steady
Dairy cows	15/24.5 kg	22.5/23.5 kg	13/22 kg	20/21 kg	€ 1.40	Steady
	25/29.5 kg	27.5/28.5 kg	22/27 kg	25/26 kg	€ 1.27	Steady
	30/+      kg	33.5/35.5 kg	27/+   kg	29/31 kg	€ 1.18	Steady
Bulls	25/29.5 kg	27.5/28.5 kg	22/ 27 kg	25/26 kg	€ 1.50	Steady
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