Okay. I'll quickly run through the fall and winter.
I'll start out by saying that the economic financial crisis that unfolded throughout the fall of 2008 affected the demand for lobster. It was perceived in our markets as a high-end special-occasion food. The shore price fell to $2.00 to $2.25 U.S. in Maine during October. Grocery chains ran specials at unheard-of low prices in the U.S., and demand remained low, even at those store prices.
The world banking crisis was affecting seafood buyers and their distribution chain customers through tighter credit and concern about uninsured receivables.
The Atlantic Canadian lobster industry sees one of its two yearly gluts of landings during December as the Bay of Fundy fishery and the LFA 33 open. Buyers were expecting heavy landings if the weather was favourable to fishing.
This year we had almost an extra week of fishing because of the way that the last Monday of November fell on the calendar.
Pre-season market intelligence revealed a possible 50% reduction in sales to restaurants in the U.S. due to depressing economic news and the deepening recession. Economic conditions were also deteriorating in the EU and Asia.
Exports of live lobster from the Bay of Fundy to the Japanese market were affected by concerns over paralytic shellfish poisoning levels in the tomalley.
In recent years, the P.E.I. and New Brunswick-based lobster processing plants have purchased up to ten million pounds from the Southwest Nova fall-winter fishery. Shore price and the level of inventory held by the processors affect their appetites for buying during December. Discussions prior to the season opening indicated that three million pounds might be the processors' limit this year, and only then at much lower pricing.
The banks were cautioning lobster buyers about credit levels and how much risk should be assumed. With food service restaurants' demand decreasing, the live lobster buyers were hoping that low prices would stimulate holiday demand in the retail grocery sector. Everyone had concerns about a large inventory carry-over in January. Most processing plants would be closed and the economic recession would likely be worsening.
Landings were heavy, as expected, until mid-December. The season also started early, as I said, due to the position of the last Monday in November on the calendar. LFA 34 fishermen decided not to fish on Sunday in an attempt to slow the landings. The fishery opened at $3.25 Canadian per pound. Fishermen even stopped fishing for two days in early December to protest the low shore price.
By mid-December, many buyers were reporting export demand to be very slow and were nervous about the buildup of inventory. We talked about the possibility of a worst-case scenario, where a portion of a high inventory carry-over might end up in the landfill.
After December 15, mother nature intervened and we seemed to experience one storm after another. Landings fell off from early in December. As we had hoped, retail grocery holiday sales of live lobster were brisk as consumers responded to the low prices. The media focused on the plight of lobster fishermen by running almost daily stories about low prices and the hardship of fishermen. “Joe the Plumber” celebrated the Christmas-New Year's holiday by eating lobsters at home.
By early January, the P.E.I.-New Brunswick processors had purchased about six million pounds, double the expected amount, at a price around $3.90 delivered to the plant.
For many shore buyers, the first of January saw inventories cleaned out and the prospect of additional landings dismal, due to weather and a low shore price that was no incentive for fishermen to brave winter conditions.
There is always some demand for lobster exports during January, February, and March. Some shore buyers began to bid the price up for the meagre supply of newly caught lobsters and for some of the held product. Fishermen felt they had been misled and sold at too low a price in December.
Conclusion: if the weather had not affected landings from mid-December, if the processors had held to their three-million-pound prediction, if the retail grocery demand had been less robust, if the media hadn't provided so much free publicity for the product leading up to Christmas, if the fishermen had held a significant quantity, the landfill scenario and a further price crash during the winter might have been the topic of our discussion today. Hindsight is 20:20.
I can go on to the spring. Spring lobster production from Atlantic Canada is estimated at about 60 million pounds. The historic breakdown of that product usage is: processing, usually about 30 million pounds; live market, about 30 million pounds. Some of the questions we have at this point when we're thinking about prices for the spring catch include: will this year's landings be comparable to last year's, will the processors take their normal percentage, and at what price point can the processors take their share?
We have a few factors to consider. The U.S.A. summer and fall lobster production is approximately 30 million to 40 million pounds on top of the Canadian. I'll mention a few of the issues and you can question me about them. As we look ahead to spring, boat price is about $7 this week. It was $3.25 during the winter. Nobody could say right now what the boat price is going to be this spring, but it's a fair prospect that it will be lower than the $5 price that we had last spring. We expect excellent quality during the spring. We expect the landings to be at least as strong as last year. Demand is the $64 question.
How much will the processors take? The credit crunch and the buildup of inventories of some of their product is certainly going to affect how much they buy and the shore price of the product. The international economy seems to be getting worse as more and more people receive their layoff notices. Credit is a big issue for this industry, because we borrow money to buy lobsters to hold an inventory. Our customers are worldwide. In some cases, we're not able to get insurance for our receivables. So there's plenty of risk out there.
Fuel prices are a plus. They are certainly down from what they were last spring and summer. And right now we have a good exchange rate with the United States, which we did not have last spring. With regard to airlift, we're in a better position than we were in December—there will be some additional airlifts out of Halifax.
With respect to paralytic shellfish poisoning in the Japanese market, it's ironic that the U.S. FDA raised this issue last July. Lobsters can go out of Connecticut and New Jersey to Japan without being tested for PSP. Canada got included in the FDA warning. We have to do pre-testing of our product before we ship it to Japan, and then pay again when it gets to Japan for lot-by-lot testing. CFIA and DFO are working on the issue, but right now it certainly restricts our market in Japan.
These are some of the issues as we look ahead to spring, and I'll close with that.
