Trying to unravel the Christmas/New Year’s lobster sales debacle was much like trying to find the way out of a maze. It was loaded with dead-ends, and those fishermen, buyers, and wholesalers, who would talk weren’t saying much. And who knows if they were telling it straight: As one fisherman/dealer put it, “lobster prices are driven by lies and rumors.”
To understand this complicated story at all, you need to go back to Sept. 11. The aftermath of the terrorist attacks: the country in mourning, its citizens in fear of another such atrocity and the economy in recession led to a huge drop in anything connected with luxury or with being in a large group or city. Restaurants, hotels, casinos, cruises, conventions, airlines — all suffered tremendous losses. So did the lobster industry. After all, the very cost of lobster makes it a luxury, a treat, which leads it to be saved for special occasions. And nobody in this country was celebrating.
To combat the lack of demand for the product, prices paid to lobstermen dropped as low as $2 per pound. At that price it barely paid fishermen to gas up their boats, take their lives in their hands, and go out on the water. Nevertheless, the price accurately reflected the market.
The low boat prices, however, did lead to supermarket specials of $3.99 per pound, which helped take up some of the overabundance of supply. Buyers, trying to hang onto the fishermen who sold to them, spent the autumn scurrying this way and that, trying to drum up business, exhausting themselves in the process and, as one reported, “not making a dime.” (Lobster processors, mostly in Canada, who buy shedder-quality product to cook, freeze, and sell to such restaurant chains as Red Lobster, had already done most of their buying, as had Maine poundkeepers who’d filled their pounds with lobster bought at higher than pre-September 11 prices.)
Then, in November, the Canadian lobster fishing season opened and southwest Nova Scotia fishermen began pouring vast amounts of product into an already overabundant supply.
“There is a great deal of competition on the wharf to get your hands on lobsters,” said Denny Morrow, executive director of the Nova Scotia Fish Packers Association, a group of small and mid-level buyers. “If you can’t buy them, you can’t sell them. There’s been a big increase in holding capacity up here, in lobster pounds and in tank houses with refrigerated water,” he explained. “And because so many people have invested in that holding capacity, they feel they have to purchase lobsters when the season starts in November for Christmas, to fill up their tank house or lobster pound. So the bidding on the wharf is a rush to fill your pound and tank house.” Morrow also noted that besides the competition to buy and store lobsters, there’s also a lot of competition in exporting the product.
According to a number of people, when a few of the biggest suppliers in New England and in Nova Scotia saw signs of the Canadian catch dwindling, they bet on substantial Christmas and New Year’s holiday sales, bought up most of the Canadian catch at the low boat prices, and held onto it, leaving an insufficient supply of fresh-caught lobster available for the Christmas holidays. (By late November most New England lobstermen have finished fishing for the season.) At the same time, these big guys allegedly negotiated and agreed upon prices with mid-level buyers for holiday sales both here and abroad. The mid-level guys, therefore, made their sales based on the agreed-upon prices and wired payment to their suppliers here and in Canada.
Around Dec. 19 a surprising surge in demand for holiday lobster played right into the hands of the wholesalers holding all the fresh-caught lobster. There was an unprecedented two-dollar rise (Canadian dollars) in three days. In one case at least, one of the biggest suppliers in Canada allegedly returned the money, saying essentially, `Sorry, fella, the price has gone up. You’ll have to pay X bucks more a pound.’
Business is business, and the lobster business is like none other: for those who buy and sell, it’s a matter of trying to predict prices two to three weeks ahead on a live, highly perishable product, the price of which can change in a day. It’s a tricky business, and things happen, but as one mid-level buyer said of the Canadian returning the Americans’ money and upping his price, “I never heard of that before.” The major players presumed to have been involved either did not return repeated phone calls or declined comment.
In order to hang onto their customers, the mid-level dealers who got caught between the people they sold to and the big guys who had the product they needed had two choices. They could either make up the difference in price out of their own pockets, or they could try to explain the situation and renegotiate terms. It was a nasty situation. We were told that those that paid the difference lost between $50,000 and $150,000; those that chose to renegotiate caused, in some cases, irreparable damage to their business connections. Most buyers and suppliers, though, honored their prices and lost money. As one said, “Customers have long memories and there are plenty of suppliers to choose from.”
Nobody’s happy except those who made the big money. New England fishermen were unhappy with the fall prices, though pleased at the unexpected rise in prices paid to them between Dec. 19 and Jan. 5. Nova Scotia fishermen, while they did well financially, were unhappy at what they perceive as a loss of potential income due to the low initial boat prices. Ten years ago they struck for higher prices per pound, held back their lobster and reached individual gentlemen’s agreements with the people they sold to for a minimum price per pound. In the last several years, because prices paid at the wharf were higher than the agreed upon minimum, the agreements lost their meaning. When the price last fall dropped to a ten-year low, buyers ignored the agreements. “It happened once,” said an observer, “it won’t happen again.” The fishermen won’t allow it.
To that point, said Morrow of the Nova Scotia Packers Association, “Fishermen believe there are conspiracies amongst buyers to gain the majority of profits in the industry, but I can tell you that most of the small and medium-sized buyers have seen their margins and profits shrink to where some have gone bankrupt. They think fishermen have been the main benefactors of the higher prices in the past ten years.”
As of the middle of February, those who buy and sell lobster noticed what they refer to as “a little bump” in sales for Valentine’s Day, but other than that, the lobster business, like the rest of the economy, was better than in the fall, but not much. Because of that, one mid-level buyer said he thinks the big guys may get stuck when they try to unload the huge amounts they bought up at the beginning of the Canadian fishing season.