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03-12-2009, 05:06 AM
http://online.wsj.com/article/SB123439872449675207.html?mod=article-outset-box
By LAUREN ETTER
As the credit crisis ripples around the globe, more consumers are postponing extravagant purchases like mink coats and chinchilla stoles, squeezing the global fur business.
"This current economic downturn is broader and deeper" than earlier ones, says Joseph E. Morelli, the chief executive at American Legend Cooperative, a mink-producing cooperative and pelt auction house based in Seattle.
Credit Crisis Takes Toll on Mink Industry
2:35
Mink farming is in a downturn as cash-strapped consumers -- throughout the world -- are no longe purchasing luxury items like fur coats. WSJ's Lauren Etter and Ilan Brat report.
Before the recent slowdown, economic growth in Russia and China was creating wealthy consumers who could splurge on luxury goods. In 2007, global fur retail sales hit a record $15 billion, according to the International Fur Trade Federation in Britain. Fur analysts believe 2008 sales were about the same or higher.
The growth in demand boosted the average price of an American mink pelt to nearly $66, a record and 36% higher than a year earlier, according to the U.S. Agriculture Department.
The fur business is a centuries-old trade involving a diverse and far-flung network of producers, merchants and craftsmen. It includes mink farmers in the U.S., Denmark and elsewhere, and auction houses in cities including Seattle and Toronto that sell the minks' fur to merchants around the world. Meanwhile, furriers in Greece are among those stitching together garments for Paris runways and St. Petersburg shops.
This year's fur-auction season got under way several weeks ago, and already at Kopenhagen Fur in Denmark, one of the world's largest fur auction houses, pelt prices are down about 30% from a year ago.
Sandy Parker, a fur analyst who has followed the industry for more than 30 years, faults the economy. The two biggest fur markets -- Russia and China -- have "placed stiff controls on the outflow of hard currency, thus severely limiting what" trade buyers at auctions can spend, he says. In addition, the Russian fur business, which grew rapidly as oil wealth rose, is being hit hard by tight credit.
"Credit cards, bank lines -- that market isn't happening for us right now," says Michael Mengar, chief executive of Toronto-based North American Fur Auctions, which used to be part of the original Hudson Bay Co., founded in 1670.
The drying up of the Russian fur business is hitting places like Kastoria. The small Greek town, whose name, some say, is derived from the Greek word for "beaver," is one of the world's main fur-manufacturing hubs. Merchants there import pelts from around the world and turn them into garments for export.
European Pressphoto Agency
Mink coats at a Beijing mall. The Chinese have become major fur buyers.
At PKZ Furs S.A., a Kastoria-based fur-garment maker, owners Christos and Maria Papadopoulos say sales have fallen about 15% from a year ago.
Customers in New York and Connecticut also aren't buying as much. At Connecticut Furs Inc. in New Britain, Conn., owner Leo Sitilides says sales of his custom-made fur coats -- which carry price tags as high as $8,000 -- are down 30% from a year earlier.
Farmers are being hit, too. "We probably won't make money this year," says Ron Gengel, a mink farmer in Illinois, on a recent snowy day as he walked through one of his 100-foot-long mink houses and made smooching sounds at the furry critters poking their tiny pink noses out of wire cages.
Last year, as the price of pelts rose, so did the cost of supplies, everything from feed to the wood to build mink houses. The price of chicken liver -- a common mink-feed ingredient -- was about 22 cents a pound, up from about 12 cents a few years earlier, Mr. Gengel says.
In addition, mink farmers have had to beef up security to ward off animal-rights activists, who have broken into mink farms and released the animals into the wild. On his farm, Mr. Gengel uses barbed wire and half-a-dozen barking dogs to deter intruders.
As mink sales have weakened, so have sales of mink-farming equipment. Tonny B. Rasmussen, a salesman for Hedensted Gruppen, a Danish mink-farm equipment maker, says sales this year are already down more than 20% from a year ago. "When mink farmers don't make money, we don't make money," he says.
Over the past decade, mink production has been shifting overseas to China, which now produces a quarter of the world's mink. Denmark is still the world's largest mink producer, accounting for about 27% of total global production, according to figures from the Fur Commission USA in Coronado, Calif.
American mink are renowned world-wide for their silky pelts, and they fetch some of the highest prices on the global market. But the U.S. is now No. 5 in the world, with fewer than 300 mink farms, mostly in Wisconsin, down from 1,200 in 1974, the Agriculture Department says.
Write to Lauren Etter at lauren.etter@wsj.com
Printed in The Wall Street Journal, page B1
By LAUREN ETTER
As the credit crisis ripples around the globe, more consumers are postponing extravagant purchases like mink coats and chinchilla stoles, squeezing the global fur business.
"This current economic downturn is broader and deeper" than earlier ones, says Joseph E. Morelli, the chief executive at American Legend Cooperative, a mink-producing cooperative and pelt auction house based in Seattle.
Credit Crisis Takes Toll on Mink Industry
2:35
Mink farming is in a downturn as cash-strapped consumers -- throughout the world -- are no longe purchasing luxury items like fur coats. WSJ's Lauren Etter and Ilan Brat report.
Before the recent slowdown, economic growth in Russia and China was creating wealthy consumers who could splurge on luxury goods. In 2007, global fur retail sales hit a record $15 billion, according to the International Fur Trade Federation in Britain. Fur analysts believe 2008 sales were about the same or higher.
The growth in demand boosted the average price of an American mink pelt to nearly $66, a record and 36% higher than a year earlier, according to the U.S. Agriculture Department.
The fur business is a centuries-old trade involving a diverse and far-flung network of producers, merchants and craftsmen. It includes mink farmers in the U.S., Denmark and elsewhere, and auction houses in cities including Seattle and Toronto that sell the minks' fur to merchants around the world. Meanwhile, furriers in Greece are among those stitching together garments for Paris runways and St. Petersburg shops.
This year's fur-auction season got under way several weeks ago, and already at Kopenhagen Fur in Denmark, one of the world's largest fur auction houses, pelt prices are down about 30% from a year ago.
Sandy Parker, a fur analyst who has followed the industry for more than 30 years, faults the economy. The two biggest fur markets -- Russia and China -- have "placed stiff controls on the outflow of hard currency, thus severely limiting what" trade buyers at auctions can spend, he says. In addition, the Russian fur business, which grew rapidly as oil wealth rose, is being hit hard by tight credit.
"Credit cards, bank lines -- that market isn't happening for us right now," says Michael Mengar, chief executive of Toronto-based North American Fur Auctions, which used to be part of the original Hudson Bay Co., founded in 1670.
The drying up of the Russian fur business is hitting places like Kastoria. The small Greek town, whose name, some say, is derived from the Greek word for "beaver," is one of the world's main fur-manufacturing hubs. Merchants there import pelts from around the world and turn them into garments for export.
European Pressphoto Agency
Mink coats at a Beijing mall. The Chinese have become major fur buyers.
At PKZ Furs S.A., a Kastoria-based fur-garment maker, owners Christos and Maria Papadopoulos say sales have fallen about 15% from a year ago.
Customers in New York and Connecticut also aren't buying as much. At Connecticut Furs Inc. in New Britain, Conn., owner Leo Sitilides says sales of his custom-made fur coats -- which carry price tags as high as $8,000 -- are down 30% from a year earlier.
Farmers are being hit, too. "We probably won't make money this year," says Ron Gengel, a mink farmer in Illinois, on a recent snowy day as he walked through one of his 100-foot-long mink houses and made smooching sounds at the furry critters poking their tiny pink noses out of wire cages.
Last year, as the price of pelts rose, so did the cost of supplies, everything from feed to the wood to build mink houses. The price of chicken liver -- a common mink-feed ingredient -- was about 22 cents a pound, up from about 12 cents a few years earlier, Mr. Gengel says.
In addition, mink farmers have had to beef up security to ward off animal-rights activists, who have broken into mink farms and released the animals into the wild. On his farm, Mr. Gengel uses barbed wire and half-a-dozen barking dogs to deter intruders.
As mink sales have weakened, so have sales of mink-farming equipment. Tonny B. Rasmussen, a salesman for Hedensted Gruppen, a Danish mink-farm equipment maker, says sales this year are already down more than 20% from a year ago. "When mink farmers don't make money, we don't make money," he says.
Over the past decade, mink production has been shifting overseas to China, which now produces a quarter of the world's mink. Denmark is still the world's largest mink producer, accounting for about 27% of total global production, according to figures from the Fur Commission USA in Coronado, Calif.
American mink are renowned world-wide for their silky pelts, and they fetch some of the highest prices on the global market. But the U.S. is now No. 5 in the world, with fewer than 300 mink farms, mostly in Wisconsin, down from 1,200 in 1974, the Agriculture Department says.
Write to Lauren Etter at lauren.etter@wsj.com
Printed in The Wall Street Journal, page B1