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A volatile year in down and feather bedding industry

25
Jan '10
For the first several quarters of the economic downturn, falling consumer prices were in lock step with falling manufacturing costs, observed American Down and Feather Council. However, as the world economies have begin to recover, manufacturers in virtually all industries are scrambling to deal with rapidly rising commodity costs that are driving up their total costs much faster than anyone had expected. According to The World Bank's commodity price data, or Pink Sheets, commodities prices, from barley to wood pulp, have increased over the last quarter of 2009. Down and cotton, the two major commodities used in natural fill bedding, are not immune to these pricing pressures.

Cotton for the Shell
The time period between March 2009 and March 2010, what is referred to as the cotton “year,” has been volatile thus far. In early December, analysts forecasted that cotton stocks will shrink 13 percent by March 2010. This represents the largest decrease in year-end stock levels since 2002-2003. Total production is expected to be five percent lower than last year, primarily due to lower yield in Chinese crops, which were only partially offset by production increases in India and Pakistan.

Conversely, cotton consumption is projected to rise by approximately two percent, causing the net demand to outstrip production by 1.6 million tons and leading to the expectation that cotton prices will continue to increase. It is estimated that cotton prices will end up being 10-15 percent higher than they were last year.

Down and Feather for the Fill
Weak demand for down and feathers over the last year resulted in depressed pricing for down of almost every type and quality. Reluctant to sell at decreased prices, many factories accumulated inventory. As demand for down and feathers increased, prices did not initially respond as the supply chain worked through existing inventories.

However, during the last 60-90 days of 2009, demand for down increased dramatically. As this “excess” inventories were depleted, down prices rose sharply. The spike in down prices is not a result of increasing demand only. The fixed nature of the supply of down and feathers is the other half of the equation responsible for the recent price volatility.

Joe Crawford, senior vice president of finance and procurement for Pacific Coast Feather Company, and marketing chair of the American Down and Feather Council, explained the situation, “All down and feathers used in our industry are a by-product of the meat industry. Birds are raised primarily for their meat, not their down and feathers (which comprise only 5 to 15 percent of the value of the bird). Farmers simply do not raise more birds unless meat prices warrant it. As a result, even a significant increase in the price of down does not result in greater supply to the marketplace. In an environment of rapidly changing demand, this fixed supply of down can result in the type of price increases we are experiencing today.”


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