What happened this week: It was one of the strange weeks which don’t really deliver a clear story. Until Thursday activity was slow. Asia was not really showing up and in Europe one was busy to lock the regular repetition of contracts in. Most of the interest and activity was consequently focussed on bullhides and only patchy interest for cows was seen from the major markets in Asia and Italy. From Thursday onwards activity started to pick up. Bids were placed, but under the market and were not acceptable considering that our purchasing prices had gone up. When negotiations came to a positive end, prices were mostly unchanged vs. the previous weeks and on the export side the exchange rate was offering again a helping hand to at least obtain fractional increases in € terms. All in all however, we would call the market steady for the week. Various of our colleagues and competitors are more optimistic than we are and expect firmer prices in the near future. Well, we fail to understand their analysis, but it may also be wishful thinking as a result of various strategical desires. As usual, players with more of a traders mind are not particularly happy with the great stability we have

had for a long time in our market. They want and need volatility to justify their existence and business strategy. Well, we believe that the times were one could be a market mover are over for long. With the growing importance of the mass producers markets are made more than ever by the purchasing power – until, until raw material is really getting short. And this is - on a global scale - not the case at the moment. Supply is presently enough to satisfy the demand of the tanning industry. Consequently are price variations more fine tuning between markets, qualities and currency fluctuation rather than a significant and fundamental imbalance between supply and demand of hides at the present time. Most price variations on the international market in the recent past have more been an adjustment to get the price/quality ratio back and a reflection of the massive price pressure on finished products rather than a surplus or lack of raw material. Any attempt for many month to achieve a sustained and significantly increased level of raw hide prices was always answered by a decline in demand and a shift of interest to other, more attractive origins. A clear sign, that enough raw material at adequate prices is still available and we do not see any change in this

fundamental situation. For the moment this means, that resistance against the present price levels is again mounting and it will be tough to fight this as only the argument of lower slaughter is on the side of the seller. The kill: The kill continues to ease into the low season. Not spectacular but remarkably are numbers sliding. This is however, neither surprising nor the real problem at the moment. Much more hurting is the sudden slump of hide weights. Avg. weights have fallen by up to 2 kgs what is not good for the hide calculation at all and no fun when one considers the increase price levels at the abattoirs which need correction. What do we expect: We still don’t expect the market to move. For higher prices demand isn’t good enough, for lower prices not enough inventories are burdening the warehouses. A higher USD rate and good news from the economy in the US help to defend against tanners attempts to drive European prices lower. However, we have to watch the US market now closely as the prices are starting to get close to ours and the price shelter we had for such a long time is starting to fade quickly. Europeans have to be aware, that world prices are still not made here. Next weeks show in Italy, might give us a bit more feel for the demand, fashion and market trend.