What happened this week: The question today is, what you call ‘the market’ these days. With the growth of the bigger companies (tanners and manufacturers) and their increasing purchasing power other fall rapidly behind. Their position in the market environment is getting increasingly difficult and under the present deflationary conditions their margins are rapidly eroding and their order situation as well. So, we are presently in a situation where many tanneries – mainly in Europe - are in serious trouble. Lack of orders and the low season in front of them they are getting increasingly nervous about their future and the classical and easy answer is to complain about raw materials. Not only about the price, but also about quality, because somewhere the responsibility for their problems has to be passed. The bigger and successful companies join the party and try to take advantage of the situation to widen their margins by using their purchasing power to take advantage by absorbing the hides others have to

pass at cheaper price levels. They increase presently productions with a positive margin. So, gaining also cost advantages against the others which have the reverse effect. A situation which could be copied from the chapter ‘market theory’ in the school books. This tries to explain why ‘the market’ depends very much on who you speak to and it explains also, why the total demand for hides has not fallen but just shifted. With the move into the strong hands and their bigger control of the volume also the price control has increased and the buyers are enjoying additional arguments presently such as the Iraq war and SARS to keep raw material markets under control and to widen their margins. Yes, there was also hide business this week. Sales were again strong and in particular this week in dairy cows. With the recent move below USD 50,00 basis Asia buyers turned up by mid week, actively bidding and trying to bargain prices down into the mid 40’s. Obviously without too much success as yesterday a large round of buying took place in the late forties. Not a really good business, because of the decline in the USD value, but

significantly better than the pessimistic views many in the trade had before. Apart from the price remains the volume of demand impressive and the only reason for the persistent price pressure can be found in the arguments stated before. Demand for other hide categories was just about stable with larger contracts to be negotiated in the coming two weeks. The kill: As expected falling towards the end of the week and also for next week we have to consider low volumes. The classical European chilled hide supplies will be tight to be fulfilled in the coming weeks. Hide weights are now rapidly falling in particular in the female section, what is burdening calculations again What do we expect?  Not very many changes. Tanners will continue to try to depress the market. From the supply side and sales over the next weeks pressure could sellers should slowly but surely diminish. However, it will require a lot of positive news to lift the general fear and emotions from the market and so one cant expect any reverse trend yet. However, the downward pressure continues to ease and without changes in the currency market the weak/steady tone continues