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From Trap to Plate: Selling lobster changes with the times

First published in Landings, July, 2013.

Even in the highly traditional world of lobster fishing, things are changing rapidly. Not only is the ocean altering, becoming more acidic and warmer decade by decade, but ways of selling lobsters are changing as well. To help lobstermen better understand the market mechanisms that affect the price paid for their catch, we begin a new series focusing on the movement of lobster from the dock to a plate. Fishermen and the buyers of fish have long had an antagonistic relationship. A fisherman has a fragile product, one whose quality diminishes the moment it lands on the deck. He wants to move it fast, and at the highest price possible. A buyer wants to pay the lowest price possible for that catch and get it at the exact moment he needs it. These two motivations often conflict. For years many seafood transactions in Maine took place quietly behind closed doors. A broker shook hands with a fishing vessel owner and the deal was done. That fisherman might not know what another buyer would offer for his catch. The broker might not know that another boat was about to offload a higher quality catch. Prices fluctuated by the hour and by the day and no one revealed much about anything. Then came the Portland Fish Exchange. The Portland Fish Exchange opened its doors with great fanfare back in 1985. At that time groundfishermen in Maine trucked their catches to Boston or landed their fish in New Bedford or Gloucester to be sold at seafood auction houses. Fishermen sold their catch sight unseen, by the boat load, to a medley of buyers. The Portland Exchange, by contrast, was a display auction, the first on the east coast. “One of the principal ideas behind the display auction was to find a way to reward well cared-for fish with higher prices. But fish quality is very subjective and best left up to the buyer,” explained University of Maine resource economist Jim Wilson, who was involved in the creation of the Exchange. The auction would display the catch from all of the boats which landed that day for buyers to observe and bid on. “So in a display auction it’s 'what you see is what you get'. In a competitive market, if buyers are good judges of quality and want quality, they tend to reward quality with higher prices and fishermen tend to respond with better handling, because it pays.” The Portland Fish Exchange was heralded as the start of a new era in seafood sales. But it did not include lobster. “The Exchange was about fish,” explained Robin Alden, who at the time was publisher of Commercial Fisheries News. “Lobster was not the issue we were trying to solve. There were plenty of wharves and dealers working with lobster.” In addition, Wilson added, lobster would not have benefited from inclusion in a display auction because lobster landings were moderate in the mid-1980s, compared to today, and competition among buyers was robust. Quality was not an issue. “The market was fairly competitive then compared with fish. Lobsters were soft or hard and there were two distinct prices. But that was when lobsters were relatively scarce,” he said. Today, however, the element of quality has become more important in lobster sales. As the catch has grown enormously in the last decade both here and in Canada, the price for lobster has dropped. Distinguishing Maine lobster in the marketplace as a high-quality item is one way for lobstermen to command a higher boat price. John Sackton, publisher of Seafood.com News, an online clearinghouse of national and international fisheries news, thinks that building the notion of quality into lobster sales will improve the price to lobstermen over time. “The reason that lobster prices are all over the map is because what is delivered is all over the map,” he said. If lobstermen or those they sell to would grade the lobsters, they could set clear prices for different types of lobsters. Instead, he said, they continue to sell a mixed boat load in order be paid quickly and go out to harvest more lobsters. Quality does not enter into that equation. Keith Flett thinks his on-line trading platform might be one way to motivate higher prices. Open Ocean Trading began operating in 2010, offering fishermen and buyers the means to contract in advance to lock in a price for all or just a portion of a fishermen’s catch, before the trip happens. Just this year he has expanded the on-line company to include lobster. The company announced that they will be contracting for lobster landed in the ports of Plymouth, MA; Portland, Harpswell, Boothbay, and Cutler, ME; and Beach Point, Prince Edward Island. “The major problem with the price for lobster is that it doesn’t allow for the best price discovery,” Flett said. “You can’t find out what the price for lobster is, as you can with say, pollock.” In addition, there is no mechanism in place to reward landing a quality lobster, one that ships well. Open Ocean Trading allows buyers to set up what Flett calls a “forward contract” with a particular boat or wharf for a certain amount of lobsters to be delivered at a certain time. The company acts as the intermediary between the two, vetting the financial and institutional strength of both. This allows the boat to know what it will be paid for its catch before the trip happens, and for the buyer to lock in at an agreed upon price. Similar systems are in place for aquaculture-raised salmon in Chile and in Norway. Flett believes that this system gives fishermen more control over their particular resource, in this case lobster. “The whole thing started with egg farmers in New York state,” he said. “They started establishing prices forward, telling the buyers what the price is going to be.” Part of Open Ocean Trading’s on-line platform includes information about the lobstermen who land the lobsters. “We incorporate handling practices on the boat, post pictures of the wharf and boat, give information about the captain and crew, to show they take pride in the catch. The story is worth money,” he said. He and a technician from Aquatic Science and Health Servicess in Canada are going to work with lobstermen at the docks this summer to show how to handle and properly pack the lobsters to ship to a buyer. They will test the protein levels of lobsters and take other steps to ensure that the lobster shipped remains as healthy as possible. “The aim is to build a relationship,” Flett said. “So that the buyer will say ‘I know that so-and-so takes good care of his lobster on a daily basis and so I will pay a little more.’” Sackton has some reservations about this new approach to lobster sales. “What is a forward contract for, exactly?” he questioned. “They must specify a grade, percent of shedders, size for it to work. Then it could establish a good knowledge and transparency about the price for say, hard shells.” “To improve is to change; to be perfect is to change often,” said English Prime Minister Winston Churchill. Selling lobster has long been a quiet art, practiced by lobstermen, wharf owners and buyers in private transactions. But with the great abundance of lobsters now being landed in Maine, lobstermen are frustrated with the current system of selling lobster which leave them at a disadvantage. What other changes does the future offer?

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