Lobster industry squeezed by oversupply as demand for what has long been considered a luxury dish has not kept pace, especially since the global recession hit in 2008

Last updated: August 7, 2013 7:30 pm

Lobster industry squeezed by oversupply

By Neil Munshi in Chicago

The Maine lobster industry is being crippled by a glut of supply that many attribute to climate change, sending the price per pound plummeting and turning the crustacean into something it has rarely been before: affordable. According to figures from the Maine Department of Marine Resources, the volume of the state’s lobster harvests has skyrocketed from about 28m pounds in 1990 to 126m pounds last year as oceans have warmed, helping the shellfish and their larvae to grow faster. But demand for what has long been considered a luxury dish has not kept pace, especially since the global recession hit in 2008, even as fuel and equipment costs rise.“Overall profitability of the industry is suffering,” said Patrice McCarron, executive director of the Maine Lobstermen’s Association. Volumes are up about 80 per cent since 2008. “So we’re in a situation where we’re trying to move an ever-increasing supply chain into a weak market.”

Prices paid to fishermen at the wharf peaked at $4.63 per pound in 2005, but fell to $2.69 last year. Gastropubs have been offering lobster macaroni and cheese, while a Walgreens pharmacy in downtown Boston is selling live lobsters for $9.99.

Rising Chinese demand for high-end seafood is driving global seafood prices to all-time highs, according to a recent UN Agricultural Organisation report. But the Chinese effect on lobster prices had not been sustained, said Mark Murrell, owner of getmainelobster.com, an internet retailer.

“The price is around $2.25 [a pound] right now, though it changes daily,” said Mr Murrell. “There’s plenty of Maine lobsters. We may have another record-breaker.”

This year a massive Chinese order drove the price up $2.50 per pound overnight. But the rise lasted a month before dropping once the order was filled.

We’re in a situation where we’re trying to move an ever-increasing supply chain into a weakmarket

– Patrice McCarron, Maine Lobstermen’s Association

The drop in prices has caused tension between Maine and Canada. The US state generally harvests cheaper soft-shelled lobsters, which are generally sold either to restaurants in the region or to food processors. Canada harvests hard-shell lobster, which are easier to transport.

Each country is the largest importer of the other’s lobster.

But last year Canadian lobstermen blocked their US counterparts from delivering to the processing plants north of the border that buy more than half of Maine’s lobsters.

This year the Canadian harvest has also been strong, sending lobstermen to farmers’ markets and roadside stalls when processing plants – which make frozen lobster tails and other products – put limits on how much each fisherman could deliver.

The price drop has brought out entrepreneurs, who are opening processing plants in Maine to handle the glut.

The state might receive a boost from what seemed to be an improving US economy, said Robert Bayer, head of the University of Maine’s Lobster Institute. “Lobster is a celebration food – when things are good, people go out to lobster meals.”

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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