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Lobster Price Not Reflecting Lobstermen's Rising Costs

To anyone who isn’t living in a remote cave, the issue of this summer is rising prices. U.S. inflation jumped 9.1% in June, the fastest pace of increase since 1981. Consumers are facing higher prices for just about everything, from used cars to a gallon of milk, which limits the positive impact higher wages have made on the family budget.

Lobstermen are in a similar, if more painful, situation. The costs of bait, fuel, traps — all items necessary to go out and catch a lobster — have skyrocketed this year while the price paid for a lobster has dropped sharply compared to this time last year. In mid-July, the cost for a barrel of pogies in Boothbay Harbor was $265. Redfish racks ran $360 per barrel. Downeast the price for pogies was around $200 per barrel; salted herring might cost $240 a barrel. Diesel fuel soared above $6 per gallon, making many lobstermen reconsider how often to tend their traps.

The cost for bait, fuel, and traps has skyrocketed. Yet the price paid at the dock for lobsters has not. T. Yoder photo.

Why can’t lobstermen pass on the increased cost of catching lobsters to those who buy their lobsters? After all, the cost of a lobster roll has increased dramatically in the past few years, topping $38 at various Bar Harbor locales in July.

The price lobstermen are paid for lobster “depends on demand,” said Daniel Georgianna, resource economist at the University of Massachusetts Dartmouth. “It doesn’t matter what it costs to catch the lobster. Demand determines price.”

Lobster prices were high this winter and early spring, in Maine hitting $13 per pound at one point. That was due in part to a low inventory of stored lobster and few vessels going out to fish during the stormiest months of the year. When the weather improved and more lobstermen set their traps, the price dropped, as it does each spring. This year, however, the drop was felt more acutely because of the record-high winter price.

During the Covid pandemic years of 2020 and 2021, demand for Maine lobster boomed. Faced with a shutdown of restaurants, cruise ships and resorts due to a homebound population of consumers, lobster dealers moved quickly into other markets, such as grocery chains, online sales, and value-added products that could be prepared at home. Lobster sales ticked up and the price paid to lobstermen increased.

That’s not happening this year. Fresh seafood sales plunged 13.3% in June, according to a recent article in Seafood Source. Frozen seafood sales remained strong overall, although value dropped by 7.4%.

“Demand for lobster is down this year,” explained John Sackton, founder and former publisher of Seafood News.com. “Canada exports to China are down because of Covid shutdowns. Companies don’t know which city or airport will be open. In Europe they are having problems because of high energy costs, inflation, and the war in Ukraine, so demand is down.”

U.S. consumers’ spending patterns were buoyed during the past two years by federal stimulus money, money that is no longer flowing. “During the height of Covid, people couldn’t travel, go out to eat, go out for entertainment, or commute to work. Household expenses were way down, leaving more money for little luxuries. Now all that is changed. Their money is allocated plus there’s inflation, so no more little luxuries,” Sackton said.

Part of a lobsterman’s inability to set his or her own price is due to the fact that there are so many lobstermen, both here and in Canada. If one individual decides not to fish because his or her costs are too high relative to the price paid for the catch, there’s likely to be another lobsterman, or many other lobstermen, who are willing to go, no matter what.

“It’s really a big problem. How do you give producers more pricing power?” Sackton said. “By controlling output.” But Maine lobstermen each run their own small business; each makes individual decisions about when and where to fish.

In Newfoundland, by contrast, the price for a lobster is set before the boat ever leaves the dock. The Newfoundland Fishermen, Food and Allied Workers Union (FFAWU) represents inshore fishermen, offshore trawlers, lobstermen and plant workers in Newfoundland and Nova Scotia. Each year the FFAWU and the Newfoundland and Labrador Processors group negotiate a base price for lobster. The official price is set by a government-appointed Fish Price Setting Panel. “The Union negotiates the price for the lobster fleet and recognizes higher costs when calculating fleet price,” Sackton said.

Maine has no comparable, minimum price-setting mechanism. Prices are driven by how closely the amount of lobster landed matches demand from various marketing channels for Maine’s product. If consumer demand exceeds the volume of lobster available at a given time, price rises. As Sackton noted, “People who want the product will pay a higher price for it.”

“The key to any of this is to market the product to increase demand,” Georgianna said. “The problem with increased marketing, though, is that it benefits all in the fishery, not just those who pay for it.”

As the summer progresses and the Canadian lobster processors begin opening their doors, it is likely that the price paid to Maine lobstermen will respond to increased demand. Meanwhile, Maine’s lobstermen are tightening their belts and crossing their fingers.

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