Steaming Ahead: July 2012

First published in the MLA Newsletter, July, 2012.

During the month of June, there was a sense of panic in the lobster industry as the price of lobster seemed to enter a free fall. It’s hard to imagine a worse way to kick off the lobster season than with a slip price that starts with a “2.” From the MLA’s perspective, this has been both concerning and frustrating and, as we all know, there is no easy fix.

I’ve talked to a lot of people to understand the cause of the situation, and listened carefully for potential solutions. Every lobsterman I spoke with raised serious concern over the boat price and his or her fear of not making any money despite working hard. If you could strip the realities of the world away, one might surmise that the solution is simple — if you’re not making money, you shouldn’t fish. However, the reality for nearly every Maine lobsterman at this time of year is that you can’t afford not to fish – even for a $2.50 lobster. Cash flow is a serious issue, and if you’re not fishing, you have no cash flow. As price drops, human nature will push lobstermen to fish harder and pray for more lobsters.

I got a bit more of a mixed response from dealers on this crisis. Most have expressed concern over the volume of lobster being landed and worries about the quantity of early shedders. The lobster market is complex between the live and processed sides and dealers vary widely in their connection or access to various segments of the market. This translates into some dealers being able to continue to move product, while others struggle to do the same.

So why is the price so low this spring, compared to other years? Remember, it’s not just what’s happening in Maine that we need to think about. Yes, our season was early, and yes, we landed a lot of lobster in June. But that would not have felt like a crisis if the Canadians were not in the midst of record landings this spring. Our neighbors to the north land more lobster than we do in Maine, and the performance of the Canadian fishery greatly impacts us. Some individual ports in Canada have recorded 30% and 40% increases in landings over last year which means that Canada has already landed a lot of lobster this year! Add to that an early season in Maine and you have a market that is over-supplied with lobster.

In my opinion the overarching reason for this spring’s lobster price is that there is simply too much lobster in the supply chain. I know that many lobstermen don’t believe this, because they do not see significant landings at their dock. But the marketplace is so much bigger and more complex than what happens on any single boat, in any single port, in any single region of the state, or even in the state of Maine as a whole.

When there is an over-supply of lobster, things get tricky for the dealers. Some dealers have access to multiple product forms – both live and processed – which gives them access to many different market outlets. Other dealers are dependent upon a single buyer and so may not be able easily to move their product. In these situations, some may operate at a short-term loss to keep their lobstermen fishing. Others will lower the price and use this to undercut their competitors in order to move product. With both lobstermen and dealers doing what they each do best – catching and selling lobster — the end result is to drive the price down. At some point the price will bottom out, stimulating new demand, leading to more buying of the product.

I think there are two reasons for optimism right now. The Canadian fishing season ended June 30, which is also the official start of summer in New England. With additional Canadian landings out of the picture until November, the existing Canadian lobsters can move through the supply chain. And the influx of throngs of tourists to Maine and throughout New England will add much-needed demand to our live market. The law of supply and demand tells us that this should spell some relief for the industry.

As this season settles down, we need to think about what, if any, changes we would like to see moving forward. There has been a lot of talk about potential management changes to help the industry ease into the shedder fishery rather than jumping in like gangbusters. These are suggested ideas that have come from lobstermen for discussion and should not be misinterpreted as MLA’s agenda. Suggestions include holding off the start of the season, implementing a rolling start to the season, taking additional days off during the week, increasing the gauge size for certain months, and yes, some have even suggested trap reductions. All of these ideas come with pros and cons and none are without controversy. But the lobster industry is long overdue for a discussion about new ideas and what could be achieved through any of them.

Lobstermen do have some options available now through the zone council system – including limiting the number of lobster traps fished, when fishing takes place, and the time of day when lobster fishing may occur. Such changes would require a referendum in the zone in order to propose a rule change to the DMR Commissioner. The process is time-consuming and would not accomplish much unless all of the zones worked together on a cohesive statewide strategy.

Perhaps the most promising effort is currently underway by the Lobster Advisory Council, which recently concluded a series of four meetings throughout the state to talk about launching a marketing program called Project Maine Lobster. The goal is to build global demand for Maine lobster based on a targeted marketing strategy with a $3 million budget. The LAC will meet again on July 18 to continue discussions on this initiative. Project Maine Lobster will not affect this year’s season, or even the next few, yet a comprehensive program to build global demand for Maine Lobster could lead to a stronger boat price and a more stable future for our industry if it moves forward.

I wish there were a magic bullet that I could offer the industry to ensure strong landings and prices. Unfortunately, there is not. I urge you to talk to your dealers about what is going on in the market right now. You should know what your dealer is up against, who he sells to, and ultimately how your product reaches customers. And think about what you can do to ensure that Maine is putting a high quality product into this extremely competitive marketplace.

I welcome your comments and appreciate any constructive suggestions you have to offer.

As always, stay safe on the water

Patrice

 

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