Guest Column: Canadian tie-up may be investment in change

First published in Landings, June, 2013.

It takes desperation to tie up your boat for five days out of a 60-day fishing season as happened here in the Maritimes this May. The Lobster Council of Canada (LCC) will do its best to ensure that Canadian lobster harvesters who made this investment have something to show for their efforts. The LCC will engage fully in the work of the expert panel that is being assembled by the provinces to review many of the questions about how shore prices are set, how the value is shared and why market prices fluctuate as they do. Indeed, this research was all completed in 2010 and has been the basis for much of our work since then. But with renewed industry and political pressure coming to bear we are optimistic that May’s tie-up finally may bring much needed change and reform to the Canadian lobster sector.

The LCC has been working for three years on many of these “marketability” issues. Our first effort was the delivery of the penultimate study on the Canadian lobster sector in the fall of 2010, “From Trap to Table – A Long Term Value Strategy for the Canadian Lobster Fishery.” This report was controversial because it was a comprehensive review of the industry and included sections on supply management and structural change that made harvesters nervous. The important and practical part of the report, however, focused on sensible recommendations on quality, price setting, branding, marketing and other facets of the industry that clearly needed reform.

The next step in the process was the formation of industry working groups that worked through most of 2012 on three of these challenges: branding, quality and price. The essential take-away from the report was recognition that these key issues had to be tackled as a precursor to successful marketing.

The working group process resulted in a comprehensive report approved in late 2012, “Building an Integrated Plan for the Canadian Lobster Industry.” The report included a specific tactical plan with 26 current and future actions to address issues of quality, brand and price. Many of these 26 action items are ongoing; we are focusing our efforts for 2013 on developing a Canadian lobster brand and establishing verifiable criteria for lobster quality at the first point of purchase. During the winter we also reviewed options involving changes in how shore prices were established but decided that, due to the requirement for structural change, we would table that issue for the near term. 

Fast-forward to the recent “Lobster Spring” and its focus on disagreements between harvesters and buyers on why and how shore prices are established. We just may have found the political and industry will to tackle shore price setting once and for all! Sometimes from the fruits of dissention come positive results. We hope that this will allow the sector to dig into the real issues at play.And what are those real issues? The fact is nobody likes the shore price or the port market system currently used for most inshore lobster in Canada. To call it a system at all is a stretch: just as it is in Maine, the shore price is set by supply and demand and changes from day to day as both of those forces ebb and flow. If a dealer needs product, he will pay more and then everyone matches. If he needs less, the price drops and everyone matches. This “system” contributes to instability, it rewards mediocre quality, it benefits irresponsible buying and it perpetuates an aura of mistrust between parties who ultimately must work together to prosper in this modern market for protein.

There are many options for change to discuss including an auction system as is enjoyed by many seafood distribution systems throughout the world. A system of contract/collaboration is also an excellent idea, allowing groups of harvesters to work closely with processors and shippers and share the market risk at an agreed-upon formula. A price to market system works in Newfoundland and Labrador and the Magdalen Islands (notwithstanding problems from time to time as the programs become established) where the parties negotiate a joint plan for price, in which the shoreprice is tied to the Urner Barry FOB Boston live price and changes on a weekly basis. Another method, final offer settlement, is used in Newfoundland to set minimum prices for species like crab, shrimp and lumpfish roe. A panel of experts takes submissions for the price from representatives from the harvesting and buying sides and then makes a binding decision. 

There are many options available to change the way shore prices are set in Canada. Let’s see if the political and industry will is there to attempt something new for 2013 and the future. The lobster sector has now gone through twelve months of unrest and turmoil which have challenged everyone in eastern Canada as well as our colleagues in Maine.

One lesson from the past year is that we must improve collaboration with the industry in Maine. I look forward to finding new ways to work together as we all harvest, process and ship the finest lobster in the world – Homarus Americanus. With leadership by harvester groups, exporters and government, we can turn this turmoil into positive energy and a renewed focus on cooperation and collaboration.