The Summer Of Our Discontent

text by Phillip Conkling
originally posted by The Working Waterfront

If you live in the Midwest, it is hard to avoid the talk this summer about corn and drought. If you live in the New York, Pennsylvania or Ohio, the talk is all about drilling for natural gas. If you are on the Maine coast, you cannot avoid hearing about lobsters. Everyone, especially lobstermen, want to know what is going to happen to the price for Maine lobsters, which has sunk as low as $1.35 per pound in some harbors.

There are so many cheap lobsters caught in Maine and shipped across the border to Canadian processing plants that over 300 Canadian lobstermen recently blockaded four plants in New Brunswick and two others on Prince Edward Island, so Maine lobsters could not be delivered there. Canadian lobstermen feared Maine’s low prices would force them to sell at similar rock-bottom prices just as their lobster season was about to open.

With no market for hundreds of thousands of pounds of immobilized Maine lobsters dying by the day in warmer than normal ocean temperatures, a full-blown crisis had brewed to the point that both of Maine’s Republican senators and Maine’s two Democratic representatives got involved. The senators requested the intervention of U.S Secretary of State Hillary Clinton, while Rep. Chellie Pingree asked the Royal Canadian Mounted Police to provide escorts for trucks hauling Maine lobsters and wrote to the corporate headquarters of cruise lines asking their vessels to buy local lobsters when docking in Portland.

Next, Maine’s governor and New Brunswick’s prime minister got into the act and offered solemn pronouncements on the seriousness of the situation. Then a judge in New Brunswick issued an injunction prohibiting the blockading of Canadian lobster processing plants for 10 days to give Canadian lobstermen time to negotiate with the New Brunswick government officials and processing owners for a resolution to the trade embargo. The situation is getting thicker than a Downeast pea soup fog, with which we have also been beset lately.

What happened next is a lesson in international political economy: not all capitalist systems are created equal. The protesting Canadian lobstermen insisted they would not cease and desist until the province guaranteed them a price of $4 per pound for their lobsters. To American ears, that demand sounded as unnatural as gas drillers insisting on a guaranteed price to frack new wells after the glut of natural gas prices had damaged their operations. But Canada is not in the United States and although Canadians are currently ruled by Conservatives espousing free market principles, New Brunswick’s fisheries minister ultimately settled with the Canadian lobstermen by guaranteeing them a price of $3 per pound for “cannery” lobsters and $3.50 per pound for lobsters for the live market. Kind of sounds like what happens in a state-planned economy.

Compared to Maine lobstermen’s symbolic action of the silent lobster tie-up last month, which did nothing to alter the fundamental imbalance of supply and demand, the success of the collective action of their Canadian counterparts must have been striking.

So what are Maine lobstermen to do to address a critical problem with their businesses?

A lot of people, including Maine’s Governor Paul LePage, have suggested that Maine needs more lobster processing capacity. But Maine’s big lobster companies all currently have more processing capacity than they have market. Meaning they could create many more tail and claw packs for, say, cruise-ship lines, or white-knuckle meat for bisques and chowders, if their customers were willing to buy more from them. Which they are not. Ignoring the realities of the market can only lead to one place: witness Live Lobster, the company which took over the abandoned sardine canning factory in Prospect Harbor amid much ballyhoo, only to be in bankruptcy proceedings a year later for lack of a market.

Other people suggest that the solution to increasing the price for Maine lobsters is to restructure the largely ineffective Maine Lobster Promotion Council (MLPC). MLPC’s current operating budget is approximately $390,000 for a $350 million industry. If that sounds funny to you, you must have a sense of humor.

Marketing consultants have pointed to the success of the Alaska Seafood Marketing Institute (ASMI) as a model Maine might follow. ASMI is a decade-old joint public-private marketing organization that successfully launched the Wild Alaska brand after Alaskan salmon prices fell to 40 cents per pound in the mid-1990s. Their efforts have been smart enough and well enough financed so that prices Alaskan salmon fishermen now get for their fish have more than doubled to roughly a dollar per pound.

However, in order to raise $3-5 million for a serious Maine lobster marketing campaign, you have to believe that Maine lobstermen have changed their minds on two core beliefs. First that lobstermen are willing to tax themselves a nickel or dime per pound for every lobster landed and sold through the wholesale chain to create an expanded marketing fund, which has proven to be an unpopular proposal in the past. And second you have to believe that the Maine lobster “industry” composed of the often disparate interests of lobster catchers, bait companies, wharf owners, dealers, wholesalers and processors could put aside generations of competition, tension and mistrust to work collaboratively in an ambitious marketing program. Things are perhaps bad enough that this might actually happen. But marketing campaigns take time to change prices and many lobstermen are running out of time on boat, truck and house payments.

But the fundamental problem is supply—or the timing of the supply of shedders that hits a saturated market all at once. There are simply too many lobsters chasing too few markets in June, July and August. Maine lobstermen could be forgiven for believing the law of supply and demand does not apply to them, because for the past generation or so, it has not. Beginning in the late 1980s, the supply of Maine lobsters began increasing; first the supply doubled, then tripled, then by 2000 landings quadrupled. Throughout this stupendous increase in the supply of lobsters, the average price Maine lobstermen received…increased! Every year! But most knowledgeable lobster industry people believe those days are over for good. If lobstermen do not figure out how to adjust the timing of their catch to meet market demand, the results will be widespread hardship.

Philip Conkling is president and founder of the Island Institute, based in Rockland, Maine.