Low demand sinks lobster industry

Portland, Maine —- The price of Maine lobster, which accounts for 80 percent of the U.S. catch, is tanking.

The primary factor, a drop-off in demand by penny-pinching diners, has been in place since summer. But a secondary problem recently surfaced: the global banking crisis left Canadian processors short on credit, trapping Maine lobstermen and dealers with too much supply.

While bargains abound for lobster lovers throughout the Northeast, there’s growing angst in New England fishing communities. One small village held a lobster bake on the town pier to unload excess lobsters and help out the local fishing fleet.

“This is as devastating to the state of Maine as Hurricane Katrina washing away all the boats and blowing down all the wharves,” said Dana Rice, a lobster dealer from Gouldsboro who’s witnessing the industry’s biggest struggle in his 30-plus years in the business.

As always, the problem boils down to supply and demand. But these days it’s a bit more complicated than usual.

The recent crisis in the global financial system resulted in lines of credit being cut off to several lobster processors, including some in Canada who have relied on Icelandic banks that have failed, according to John Norton, president and chief executive of Cozy Harbor Seafood Inc., a seafood processor in Portland.

More than half of Maine’s lobster harvest is typically shipped to Canadian processors. But this year is hardly typical.

Jim Wilson, a professor of marine science and economics at the University of Maine, is astounded how the Maine lobster industry is being slammed indirectly by the mortgage crisis, Wall Street derivatives and bank failures in Iceland.

“It’s rather amazing the interconnectedness that has built up in the economy,” Wilson said.

Even before the credit crisis intensified, lobster purchases by chain restaurants, cruise lines and other businesses were below normal this year as consumers reined in spending. A strong harvest only amplified the problem.

The industry has scrambled to move product, but with Maine lobstermen alone hauling around 400,000 pounds a day, that’s no easy feat.

Hannaford, Shaw’s and other supermarket chains in the Northeast agreed to cut prices, and restaurants launched lobster promotions to help out, said Dane Somers, executive director of the Maine Lobster Promotion Council.

Along the Portland waterfront, seafood shops are selling lobsters for as cheap as $3.89 a pound, which is about the price of bologna at the deli counter.

Retailers as far south as Washington, D.C., are selling live lobster for as little as $5.99 a pound, said Neal Workman, founder and head of the Fisheries Exchange, a Boston-based company that tracks prices, catches and other market information for the lobster industry.

Lobster is Maine’s most valuable fishery. Its haul of roughly 63 million pounds last year was worth some $300 million at the dock with a total economic impact estimated at about $1 billion.

The plunge in lobster prices comes at the time of year when fishermen are trying to put away money to last through the coming cold-weather months when they aren’t pulling traps. Many lobstermen will have trouble making boat payments and paying bills this winter, said Bob Baines, a lobsterman in Spruce Head.