Thanks very much for having me join you today, Mr. Chair.
The Lobster Council of Canada is the only organization that includes all parts of the lobster value chain, including harvesters, shore buyers, processors, live shippers and first nations. We focus on market access issues, marketing and promotion of Canadian lobster, communication and encouraging collaboration in the most profitable seafood sector in Canada. The sector has annual landings of over 200 million pounds, representing $2.5 billion in export sales.
This pandemic has had a dramatic impact on the lobster market around the world. Our challenge, just like Christina's, is focused on the fact that 75% of processed and live lobster is consumed in the food service sector. This sector has effectively collapsed over the last three months, beginning in Asia, Europe and finally North America.
I will now provide an update on the market situation starting with live lobster, a market that represents about 45% of our total lobster export value.
The live market collapse began in China in late January. The ensuing quarantines throughout the world, shutdown of borders, significant holdover of live inventory and cancellation of air traffic further depressed the live lobster market. It caused an immediate collapse in the winter shore price, which is the price paid to harvesters, from $10 to $4.
Beginning in early April, the live lobster market in China and the Pacific Rim began to slowly return, with consumers procuring their seafood from retail and e-commerce channels. However, this demand from Asia is a fraction of where we were pre-COVID, and is based on a much lower market price than we had enjoyed in January.
It is important to understand that volumes being harvested today, on May 7, given bad weather and actual effort on the water, are a fraction of what will be landed one week from now, when every season in eastern Canada will be open. At the end of April, landings were approximately 25% of where they'll be in one week’s time, when all harvesters take to the water in all five eastern provinces.
I will focus now on the processed lobster market. The markets are quite significantly different but they're interrelated. The processed lobster sector represents about 55% of our total lobster export value.
Processed lobster buyers from the United States make up 75% by value, and include casinos, cruise lines, quick-service restaurant chains and independent restaurants. All buyers in our key markets, which include the U.S.A., European Union and Asia, are uncertain of business recovery timelines, the volumes they will require and what price level will work to bring consumers back. There's a lot of uncertainty in the food service sector, as we all know.
Due to typical seasonal buying and production patterns, processed lobster market prices began to retreat in February, a little later than the live sector. The price decrease has accelerated as the spring production periods approach and orders from customers worldwide are simply not there. With lower short-term shore prices and the expectation of further shore price drops due to expected fishing volumes that will exceed plant capacities, labour issues, which have been talked about, that affect plant capacity and a challenging market, exporters have seen a dramatic drop in the markets, resulting in writing down their high-priced inventory of lobster tails and lobster meat that they produced early in the winter.
There is some interest in Asia for in-shell whole frozen products at a price and volume that may or may not work for the harvesters and processors who produce these products. That's a bit of good news. Variables that could change the spring dynamic for both the live and processed sectors include the pace of return of key markets, harvesters' fishing decisions, bad weather and challenges with the North Atlantic right whales that Max just talked about. When all seasons are open, it is expected that experienced buyers will demand lower prices for all lobster products, which likely will cause the shore price to drop for all. In summary, the markets for both live and processed lobster are generally bleak, with some returning business but at a fraction of where we typically are in early May.
In an effort to help harvesters and the shoreside sector plan for this challenging spring season, the Lobster Council has developed what we call the “Canadian lobster model”. We did some modelling. The model takes 2019 data on lobster volumes in the U.S. and Canada, processed and live exports values, as well as estimates of when we expect the key markets to recover. This data then provides us with an estimate of what we're calling “stranded” lobster, which is lobster without a home or market. I think Leonard talked about it a minute ago. We have that estimate for the end of every month and the end of 2020.
Our latest modelling estimates for this year show that at the end of 2020, if we do exactly what we did last year, we could have upwards of 90 million pounds of lobster stranded and without a home at the end of the year. I don't think any of us want that.
I will sum it up by saying that our challenge as a sector is to balance public health concerns on boats and in plants, and lobster season openings and plant production capacity, with slow and uncertain markets around the world.
We need some lobster, but as our model shows us, we don't need anywhere near everything that we can catch.
Thank you very much.