With price negotiations currently underway for the Newfoundland and Labrador snow crab fishery, well-known market analyst John Sackton warned stakeholders to temper their expectations.
Before the beginning of price negotiations between the Association of Seafood Producers (ASP) and the Fish, Food and Allied Workers Union (FFAW), the government of Newfoundland and Labrador released a recommended pricing formula, known as the Blackwood Formula, for the consideration of both parties. The FFAW has since rejected the Blackwood Formula, saying in a press release, “Harvesters have been clear that the Blackwood Formula as written will not work and other formula offers are now being exchanged.”
Sackton said that it is in the best interest of both the ASP and FFAW to agree on some kind of formula to better adapt to the current snow crab market.
“In my view, the formula is the only way to take into account actual market prices. Without that, you’re just making a guess as to what the market is going to do. If it goes up, one side is mad. If it goes down, the other side is mad. So, you’re fighting over what you think is going to happen instead of just agreeing,” said Sackton.
“It’s very destructive to the sale of Newfoundland crab in other markets to have a standoff every spring as to what is going to happen, when it’s going to open, what is the price going to be. It’s not helpful in the overall scheme of trying to sell crab.”
According to Sackton, the crab market is at a 15-year low not seen since 2010–2015, while volumes are up from these dates. He said that harvesters and processors must temper their expectations and work together to make the most of a lacklustre crab season. Sackton cautioned against a repeat of the 2023 crab season where price negotiations broke down, seeing members of the FFAW engage in a six-week tie-up that resulted in a delayed season.
“You’re coming in with more product than you had then, so I didn’t think the statistics are lined up very well to expect some sort of rapid bounce back in price,” said Sackton. “Everyone is in the same boat. If you’re trying to maximize the value of crab, you can’t keep hitting each other over the head with oars, you’ve got to row the boat.”
In response to the tie-up, the ASP issued a grievance stating the FFAW’s actions were contrary to the Fisheries Industry Collective Bargaining Act (FICBA) and the Master Collective Agreement (MCA). Section 19.13 of FICBA states, “A fisher shall not engage in a cessation of business dealings and a bargaining agent representing the fisher shall not take a vote as to cessation of business dealings between fishers and processors or authorize or participate in taking a vote or declare or authorize a cessation by that fisher.”
The grievance arbitration decision concluded that the FFAW did breach the FICBA and MCA. The arbitration has now entered the damages phase, where the arbitrator will decide the damages owed by the FFAW to the ASP. The ASP is seeking compensation for the processor’s losses and costs for these six weeks, as well as punitive charges to discourage the union from repeating the tie-up of 2023.
The FFAW, however, has fired back at the ASP.
The union claimed that arbitration recognized that “outdated legislation” made it impossible for harvesters to engage in a tie-up, which they said made it impossible to do their job of representing harvesters. In response to the ASP seeking damages, the union has requested financial records from every crab processor in the province.
The primary purchasers of crab in recent years are major retailers and chains, which Sackton said are extremely price sensitive. This leaves few options for processors in Newfoundland and Labrador to find a buyer willing to pay a higher price for their product. For processors to maximize the value of their product while paying harvesters the maximum value, he said that a formula that works for both parties is necessary to avoid a repeat of the previous year.
“You’ve got to hammer out what a fair revenue split is so both of us are tied into this industry. And then separately you hammer out what is the maximum price the market is going to bear. If you figure out the first one, then you’re really free to push on the second one,” said Sackton.
Regardless of how price negotiations between processors and harvesters turn out going into the 2024 snow crab season, Sackton said that stakeholders will be going into a shrunken market. He pointed to the shutdown of the Alaskan snow crab fishery as proof that the demand for snow crab has fallen to record low numbers since the momentary highs of 2022.
“If your major competitor has disappeared and you still can’t get buyers to pay more for your product, you’ve got to question what else is going on,” said Sackton.
“If you’re a salesperson, you’ve got to pay attention to your markets. Whether they want to be or not, harvesters have to recognize they’re tied to salespeople. The best thing they can do to add value, in my opinion, is to ensure that the sales push is as successful and far-reaching as possible. If they don’t trust the driver, it’s just not going to work… This idea of denying market realities to prove a political point is hurting people and their pocketbooks.”
In the U.S. market, crab is currently selling at $5.50 per pound, which is equivalent to a $3 per pound price in the 1990s and 2000s. Sackton said that there is a chance that this price point could trend upwards toward the $6 range, but expecting much more than that is a “pie in the sky” idea.
“The sooner that people accept that we’re going to be in a sustained period of prices that are below what we had in 2020 to 2022, the more realistic and better it’s going to be,” said Sackton.
“Maybe it will get up to $6, but to do that you’ve got to be firing on all cylinders in terms of a sales game. You can’t afford to put people off and have them say, ‘I don’t know what’s going to happen, so I’m going to wait until the end of May to make my purchase.’ That’s not going to support that kind of price.”
