What happened this week: The market is still in holiday mood – at least as the European situation is concerned. However, the some tanners have already returned from their holidays and some keep also contact during their  vacation. Those few took the initiative and for quite some time the first larger sales in Europe were concluded. This was well mixed between dairy cows and bulls and it was quite obvious that the buyers decided to wait for better times – lower prices – but to lock in what they have and so they were realizing, that in the long run the purchase levels are still quite attractive. The rest of the market activity was again deriving from the Far East. Interest was once and again concentrated on dairy cows and supported by the firm market in the USA. Price moved gradually up again and using a bit of timing on the currency market revenues were favourable. In addition to this we saw again flurry of attempts of export  traders to cover shorts, but to cover their contracts which seem to

be around two month old at present levels cant be too much fun. More and more information available is increasing the impression, that we are in front of a decent quarter for leather business. In addition seems the inventory situation extremely different with many tanners around the world. Only few of the big players has the courage to buy strongly into the ‘depression’ of June/beginning July and only they dispose today not only of a fairly priced but also sufficient inventory which lays the base for a profitable outlook for the rest of the year. Many others seem to be insufficiently  covered and need now to decide if they buy hand to mouth or book larger volumes in the near future. Many will now wait for the Shanghai Leather Fair and the trips to Asia to try to get a final feel how good and stable the leather demand is for the coming months. We believe, that the demand is there, but it will be a tough time as prices are concerned. European prices look still reasonably attractive but margins in general are thin, so that tanners will have a difficult time to equalize possible price rises or to

compensate those which have already taken place. Worrying are the latest news about the cattle herd and slaughter in Germany. The official forecasts for the year in January 2003 have been turned upside down. From all what has been published this week we have to expect a double digit decline for the total year after a forecast of minus 1,7 % in January. Also the cattle herd has declined massively and fallen below 14 Million head. . The kill: The kill was slightly better this week, but still on very low levels. While the North of the country is returning to school this week we hope, that things will a bit better in this area. The rest will stay slow until the end of the month. The outlook is now grim for production considering the news noted above. What do we expect?  We think that the market for cows will stay firm due to low supply and sales effected. Without any further price rises however, as the market has run its course for the moment. The bull market will also turn to a firmer tone as European hides are attractive. Price movements will, however be still limited as we need the tanners to be back before the move can really be started.