The strengthening Canadian dollar is pressuring the lobster industry.
In Nova Scotia, the season is currently closed. This means that dealers are selling off live inventory purchased at higher prices.
With the Canadian dollar dropping from $1.35 to $1.25 in late July, this is the equivalent of a seven per cent drop in money returned back to Canada, squeezing margins.
This caused the Canadian Lobster Council to warn that the country’s lobster processors were under pressure.
In New Brunswick, the fall lobster season has begun in LFA 25, the Northumberland Strait between New Brunswick and P.E.I. The Maritime Fishermen’s Union (MFU) is objecting strongly to shore prices put out by processors.
Packers were offering $4.25 (CA) for canners (under one-pound lobsters) and $4.75 (CA) for markets. This is a full $2/pound lower than the price paid in LFA 24 and 25 last spring.
The MFU says that the change in currency cannot justify such a large swing in the shore price.
Further, the change in carapace size from 73 mm to 75 mm this year is cutting down on volumes, probably on the order of 10 per cent.
This is also putting pressure on harvesters. The MFU says “This price is totally unacceptable and corrective measures must be taken immediately if the processors want to be taken seriously by the fishermen. Our fishermen expect better prices when they receive payment for their catch.”
But lobster landings have increased in Maine and the live shore price has been fluctuating there as well. New-shell lobster prices declined from July to August, but hard-shell wholesale prices are going up.
The biggest issue is that canner lobsters in the fall are traditionally bought by processors, who face a much bigger swing in the value on processed products. For example, a currency swing of seven per cent on a $15 lobster 4 oz. tail represents a loss of $1.05 at the processor tail level, which translates back to a $3 to $4 difference in raw material prices, depending on yield and product form. A shell-on tail, plus the lobster meat from claws and knuckles should equal about 33 per cent to 35 per cent of the live lobster.
Even though there is pressure for lower shore prices, it is still not likely to make up for the currency swings and will lead to pressure to produce whole cooked and whole frozen lobster as only option. When the entire animal is sold with minimum yield loss can packers hope to make back their cost.
Conversely, this will continue to put upward pressure on tail and meat prices.
Investors seems undaunted by the possible price volatility.
The recently announced equity investment and combination of Riverside Lobster and Cheticamp will create a lobster and crab company with $175 million in sales.
By contrast, Clearwater, generally thought to be the largest Canadian lobster producer, sold $108 million of lobsters last year, along with $32 million in snow crab.
The consolidation in the industry is happening as investors and companies with deep financing bet that they can become strong enough to discipline the market — enforcing their prices both on shore where they negotiate with harvesters, and in the marketplace, where they sell to major buyers.
This article was republished with permission of John Sackton and seafood.com.
