Following a price bubble in the period 2010-2013, fur pelt prices have been dropping significantly with a subsequent decrease in world production. The same market development has been observed before and history suggests pelt prices are about to go up again soon, according to Senior Advisor at University of Copenhagen's Department of Food and Resource Economics, Henning Otte Hansen.
He has earlier written a book about the Danish mink production and the underlying economic structures of the global fur trade. Now he has examined price- and production statistics for natural fur pelts from 1950 to 2019.
"The price increases are about to come. It’s only a matter of the time perspective,” he said, explaining mink pelts are price elastic products, a characteristic achieved because by a market without the market regulations are known from other agricultural products, where prices do not vary much over time.
The price-setting on the market for natural fur pelts is truly expressing supply and demand, although it takes a few years for the supply to adjust to demand when prices first begin to drop.
“You can tell from the statistics that price and supply are closely associated. When the supply - the global production of pelts - have been decreasing for a while, the prices begin to go up. If prices go up the supply goes up as well. When the supply again exceeds the demand, the pelt prices drop, and rather quickly and dramatically too.”
This pattern happened from around 2000 when prices were at the bottom, and towards 2013, when prices again reached a peak.
“When the price was at the top in 1987, it took about 8 years before it began to increase dramatically again. If the same pattern repeats this time, prices will begin to increase again in 2021 latest,” he said.
The effects of the COVID-19 may, however, impact the curve.
“If the corona-crisis develops into economic crisis and recession the demand for fur will drop. As the demand for fur products is relatively dependent on income, a poor economy can impact the demand considerably,” Henning Otte Hansen said, but pointed out the negative fluctuation in pelt price that followed the global financial crisis in 2009, was short and the upward price curve for that period continued shortly after. Another possibility is that economic effects from the corona-crisis extend the period before prices go up again.
The global mink production has now dropped to about 45 million pelts, down from all-time high 87 million in 2014. This is approximately the same as world production in 2007.