At the start of last summer, the U.S. lobster industry was riding high, fueled by explosive growth in sales to a Chinese middle class that couldn’t seem to get enough of our tasty, lucky-color red symbol of wealth, status and success.
Then, in July, China slapped the U.S. lobster industry with a 25 percent tariff in the second round of the then-fledgling U.S.-China trade war. American dealers watched in dismay as China turned to Canada to satisfy its craving for lobster, which is the same species without the tariff-inflated price tag.
New trade data shows live lobster sales to China fell by 46.7 percent, or $82.1 million, in the 12 months following July 2018 – from $179 million in the year before the punitive tariff went into effect down to $93.8 million in the 12 months after the tariff.
“We just can’t compete with Canada right now on price,” said Hugh Reynolds, the owner of Greenhead Lobster in Stonington. “Between the tariff and the strong dollar, the China market is over and done for Maine, I’d say. Our China numbers are way down. I don’t know anybody selling there.”
Instead, Reynolds is looking to grow his domestic and value-added lobster product markets.
The tariff hit Maine Coast, a York-based lobster dealer, particularly hard, as it had made its name on its development of the mainland China market and had grown that part of its operation to represent about 20 percent of its business. When the tariff hit, it lost 80 percent of its China sales.
“Did we see an impact? Yes, an immediate one,” head of marketing Sheila Adams said. “It happened, no doubt, but our industry, it’s resilient. Lobster is a delicious, highly regarded, sustainable protein. People love it. Canada alone can never meet all of the demand, especially at certain times of the year.”
Nimble U.S. lobster dealers can still make money in China in the days before major holidays, like Lunar New Year or Mid-Autumn Festival, or when Canada’s lobster fishery is closed, Adams said. Big demand drives up Canadian prices and makes even tariff-inflated U.S. prices more palatable, she said.
China is still a major player in the U.S. market, despite the tariff. It remains the biggest consumer of live American lobster for six months out of the year, even with a trade-inflated price tag. It is just buying less than it used to, with its share of the U.S. market falling from 28.4 percent to 16 percent.
But the trade data isn’t all bad news. Not only did China sales not crash as hard as some had feared, but total international sales of American lobsters dropped by just 5 percent, or $30.6 million, from the year before the tariff to the year after – from $618.9 million to $588.2 million.
While Canada profited from the U.S.-China lobster war, data shows it also helped buoy the U.S. market.
In the year leading up to the tariff, Canada purchased $301.7 million of live U.S. lobster – 29 percent more than the $234 million it bought the year before. Sales of live lobster to Canada grew from 38 percent to 51 percent over that same period.
Bottom line, while it may have gladly assumed the role of being China’s sole market for North American lobster, increased U.S. lobster sales to Canada offset all but $14.4 million of America’s China losses over the last year, helping to blunt the impact of the China tariff on U.S. dealers.
But a sale to Canada is not necessarily as good for the U.S. lobster industry as a sale to China, even if the American dealer is paid the same amount of money for both transactions, according to Annie Tselikis, the executive director of the Maine Lobster Dealers’ Association.
“Just because exports to Canada go up doesn’t mean it’s the most advantageous sale,” Tselikis said. “I want to maximize the value of my product, get the best margins. I’ll probably get a better margin selling to the Chinese consumer that selling to a Canadian processor or wholesaler.”
American dealers never fail to sell their Maine lobsters, Tselikis said – the goal is to find the one with the best margin. With China buying as many Canadian lobsters as possible, even the usual low-value Canadian processing sector is paying better than usual, Reynolds said.
Although competitors, Canadian and Maine lobster dealers also have a long tradition of working together, Tselikis said, buying and selling each other’s lobsters to establish a year-round supply chain to meet their international clientele’s continuing needs.
Meanwhile, Maine lobstermen say they have yet to feel the sting of the Chinese tariff. While the price is variable across the state’s 3,500-mile coastline, boat prices have generally been strong, especially among the soft-shell market, which is landed in summer and fall and fetches lower prices than hard shells.
According to Urner Barry, a national seafood consultant, soft shells are selling wholesale for 15 percent more than they were this time last year – $6.25 for a 1-1/4 pounder compared with $5.43 – because a wet, rainy spring delayed the traditional July start of the Maine fishery. Product scarcity means higher prices.
The price that Maine fishermen netted for their lobster increased 3.6 percent – from $3.92 per pound in 2017 to $4.05 per pound in 2018 – despite the mid-year implementation of the 25 percent Chinese tariff and the yearlong impact of an 8 percent European Union tariff, state data show.
Maine lobstermen, who land about 85 percent of the annual U.S. lobster harvest, are more focused on the looming bait shortage and fishing restrictions sought by environmental groups determined to shield the endangered right whale from serious or fatal entanglement in lobster gear.
While individual dealers may be reeling from the China tariff, the industry as a whole has found ways to survive, collaborating with export partners like the Maine International Trade Center and Food Export USA-Northeast to develop new markets in Southeast Asia and grow existing markets, including Canada.
Dealers are pitching live lobster to Southeast Asia’s growing middle class and gourmet lobster meat rolls to Berlin foodies, participating in trade missions to Vietnam last year and Dubai this year in the hunt for the next big lobster-loving consumer.
While some U.S. dealers lobby for new trade deals to even the playing field in China and Europe, others, including Reynolds, worry that Canada is reinvesting its China profits in the infrastructure that supports the lobster export industry, building new roads, cold-storage facilities and airport hangars.
For years, U.S. lobster dealers have been able to tout America’s superior distribution network when they are selling their highly perishable product into farflung, emerging markets. While Canada fishermen can land the same product, they have always had a harder time getting their lobster to market – until now.
“We are really struggling right now, but I’m worried it’s only going to get worse,” Reynolds said.
Reynolds likened the global lobster trade to a holiday meal, with Canada and the U.S. the guests.
“Canada is growing so strong in the export business,” he said. “It’s not just China and Europe anymore. They’re making inroads into Malaysia, Singapore, South Korea and Hong Kong. It’s kind of like they’ve taken the meat and potatoes, but they’re also taking the apple pies and green beans, too.”