Eyeing A Possible Crash, Lobstermen Consider Different Ways To Protect The Market

Jun 24, 2020

Maine's lobstermen, dealers and regulators are warily eyeing the possibility of a market crash when the big seasonal harvest of recently-molted lobsters — called “shedders” — come in. With restaurants and other end-buyers still struggling, there is talk within the industry of reducing the size or timing of the catch to avoid a glut, but no one appears to be enthusiastic about the options.

Portland lobsterman Willis Spear says he has seen some signs that the shedders might be starting to come in.

"We hauled up in the bay just to see what was there. And there were shedders. But they were different shedders than last year. They're hard shedders, they're eating the bait. Maybe I'm late, I don't know. They were nice lobsters."

Spear says he has recently been getting $3.50 a pound — a dockside price that he says seems too low, but which others say is a sign of how markets have tanked since the arrival of COVID-19. Some lobstermen are reporting dock prices at $2.30 and worse.

So cautious interest is growing in whether the industry should embrace efforts to limit or time the catch to forestall a glut that would annihilate prices. One idea: raise minimum sizes, that is, throw more of the smaller lobsters back to bank them underwater for a time when market demand is better.

"I was in agreement about increasing the measure to help put more lobsters back on the bottom for next year. But then I got to thinking, it's based on the assumption that the dealers will keep the price up."

Other possibilities include requiring that "culls" be thrown back. The theory is that by removing the lower-quality lobsters with just a single claw or no claws at all, the overall product quality increases, and that should help the price.

But as Marine Resources Commissioner Patrick Keliher told an online meeting with Downeast lobstermen this week, that plan might just create an oversupply of culls down the line.

"There was a lot of interest there,” Keliher says. “The problem is, we put something like that in place, when you take that off, just think of the amount of culls you might have available that would be landed. So it could have an unintended consequence."

Other efforts to slow down the pace of the catch could also suffer from the law of unintended consequences. For example, lobstermen are discussing limiting the numbers of days each week at sea, ideally slowing the pace of the catch.

But as Brooklin lobsterman David Tarr noted, the big boats might just fish harder on open days and bring in just as much lobster as ever.

“The summer days are from, what, four in the morning to late at night, so I wouldn't be surprised if somebody could haul in 800 a day,” Tarr says.

Several fishermen resist the idea of government intervention, saying that the fleet is too diverse for a one-size fits all solution. One likened the idea to socialism.

And Annie Tselikis of the Maine Lobster Dealer's Association says lobster wholesalers and processors aren't embracing intervention either. Their markets are so varied, from tourists in coastal Maine to restaurants in Singapore, she says, that any single action is likely to be unsuited for most.

"What I'm hearing from my members is that this really needs to be about their individual business decisions to make it through this season as best as possible,” Tselikis says. “And I'm also hearing the same thing from commercial lobster fishermen."

She says constant communication up and down the supply chain, from water to end-buyer, will be key, to try to align the timing and size of the harvest with actual market demand.

Commissioner Keliher says he has been working on a plan to facilitate those communications. And he stresses that he is not pushing for government action. But nonetheless, he says he has to at least consider options in case prices drop to dire levels. That could include emergency action by the governor.

"Do we need something that's in place if really... we get into a situation where we've got product dying in multiple areas of the state cause there's no place for that product to go. All we're doing at that point is undermining the overall value of this brand and this product and it will likely take multiple years to dig out of," says Keliher.

Some industry observers agree that if a glut develops, it could be years before prices climb back to levels seen in recent years, as happened in 2012. That's because consumers grow accustomed to lower prices and resist later increases, says consultant John Sackton. He says that today's low prices at the dock and in supermarkets running lobster specials are not a good omen.

"This is a sign that there aren't enough buyers out there."

Sackton says that through the pandemic, there has been one bright spot: increased demand for fresh seafood among retail consumers. Nimble action by individual lobstermen and some dealers to forge new direct-to-consumer markets, he says, has helped offset the impact of empty restaurants, casinos and cruise ships.

"But the only thing is that applies on the coast and it applies to smaller volumes. You can't scale that up."

Sackton estimates a potential over-supply of lobster in the United States and Canada of as much as 100 million pounds this year — roughly the size of Maine's annual harvest. Whether Maine’s tourism industry gets on its feet this summer could make a big difference for local lobstermen’s ability to sell their catch – 20 million pounds worth or more, Sackton says.

And a recent diplomatic flare-up between China and Canada over the extradition from Toronto of a businessman from the Huawei cell service company, he says, could complicate matters: China this week declared that Canadian lobster shippers must certify that their product is free of COVID-19 before selling into the country. He says many are deciding not to take the risk of product rejections or litigation in China.

“It’s made the Canadians very anxious about the Chinese market,” he says. “If there was to be any hiccup in the Chinese purchases of lobster from Canada, that would cause severe blowback in Maine because it would re-orient some of that lobster back toward the U.S. market and we’d quickly be back in an oversupply situation.”

He supports plans to time or reduce the harvests, such as barring culls or reducing days-at-sea. He says that if prices stay too low for too long, not only will consumers resist later price increases, but processors might buy up cheap inventory, and then once prices do improve – lobstermen won’t benefit until the processors have sold off that inventory.

At some point, it can cost more to buy gas and bait than lobstermen bring in selling their catch. “That’s the situation you want to avoid,” he says.

Sackton says it's still an open question whether this summer will devolve into what he calls a "chaotic" season.

Back at the Portland wharf, lobsterman Willis Spear is worried.

It's so uncertain. I really don't know. But I've got a deep foreboding."

Spear adds though, that whatever the profits or losses, he will likely keep on fishing.

“That’s what lobstermen do,” he says.

Marine Resources Commissioner Patrick Keliher will take another sounding of industry sentiment in a final online meeting next week.