Fur Market Report: August 2007
By Parker Dozhier
When ranch mink prices tumbled earlier this year, the reaction by users of wild fur was instant. Nowhere was it more apparent than the movement of muskrat on the early international auctions. Huge quantities of skins were withdrawn because of the lack of interest and unreasonably low bids. Country prices began falling within hours of the news.
For three years, ranch mink prices had been on a steady upward spiral. Some market watchers claimed a downward adjustment was long overdue.
Increasing crop size is often associated with oversupply and lower prices. Others attributed the lack of clearance and the lower prices as merely a result of the mild winter in Eastern Europe — particularly Russia.
It took more than three years for our muskrat markets to begin responding to the advancing cost of the lower grades of ranch mink. Manufacturers were slow to accept this suitable substitute. But finally, they did.
At recent auctions, American and Scandinavian ranch mink prices rebounded, and have now recovered to the previous highs. Equally as important, clearance has been close to 100 percent. And we’re talking about millions of mink.
It appears the gloom and doom attributed to a mild winter, lackluster sales and overpriced raw goods has been laid to rest.
How the market will play out with the huge carryover of muskrat has yet to be seen. Auction officials indicate some private treaty movement. Early fall wild fur international auctions could offer some relief to the carryover collections.
If the sole contributing factor to the unexpected plunge in muskrat demand was the mild winter weather in Europe, then what explains the continuing robust activity in our raccoon markets and the rebound of ranch mink?
Russians certainly enjoyed a mild winter last year — in fact, the mildest on record. It doesn’t matter if raccoon are sold to makers from China, Turkey, Greece or Russia, most finished products will ultimately end up in front of Russian consumers.
Russia is the largest fur-consuming nation. If it experiences another mild winter, some people in the fur trade believe our raccoon harvest will begin backing up at collection points. We’ve seen it happen in the past.
Many buyers are still holding sizable muskrat collections, tying up capital that would otherwise be available at the beginning of next season to buy fur.
A couple of buyers told me they have yet to fully recover from the otter dilemma.
Most of the buyers I have interviewed indicate they were pleased with clearance this past season, but are unwilling to discuss the upcoming season. Several high-volume raccoon collectors claim their profit margins were razor-thin after labor cost and travel expenses are factored in.
Country fur buyers are expected to approach the coming season with more caution than usual. Skepticism is understandable. Increasing fuel, travel and labor costs cut into profits.
The early winter weather in Eastern Europe is expected to set the tone for the buying activity in the country.
It certainly looks as if we’re facing a shaky market that’s weak at best, and getting weaker. But that’s only half the story.
Consumers in Russia have more money in their pockets than they’ve ever had. Economic growth is at an all-time high.
Reportedly, Russia’s economy is expanding at 8 percent to 10 percent annually. I strongly suspect the underground economy would push that estimate up considerably.
The Hoover Institute attributes this phenomenal growth to one thing: Oil.
Foreign investment money is pouring into the country at an unprecedented rate, and that is creating jobs. Good-paying jobs are spilling across the country in many different directions.
With money to spend — many for the first time — these people are looking for goods to buy. Furs are at the top of the list.
While we might agonize over the price of gas at the pump and $70 per barrel foreign oil, ultimately, that money finds its way into many different hands.
Without a doubt, another mild winter in Russia will dampen some of the retail movement of furs. But that same mild winter would cut heating bills and leave money on the table. Hopefully, some of it will be spent on furs.
China, the world’s second-largest consumers of fur, is enjoying the same type of phenomenal economic growth. And China will host the Olympics next year, which will bring in hordes of tourists with money to spend. A lot of inexpensive Chinese fur products will be going home with many of them.
The coming season could shape up to be really interesting.
So despite a mild winter, economic growth in Russia and China is driving the fur market. I can find no other explanation for the rebound in ranch mink prices and continuing good clearance of our raccoon crop, as well as almost everything else.
As for the muskrat carryover: well, let’s just wait and see.