Steaming Ahead: August 2012

First published in the MLA Newsletter, August, 2012.

When local and national media spin headline after headline about Maine lobster selling for less than bologna, you know that things aren’t going well. The slow recovery underway since lobster prices plummeted in 2008 seems to have been swept away in a storm of bad press. Gone are the days when a lobsterman worried about catching lobsters. Enter the era of worrying if you will be paid enough to make ends meet.

The world financial crisis in 2008 delivered a wake-up call to the Maine lobster industry and alerted us to the realities of doing business in the 21st century. Lobstermen from remote harbors and island communities were suddenly talking about New York City’s financial institutions, Icelandic banks and Canadian processors as they abruptly realized that they are part of a global economy.

The 2008 crisis also pushed the leadership of the industry to delve into the causes of the crisis in a search for long-term solutions which could stabilize the industry and perhaps lessen the blow if market conditions worsened again. The Lobster Task Force produced a strategic plan in 2009 for our industry with an array of recommendations including establishing a new marketing entity and investing more money in marketing Maine lobster. Canada quickly followed suit with its own strategic plan and the formation of the Lobster Council of Canada.

Maine’s Lobster Task Force also generated much discussion about the need to develop more Maine-based infrastructure and processing capacity to lessen our dependence on Canada. Adding value to our product here in Maine ensures that our lobster reaches consumers labeled as Maine lobster, and the profits flow back to our lobstermen.

Unfortunately, this summer’s crisis revealed that little progress has been made since 2008. There have been a few small steps including new laws to ensure that Maine’s processors remain competitive. Just this year, the Lobster Advisory Council (LAC) drafted a proposal to establish and fund a new marketing entity. The fate of this proposal will lie with the industry as it makes its way through the legislative process this winter.

Following the Lobster Task Force, there was a flurry of interest about establishing new processing capacity in Maine. There were small startups announced in York and Tenants Harbor, and attempts at larger operations such as Live Lobster’s conversion of the Stinson plant in Gouldsboro. One thing became clear – establishing a successful processing operation is not a simple undertaking. Even long-time processor Portland Shellfish is offline this season due to regulatory compliance issues.

Fortunately for Maine lobstermen, the state does have a few processors that have proven successful – Cozy Harbor, Shucks and the most recent addition,  Linda Bean’s Perfect Maine Lobster. Each seems to be well positioned in this difficult market. When many dealers along the Maine coast stopped buying lobster in July or were only able to buy with significant decreases in price, Maine’s processors continued to buy product and provided some stability to the pricing.

Maine does not yet have the processing capacity to move enough volume to dramatically change the price situation for the majority of Maine harvesters. However, the market stability they provided this summer under such volatile conditions should prompt the state and the industry to investigate what can be done to expand our processing capacity and cultivate product innovation.

One of the more troubling sides of this summer’s crisis has been the deep philosophical divide among industry members. A lot of fingers have been pointed – harvesters blaming dealers; dealers blaming harvesters; harvesters and dealers blaming each other.

While I strongly admire those individual harvesters and coops which chose not to fish out of financial necessity, I also respect the many who believe that it is their right to continue to work. What I found a bit shocking was the large group of harvesters and many dealers who looked to state government to shut down the fishery. Fishermen who have begged for government to LEAVE US ALONE day after day, year after year, were suddenly calling on the state to intervene.

The anti-trust laws of our country are based on a belief that a free economic market works best for everyone. Economics dictate that when the price for lobster goes too low, individuals stop fishing. The reality is that Maine has a large and diverse group of individual lobstermen who have different economic breaking points. The result has been deepening tensions between those who chose not to fish and those who continued with business as usual.

While the price has dropped below the comfort zone of most lobstermen throughout the state, the depth of this summer’s crisis has been very dealer specific. Southern Maine has seen the most stability in dealers’ ability to move product and maintain price. Overall, dealers with strong connections to the northeast live market and those with processing capacity here in Maine were able to move product, while dealers who are solely dependent upon moving lobsters to Canada were severely challenged. When many lobstermen chose not to fish, those dealers who were buying looked to their lobstermen for fresh lobsters rather than purchase product held by their competitors.

Lobstermen have a huge role to play in turning things around. As individuals and as a group, we must become more educated about the market and understand how Maine lobster gets to consumers. Every lobsterman knows who he sells to, but few know where the lobster goes once it leaves the local dock, or how many of his lobsters perish before they can be sold.

The LAC will be leading a discussion about the potential to make structural changes in our industry with the goals of increasing harvester profitability and improving product quality. To be successful, the conversation must be open and transparent, and it must include harvesters, dealers and processors. Change is never easy, but sometimes it is necessary. And in all honesty, only significant changes to our industry will translate into any increase in profitability to the boat.

I don’t claim to fully understand all of the market forces at work right now. But I do think we are in for a long and challenging season. A stable and profitable future for our industry will require tolerance, patience and understanding. It will require much more information and clarity in the market, and better communication among lobstermen and their dealers. While it may be too late to make improvements for this season, the lobsters remain out there. The resource is robust. As an industry we have made changes before, some of them painful, and I am entirely confident that we can do so again.

As always, stay safe on the water.

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