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Commercial Fisheries News
Volume 35 Number 3
November 2008
Lobster crisis: Solutions will come hard
AUGUSTA, ME – The sudden and drastic drop in the lobster market prompted the Maine Department of Marine Resources (DMR) to convene a special meeting on Oct. 15 with lobstermen and other members of the public to discuss recent global events that had contributed to the record low prices lobstermen were receiving for their catch in October.
A six-member panel explained various factors behind the price drop and fielded questions from worried lobstermen. The panel also explored possible options to alleviate the economic crisis spreading through the entire Maine lobster industry.
DMR Commissioner George Lapointe opened the meeting by denying a rumor that he intended to shut down the industry in an effort to reduce supply and thereby strengthen demand.
“Shutting down the industry isn’t what this meeting is about,” he stated. “I do not have the authority to close the industry. We are here today to look for answers, but there are not a whole lot of answers to this problem.”
Lapointe introduced the panel members: Charles Colgan, professor of public policy and management at the University of Southern Maine’s Muskie School of Public Service; Bob Baines, lobsterman and chairman of the DMR Lobster Advisory Council; Dana Rice, owner of D.B. Rice Fisheries; Peter McAleney, owner of New Meadows Lobster; Dane Somers, executive director of the Maine Lobster Promotion Council (MLPC); and John Norton, president and CEO of Cozy Harbor Seafood.
Price crash
Charles Colgan opened the panel discussion, explaining that the problems the industry is facing right now are caused by the consumer-led recession. Although briefly alleviated by the economic stimulus package, consumer spending has been in steady decline.
“When people do not have a lot of money to spend, they begin spending in a certain order,” he said. “Lobster is not at the top of that spending order because lobster is seen as a luxury item. McDonald’s becomes where people spend their money.”
John Norton compared the current crisis to the market version of “the perfect storm.”
He outlined five factors that have simultaneously come together to produce the sudden drop in price:
Economic slowdown that accelerated with the spike in oil prices;
Increased lobster supply from a massive Canadian spring catch and this year’s strong Maine catch;
An abundance of rock lobster tails being sold heavily into restaurant chains such as Red Lobster and the cruise ship industry at low prices;
Low consumer confidence resulting from recent Wall Street and Washington, DC events; and
Banking crisis that tightened credit for those who put up inventory and caused unwillingness of people to take capital risks.
Maine distribution
The panel also explained how Maine lobster is distributed and how the current distribution model has contributed to the crisis.
Peter McAleney pointed out that Canadian processors have been absorbing the bulk of the Maine lobster catch since the early 1990s. Without those processors, he explained, the Maine lobster industry would not have been able to maintain relatively high price levels over the past 15 years.
“I hate to say this, but if the Canadians had not been around to buy our lobsters, the price would have been extremely low in the early ’90s and now,” he said. “The Canadians have taken the glut off the market.”
Norton added that the processors are not creating the problem for Maine lobstermen. Rather, the current problem rests on the market slow down.
“The processors are not your market. They are just the way to get to your market,” he said. “Cruise ships, chain stores, major restaurants. Those are your markets and those markets have stopped spending money.”
How bad is It?
Bob Baines described the magnitude of the economic crisis the industry is experiencing.
“Guys came into this season with their backs against the wall,” he said. “Now we are in a situation where guys will not be able to make their boat payments through the winter.”
He urged lobstermen to become involved in the process to find solutions for the current lobster price and distribution situation.
“We cannot just go out there and fish. We need to get involved and be pro-active. We need to listen to each other and make a strategy to work our way out of this,” said Baines.
Dana Rice echoed Baines’ plea for lobstermen to curb their fishing efforts.
“Some guys are out nine days in a row trying to catch the $2.50 lobster before it becomes a $2 lobster,” he said. “Guys just need to fish three to four days a week.”
But Rice thought the solution warranted a much larger response.
“I will go out on a limb here and say the governor’s office needs to get involved,” he said. “This is an economic disaster the size of Katrina.”
Promotion efforts
Dane Somers reported that, for the first time in the Maine Lobster Promotion Council’s history, the council had released emergency funds to increase Maine lobster advertising.
Somers also informed lobstermen that MLPC has negotiated with major food chain stores to reduce their profit margin on lobster sales in an effort in increase the volume of lobster sold.
Peter McAleney, like Rice and Somers, described the economic crisis in seismic proportions.
“This is a long-term problem and, to be honest, I do not see things getting better until next July or August,” he said.
Shut down?
Baines asked if shutting down the industry would help in the short term. Colgan didn’t think so.
“Closing the fishery will not be helpful and could possibly damage the lobster market in the long run,” he warned.
Lobsterman Gerry Cushman from Port Clyde spoke up.
“I don’t want the lobster dealers just to tell us to slow down,” he said. “We need some tools in there to help us slow down.”
Rice understood fishermen’s frustration at being asked to independently slow their own fishing efforts when their neighbors are increasing effort, but he said pushing for new regulations to reduce fishing effort would ultimately hurt the industry in the long run.
“There is no quick fix to this,” he explained. “We do not need to overreact and act fast by putting in some regulation that just won’t work in the long run.”
McAleney shared Rice’s concerns, saying, “Shutting down the industry would be the worst thing we could possibly do. If we shut things down, people will take lobster off the menu. People will stop eating lobster.”
More processors?
Questions arose from lobstermen concerning the industry’s over-reliance on Canadian processors. Some fishermen asked if Maine-based processors would be a partial solution to the current crisis.
Norton responded, saying that locating processors within the state would not necessarily increase the demand for lobster.
At the same time, he added, “Maybe demand would not increase, but locating processors here would help Maine by increasing jobs.”
And, he continued, “Locally based processors will be more committed to Maine lobstermen than a processor based in Canada.”
Lobsterman Jon Carter from Hulls Cove agreed with Norton.
“Now is the time to keep Maine lobster in Maine,” he said. “We need processors here that will fight hard for us and bring millions of value-added dollars to the state.”
New markets, image
Several panel members expressed concern that the current low price for lobster eventually will tarnish the image of the Maine lobster as a luxury item worldwide. Lobstermen, too, shared similar concerns.
Patrice McCarron, executive director of the Maine Lobstermen’s Association, asked the panel, “Will this fall’s low price create a situation where the boat price next spring opens low?”
Norton said it depends on the economy.
“We are going to see things improve once the credit crisis lessens up and lobster can be inventoried again,” he said. “We want to keep lobster as a premium item in the long run, but right now we cannot sell it as a luxury item because of global economic conditions.”
Colgan expanded on Norton’s comments.
“You need to think about market segmentation,” he said. “You need to build the low end of the market very quickly – lobsters selling around $7 to $8. The high end of the market – lobster dinners selling for $89.99 – will still be there.”
McCarron, along with several lobstermen, expressed serious concern that lobstermen will go out of business over the winter and not be able to re-enter the fishery in the spring.
Lobsterman Steve Train from Long Island commented, “Let’s just leave the lobsters on the bottom and catch them next spring.”
Many lobstermen in the crowd expressed concern for themselves, as well as their fellow lobstermen.
McCarron stated, “I would like to see a crisis response team organized.”
Gina LeDuc-Kuntz
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