August 2006 Market Report

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Fur Market Report: August 2006

By Parker Dozhier

Results from the May and June wild fur auctions were met with cheers and tears.

International buyers attended in record numbers at the May sales. Many of the new buyers were from Russia. Any time new players enter the market, the added competition is welcomed.

Fishers and muskrats posted record highs. Spotted ‘cats eased a bit, but demand is steady. Beavers have reached a comfortable price level, with consumer acceptance absorbing all grades and sizes. Additional dressing capacity in China has helped the beaver market.

Ranch mink continues its gradual upward spiral. That’s good news, because more garment producers are beginning to explore using wild fur. On the downside, they are often buying with the low-income consumer in mind. For example, many Russian buyers are seeking bargain-basement raccoons.

While a fairly large number of unsold raccoons is available, they are beginning to move through the auction houses either under the gavel or through private-treaty negotiations.

When to sell and when to withdraw a collection often presents a dilemma for auction officials. They evaluate each lot and estimate a value prior to the sale. The estimate is based — among other things — on previous sale results, industry trends and the availability of goods. Then too, if some of the primary users for a particular article are not in attendance, the entire collection might be withdrawn.

By withdrawing a collection, the market can be protected — to a degree. Hopefully, the goods will sell at a later date at or near the evaluation.

Ten percent movements up or down are always expected. However, astronomical drops are cause for immediate action. And that was the case with otters at the May auctions.

While a few otters sold, they were mostly the smaller sizes and dark skins — obviously not for the primary Chinese market.

Otter Market Crash Results From Chinese Import Problem

The problem seems to be an internal one in China, and our otters can no longer flow freely into the country.

Repeated calls to the Chinese Embassy in Washington D.C. resulted only in a refusal by the Counselor of Economic Affairs Office, Tian Jun, to grant an interview. E-mails to the CITES Secretariat’s offices in Geneva and Bern, Switzerland, and to the Chinese CITES office of Scientific Authority in Beijing have gone unanswered. But here’s what we do know: China became a signatory nation of the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) in 1981. Canada signed the international treaty in the late 1970s, about the same time as the United States. There are now 169 member nations of CITES.

CITES establishes trade restrictions based on the recommendations of the individual nations’ scientific authority and management authority, which are required to become a member nation.

There are three levels of CITES management — Appendixes I, II and III. Appendix I are endangered species such as elephants, tigers, pandas and many rare plants. Appendix II are species such our river otters, bobcats, lynx, wolves, alligators and ginseng, which require monitoring and a controlled harvest to ensure they will not become endangered. Or, they look like an Appendix I species. The seldom-used Appendix III either look like or are being considered for Appendix II.
China was a fair-weather member of the General Agreement on Tariffs and Trade (GATT). But China seldom lived up to the treaty’s obligations, and often imposed tariffs and import duties on foreign goods.

When China threw open its doors to international trade in the early 1980s, trade with the free world was totally dependent upon being a signatory nation of the World Trade Organization (WTO), which was the predecessor of GATT. Unless China signed on to the WTO, their letters-of-credit, currency and contracts were considered worthless by banks and businesses in other member nations.

If a nation signs one treaty, all other international treaties they have signed must be equally observed, thus the apparent problem — CITES.

Chinese garment makers are buying high-priced ranch mink, purchasing coat-type raccoons, lower end and small beavers, muskrats and high-dollar fishers — none of which are CITES-listed species, so they are being moved openly and freely into the country.

While some fur market watchers have suggested that because of high prices in previous seasons — particularly for pales — we have over-produced otters this season, nothing could be farther from the truth.

Otter pelts from around the world found their way into Hong Kong, and then to China. Giant otters taken by commercial fishermen in Brazil, Asian short-clawed otters taken by trappers and hunters, southern river otters shot by Argentine hunters, smooth-coated otters from India and hundreds of pelts of other species of otter have turned up in seizure records. Interpol’s Wildlife Crimes division has devoted considerable effort to these seizures.

The export of fur and leather products are of vital interest to the Chinese government. In 2003, the most recent year with data available, China exported $17.67 billion worth of these products. Last year, China reports a $130 billion trade surplus. Our legal otters are imported into China, but seldom, if ever, exported. Non-compliance with CITES, which China has been cited for many times, jeopardizes China’s WTO status.

This CITES problem has been simmering on the back burner for about a year. The Dalai Lama’s recent rants merely turned up the heat. Last year, in August, Chinese CITES officials hosted the “Silk Road CITES Enforcement Seminar.” All 12 Asian member nations of CITES attended.

In June, officials with the government of the People’s Republic of China, along with those of CITES, through its embassy in India, issued a proclamation stating that those arrested for smuggling CITES-listed species into the country would be subject to “life imprisonment or death, concurrently with confiscation of (his or her) property.”

China is not going to jeopardize its WTO status for the importation of otter pelts, legal or otherwise.

The dilemma we face is that Chinese wildlife inspectors wouldn’t know an illegal Brazilian giant otter from a legal North American river otter from Alabama.

However, the problem is being addressed. In a June statement, China acknowledged 12 areas of increased CITES involvement and seven issues to be corrected by customs. Paramount among them is the ability to tell one critter from another.

They’re working on it. How long will it take? We don’t know.

Next season, roll up your otter pelts fur out, put them in bags, and freeze. Let’s wait this thing out.

Fur Broker Pleads Guilty to Bid-Rigging

David Karsch, a New York fur broker, has pleaded “nolo contendere” (essentially guilty) of conspiring to bid-rigging otter pelts. He was representing Chinese fur merchants.

The initial incident was brought to the attention of the U.S. Department of Justice by Donald Blahut, former chief financial officer of Fur Harvesters’ Auctions.

Karsch faces three years imprisonment and a $350,000 fine. Sentencing is set for Sept. 18.

The aging Karsch has agreed to cooperate with the FBI in its ongoing investigation into fur auction bid-rigging.

You can’t have a conspiracy with only one player. Stay tuned.

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