January 2007 Fur Market Report

TR0107.jpgFur Market Report: January 2007

By Parker Dozhier

It’s official — or at least as official as any ruling by the Chinese government can be — the issue of excessive VAT and import tariffs on furs has been resolved.

According to the China Leather Industry Association, which is more or less a government agency, raw fur and leather goods will not be subject to the new taxes.

In years past, raw furs entering China but destined to leave in the form of a finished product were eligible for a program allowing a tax exemption. Other countries — Korea, for example — have similar programs. These programs are usually termed “Held In Bond.” It’s a logical concept, because the raw furs create jobs.

In a report from the Chinese Import/Export Corporation, last year’s exports of finished fur products reached $1.87 billion. However, the report does not break down the exports by type — hats, trim, coats, novelties or merely dressed skins.

A large part of the confusion centered on the term “finished product.” Is a finished product a dressed fur, or is it only considered finished when manufactured into a garment?

As of Nov. 6, 2006, companies that had been exempt from the tax will continue to be eligible for the program.

If the earlier ruling had stood, it would have added 25 percent to 30 percent to the cost of producing a fur garment. I believe we all know who would suffer the lion’s share of that tax.

While we might have dodged the bullet on the VAT issue, we haven’t been so lucky with that other lingering Chinese problem. The issue of our river otters entering China remains unresolved.

My contacts with the U.S. Department of Agriculture in Beijing report that the issue is being addressed. But what that means is anyone’s guess.

Herman Jansen, Chairman and CEO with North American Fur Auctions, is on an extended trip to China. While there, he is meeting with Chinese government officials in an effort to resolve this critical issue. His effort might bear fruit.

At home, weather conditions have hampered harvest activities in many parts of the U.S. and Canada.

An extraordinarily late freezeup in some parts of Canada has curtailed access to highly productive marten, fisher, beaver, otter and lynx territories. The ice on rivers and streams must be thick enough to support the weight of snowmobiles or dog teams in order to establish and service productive wilderness traplines. So far, it has not been cold enough to allow access.

Meanwhile, heavy snows in late November and early December interrupted U.S. trappers in the Midwest and Northeast.

Following a season with favorable prices, particularly on muskrats, marten, cats, fishers and beavers, it was widely assumed we would flood the market with wild fur this season. Set those fears aside.

The recent resurgence of fur apparel and accessories in the high-fashion world has produced remarkable results. Expanding economies, particularly in developing nations, more discretionary income, a cultural desire to demonstrate status and the quest for fashionable warmth has brought us our new Fur Boom.

While this did not come about overnight, it occurred rather quickly. For several selling seasons, we watched as ranch mink and fox prices increased. It was only a matter of time before consumers and the designers — whose careers hinge on being innovative — sought something other than ranch mink and fox.

Today, the high-fashion industry is focused on our spotted cats, marten, beaver, fisher and the best coyotes. The other furbearers we produce are either headed for the trim trade or are used as utilitarian furs.

In many ways, the wild fur trade rides the coattails of the ranch fur industry. But we offer the designers and consumers something different. And now, as we are seeing, that is something they want.

Weak items in our market are raccoon, nutria and commercial coyote. Our otter, particularly the pales, are trapped in a political quagmire beyond our control. Wild mink and red fox compete with ranch goods in the trim trade. Few trappers have seen a ranch mink. They look like small otters. They’re huge.

Despite the problems associated with these struggling items, the U.S. dollar continues its downward slide against most foreign currencies. This downward trend only helps fur prices.

Longline trappers also got some relief as gasoline prices moderated before starting to climb again. That hike in gas prices is, of course, directly tied to the weaker U.S. dollar.
Bob McQuay, of NAFA, summed up the season so far with a comment echoed by many fur buyers.

“Thus far, it’s really been a mixed bag,” he said. “In some areas a little more, in others a lot less.”

This season seems to support the theory that weather controls the fur harvest. But trappers should also realize weather plays an important role in the movement of goods at the retail level.

Two season ago, we witnessed the impact of an extremely mild winter in Russia and Eastern Europe, and its affect on the raccoon market.

For the past three weeks, the weather in St. Louis, Mo., has been colder than in Moscow, Russia. The Scandinavian nations are reporting the mildest early winter on record.

Surely, by January, Moscow will be buried in snow. At least let’s hope so.

McQuay reports significantly more interest in NAFA’s Private Treaty Catalogue this fall than in the past. Additionally, he points out that a few years ago, six to eight Russian buyers usually attended the February auction. Last year, there were 67 in attendance, and all were active buyers. Even more Russian buyers are expected this year.

Russia is much closer to becoming a member of the World Trade Organization. Once a member of the WTO, expect to see Russia become even more open to foreign trade.
While China is certainly the leader in fur consumption today, many in the trade believe the greatest potential for expansion lies in Russia.

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