Cloud Hangs Over Russia – October 2008 Fur Market Report

GENERAL OUTLOOK
What was shaping up to be a banner season for our wild fur markets might have just taken a serious turn in the wrong direction. This all occurred in one short month … actually it only took five days.

Those engaged in the fur trade do so expecting a comfortable level of economic stability. Considering the length of time between buying the raw furs and the finished products being placed before consumers, a long-term stable business environment is essential for the type of speculation required.

Vast sums of cash are invested, often for a year or more before any returns are appreciated. And more often than not the profits are razor thin due to the highly competitive nature of today’s fur trade.

When Russian tanks rolled into Georgia, billions of dollars of foreign investment flowed out of Russia overnight. The parts of the world embroiled in these events are the largest per-capita buyers of furs in the world.

Around the world, the garment makers, fur dressing plants, skin brokers and retail furriers are watching these events closely and wondering: What next? Is it over? Is Ukraine, the Baltic Countries or even Poland in the sights of the Russian Bear?

While open hostilities lasted a mere five days, it only took three days for $8 billion in foreign investment capital to be drained from the Russian economy. That was only the beginning. During the past month, one French investment bank has pulled $25 billion out as a direct result of the conflict. More importantly, the cash flow continues to pour out of the Russian markets as investors seek out “a more friendly environment,” as one analysis put it.

For business people engaged in the fur trade in Russia, Greece, Turkey or China, these events are viewed as unsettling. These buyers of our raw furs crave predictability and a stable business climate. A dark cloud now hangs over Russia. Only time will tell if the weather clears before the selling season gets underway. Such is the nature of our volatile fur trade.

When to sell? That question is foremost on the minds of fur harvesters this time of the year. Will the markets develop early, then peak, or even crash? Will a short harvest, and the ensuing shortages, create a strong late market?

Should the Northern Hemisphere, both here and in Europe, experience a warmer than normal winter this season, all bets are off. The catch will be larger here and retail sales will be down there. It’s that simple.

However, a mild winter in the U.S. and Canada, and the subsequent larger harvest, will likely result in lower prices later in the season. At the same time, a cold, harsh winter in Eastern Europe should move furs off the racks.

No doubt, there are standing orders for some articles already in the hands of seasoned country fur collectors. Generally, the orders are for firmly established prices, but even these offers are often subject to further negations when unexpected events arise.

Close attention to the weather here and in Eastern Europe is certainly in order this season. Web sites and larger newspapers are good sources for weather trends.

Early reports of retail activity from fur vendors will be slow coming out of Russia, Ukraine, Estonia and other major markets in Eastern Europe. My few reliable contacts with fur retailers in that part of the world generally will not give firm sales assessments until February or March.

So, one of our best indications of the depth of the market this season will be the December reports from the ranch mink and fox auctions conducted in the Scandinavian countries. These results will give us the only actual first indications of the direction of the market.

Prior to the results of these sales, most country buyers will be flying by the seat of their pants … clueless as to the real value of the goods they have invested in. These auctions will at least give country buyers the depth of the demand and some clue as to the early retail activity.

Ranch fur average prices have climbed to record levels. Should this trend continue, it would be a clear indication of consumer demand.

Unquestionably, ranch fur activity is a world apart from our little corner of the trade, but wild fur prices typically follow demand for ranch fur. Remember too, mink and ranch foxes quickly establish a certain degree of “sameness” with consumers and many of these buyers appreciate the uniqueness of raccoon, beaver, spotted ’cats, fisher, wild sable and gray fox.

When to sell is always a gamble, but then, so is buying early without firm information.

MARKET BRIEFS

BEAVER: The unique North American furbearer is gaining strong acceptance in all of the consuming countries. Beaver, either sheared or natural, is being used for fashionable hats and trim. Straight hair jackets and vests are reported to be hot items in the Eastern European markets. Understandably, buyers will approach this season with caution. Last year the uncertainty of the demand and cost of maintaining traplines curtailed production. Late activity had country buyers scrambling to put collections together. It’s highly likely we will see the same pattern this season. Late-season trapper auctions saw the highest average in recent years. Region 1 late (March/April) auctions saw beaver average over $30. Region 9 auctions posted averages ranging between $22 to $25. The lower grades and hatter types from regions 3, 5 and 11 averaged between $10 to $14. With the exception of the heavy shearable types, which will be taken by North American and high fashion makers in Western Europe, the remaining offering will be taken by China and Russia. If early Russian consumer activity is favorable, look for a replay of last season. This is particularly true in light of the fact the harvest numbers have been declining for several seasons.

MUSKRAT: Late season international auctions posted 100 percent clearance. This is goods news, even if prices have not reached the levels of a couple of years ago. Some buyers took the price drop on the chin and are expected to begin the season with caution. Watch the international ranch mink auctions closely. If there is good clearance and strong prices, all systems will be good for the late market. However, should international activity be slow to start or not develop, this item will suffer. Early activity will be focused on the goods from along the Eastern regions were opening prices are expected to be in the range of $3.50 to $4.50.

WILD MINK: There was a time when Italy and Germany butted heads for this article. The German market for wild mink has disappeared, so now we only have one major user: Italy. While the Greeks are taking a few for marketing in Russia, the competition is simply not there to push prices higher. Regions 1, 2 and 12 are expected to see opening prices around $20 for the larger males and about $12 for females. Regions 10 and 11 are expected to see tops of around $12 to $14. Ranch mink activity will have very little bearing on the wild mink market.

RACCOON: Trappers and hunters in Regions 12 and the northeastern areas of Region 10 will again find themselves in the “cat-bird seat.” These bright, long straight-haired, heavy goods saw some of the highest prices in recent years. Advances of 35 percent to 40 percent were common. Country prices of $35 to $40 and more were frequently reported for select collections. These are highly sought by makers from Russia, Turkey, Greece and China. This degree of widespread competition leads to rapidly advancing prices. If the Russian and Eastern European retail markets are as active as last season, expect a replay with further advances possible. Certainly, initially buyers will be somewhat cautious due to the unsettled nature of the market early in the season. Should an early, hard winter hit the northern tier states, demand will increase for the semi-heavies from regions 9, 10 and 11. Clear, bright colors are becoming more important with each passing season. This is attributed to the greater degree of sophistication of the ultimate consumer. They are seeking bright silver tips and glossy black guard hairs and bright underfur. Those with brown and yellowish pelage and muddy underfur will require dying, and therefore will sell at reduced prices, in some cases significantly less. Select semi-heavies consistently traded around $25 and more last season and should again with normal retail activity in the consuming markets. Coat types will continue to move, but this market will be set much later after buyers assess the take in the northern regions. Most of these coat types will be taken by China. Hopefully, in the coming years full-length raccoon coats will catch on and we’ll be back to the “good ole days” of $30 coat types.

OTTER: Everyone involved in the otter market is now in a wait-and-see position. The three years of carry overs are gone. Trappers and fur buyers were not happy with the prices, but now with the carry overs gone, markets are seeking a new price structure. Garment makers took a chance adding this item to the line. Now, they are waiting to see how well the products are received by consumers. Should consumers accept these articles — men’s coats, hats and trim — then a new pricing structure will develop. When, and if, higher prices are eventually realized, it will be for the dark browns and blacks. Southern pales, the vast majority of which are singed, will continue to be cheap. Considering the licking many buyers took on the “crash,” don’t be surprised to see a great deal of resistance, regardless of price. Most buyers of darks are expected to be willing to speculate on fresh goods in the $40 to $60 range for tops. South pales will see select straight hair goods move at $25 to $30. Singed goods may be difficult to sell.

RED FOX: The high fashion makers in North America and Western Europe are expected to take the top grades of heavy and semi-heavy types. Dark, cherry reds are what they’re looking for. Used almost exclusively as trim, one of these select skins at around $35 will trim quite a few coats or jackets and add significantly to the retail price. However, they compete with ranch fox, which are larger. The lower grades and flatter types are being taken by Chinese makers and will continue to move in that direction this season. Pales, those with frosty rumps and the flatter types will continue to be cheap. Most will be dyed and used in low-cost hats or as trim.

GRAY FOX: Prices had been advancing nicely for several years, then last season late international auction activity put a damper on movement. This is expected to be temporary. Auction officials attribute the lack of late-season clearance to market conditions in Russia and Greece. Apparently, the article continues to sell well, so possibly the major users — market makers — simply did not attend these late sales. A great many skins were withdrawn in order to protect the market. Regardless of the reasons, country buyers are expected to open the season somewhat gun-shy about this article. This too, is understandable considering the turmoil in Russia and buying into an unsettled market. Production numbers of this unique item are always low and this season will be no exception. Regions 1, 2 and Eastern 11 are expected to open in the range of $25 to $30, while goods from lower 11, 5 and 3 can look for opening offers of around $20 to $25. Considering the limited anticipated harvest and the questionable nature of the market, selling early might be a misstep.

COYOTE: This is truly a highly selective market. Vast quantities of low grades, flats, last caught and darks are lingering around unsold. Some of these are already a couple of seasons old and not getting any better, only cheaper. The trappers and country buyers owning these skins are not particularly anxious to add to their collections. Then too, there is the high fuel cost of maintaining an extensive open country trapline. Some nice coyote will understandably be taken in conjunction with ’cat trapping activity. The higher elevations of Region 9 will again see some selects sell for $40 to $45 or more. But, to make the cut, the grade will be tough. Those with wide bellied, fluffy pale types from regions 10 and southern 9 will help fill the gas tank. But, those taken in conjunction with gray fox and ’cat trapping in regions 3, 5 and southern 11 will hardly be worth finishing. High fashion houses in Western Europe, mostly Italy, will continue to vie for those selects from the High Country. The rest — those that do sell — will be going to China or Korea as low cost trim. One skin, used as trim, goes a long way.

BOBCAT/LYNX-CAT/LYNX: There is little reason to expect this item to see anything other than a replay of last year. The limited numbers taken in comparison to the demand by the high fashion houses is expected to continue to hold focus on the spotted cats. We even see this spilling over into the Region 8 lynx prices. The markings on lynx are far less spotted and more muted than lynx-cat/bobcats, yet they have advanced significantly in the last couple of years. The only unknown part of the equation is what will the retail activity in Russia be this season. Affluent Russian consumers have discovered this fashion statement and are become an important outlet for expensive fur garments produced by the high fashion houses in Europe. The flatter types will continue to sell well, but prices will be determined by the width of the belly, the fullness of the flanks and how well the spots are defined.

MARTEN: Prices continue the upward spiral. Numbers are generally low when compared to the growing demand by a wide range of makers around the world. Clearance has been 100 percent. Most collections from Region 8 saw averages above $100. Larger sizes are preferred as most are used as trim. The smaller sizes and lighter colors from the Western Region of the Lower 48 are expected to see some advances due to this growing demand. Russian ranch production remains much lower than during the Soviet Era. The Russian wild catch is far, far lower than when the Communist government subsides trappers. This program was introduced when the Soviets clamored for hard currencies. Now they get that from oil.

FISHER: This is a hot item and getting hotter each season, especially in Russia, where the silky females are gaining favor among the super rich as a full fur garments. In order to maintain this market at the current levels — or advance it — Russian retail activity this season is critical. It took several years before the females were valued higher than the males, but we are there now. Males will continue to sell well as a trim item, with China, Turkey and Greece as the major players. High fashion houses in Italy will be competing for the limited number of females taken. Country buyers will be cautious early in the season until there are indications the retail activity in Russia is assessed.

Please FAX regional fur auction results to Parker at (501) 262-1582. Or, e-mail results to HeTraps@aol.com.

 


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