BUDAPEST (Reuters) - A good night's sleep on luxury Hungarian down pillows is likely to become a rarer experience as Hungary's poultry sector declines in the face of mounting problems.

According to British retailers, pillows and duvets made from Hungarian goose feathers are "soft," "luxurious" and have an "unparalleled ability to spring back to shape.

"The feathers are hand-plucked from geese which are given a special diet, raised for longer than most competitors, bathed in summer and kept sufficiently cold in winter to develop big feathers, a Hungarian producer says.

But in recent years Hungary's poultry sector has been hit by repeated bird flu outbreaks, leading to the culling of 1 million birds, mostly water fowl, and a doubling of feed prices.

"Producers are getting into an impossible situation," said Peter Kovacs, managing director of Hungaria Tollfeldolgozo Kft, which exports most of its products to Europe and the United States.

"Feed has become expensive, the price of maize shot up to the sky, severely affecting the viability of the sector," Kovacs told Reuters.

Hungary will produce 3,000-3,200 tons of water fowl feathers this year, compared to about 4,300 tons 10 years ago, the Hungarian Feather Product Council told newspaper Nepszabadsag.

Feathers still account for up to 12 percent of Hungary's poultry exports, although competition from China is increasing.

Hungary raised 4.9 million geese a year on average between 2000-2003, but that fell to 2.59 million in the last three years, Nepszabadsag said.

Costs have risen because of stricter rules on farming methods after Hungary joined the European Union in 2004.

Hungarian goose down duvets sell for between $600 and $800 compared with $200 to $300 for equivalent Chinese products, industry data show.

Hungarian geese are also raised to make foie gras, or liver pate, which is popular western Europe, especially in France.

This year brought another shock to livestock farmers as a severe drought ruined half the maize crop, adding to a global rally in grain prices.

"Raising geese has a long tradition in Hungary," Kovacs said. "Farmers need to be supported."