Canadian lobster stocks depleted by record export demand

Published Oct 6, 2021
Dumping day signals the start of the lobster season in Canada’s largest lobster fisheries and is scheduled for November 29th. Until then, lobster could be off the menu, as soaring demand from the retail industry and the return of the restaurant industry have left stocks depleted. Canada’s live, frozen, and processed lobster exports in the first 7 months of 2021 are up 36%, 103%, and 160% respectively from the same period last year. With way more than a month to go before the next lobster season starts, the surge in demand means a surge in prices.

Canada is the world’s largest lobster producer and exporter

The lobster caught in Canada is called Homarus americanus., which translates to American lobster. American lobster (species) make up more than half of world lobster catchments (52% in 2019). Spiny lobster, which is mostly a warm water lobster, makes up the bulk of the rest, with Rock lobster and European lobster playing small parts.

Canada catches 33% of the world’s lobster, all of which are American lobster (species). The US catches 18% of the world’s lobster, 99% of it is American lobster (species), with spiny lobster from Florida and California making up a tiny proportion. This means all American lobster (species) comes from either Canada or the USA. The total supply of American lobster (species) has been hovering around 150,000 MT for the last 7 years. While official figures for Canada’s lobster landings in 2020 still haven’t been released, estimates are that it will be 5 - 8% lower than 2019.

Source: FAO 

Canada’s lobster season and supply

The day lobster fishermen dump their cages into the depths of the main Nova Scotia lobster fishing areas (LFA’s) is known as dumping day. It is scheduled for the last Monday of November and the lobster season in these fisheries runs until May 31. Although the main LFAs are open from November to May, the main landing seasons are in December and again in May to June. Between January and April, lobsters do not move to the bottom of the ocean and are harder to trap and bad winter weather also dampens lobster landings in these months. Some of the smaller LFAs will open soon, on October 15, and live lobster could start dribbling in, but these quantities are small compared to the main LFAs and won’t meet the firm demand.

While the next main lobster catching month is in December, and it complements the celebration of Christian holidays in Canada and the USA, both retailers and restaurants aim to have this delicacy available year-round. There are a number of workarounds to have lobster available all year. Lobsters caught in the main landing seasons are often held in high-tech offshore holding facilities to be sold at different times during the year. Lobsters can also be frozen or processed, and exports from these categories make up more than half (53% in 2020) of total Canadian lobster exports.

There are strict regulations that govern the landing of lobsters in both Canada and the USA. The most important is the size of the lobster. The legal size in most of Canada’s LFAs is 82.5mm carapace length. Lobsters that are egg-bearing must be released. The number of traps and the number of lobster fishing vessels is all limited.

Although Canada’s total lobster catchments were more than 100,000 MT for the first time in 2019, that of the US was below 60,000 for the first time in 8 years. Total American lobster (species) landings have been constant at around 160,000 MT since 2014. Given the controls in place to protect lobster populations, the supply side has little wiggle room and mostly downward risk.

Frozen and processed lobster exports soaring

Canadian lobster exports are reported as either live, frozen, or processed. Canada exported a total of 84,202 MT in 2020, down from around 97,354 MT in 2019. However, for the first 7 months of July 2021, exports of lobster in these 3 categories were already at 62,342 MT, 25% more than the same period last year, and the highest on record for corresponding time periods.

While live lobster exports, measured by quantity, for the first 7 months of 2021 are up by only 13%, frozen lobster is up 41%, and processed lobster is up an incredible 81%. While it is true that the Covid19 pandemic subdued the lobster market in 2020, these exports are much higher than the 5-year average for months 1 to 7.

Frozen and processed lobster makes up only 37% of Canadian lobster exports on a weight basis, but 53% on a value basis. The surge in demand for Canadian lobster is even more pronounced when the values of exports for the first 7 months of 2021 are examined. The value of live lobster exports is 75% higher for the first 7 months of 2021 compared to the same period in 2020. For frozen lobster, it is up 103%, and for processed lobster a massive 160%. Processed lobster exports reached USD 286,751,000 by the end of July, more than twice the 5 year average for months 1 to 7.

Source: ITC Trade Map

Prices caught in the slipstream of rising demand

The sudden leap in demand can be explained by the change in the behavior of consumers as a result of the recent pandemic. Restaurants were hit hard by restrictions in 2020, and subsequently, demand for lobster plunged. However, while all lobster exports were down 20% in 2020, from 2019, processed lobster exports were only down by 7%. Left without the option to go out for a fancy lobster dinner, consumers turned to processed lobster products to be prepared at home. In fact, according to the Food Industry Association (FMI), grocery sales of seafood in the US were up 28% in 2020, from 2019. It appears that consumers have now permanently added shellfish to their shopping lists, and combined with the restaurant industry that is coming back to life, demand for Canadian frozen and processed lobster in the first 7 months of 2021 is the highest on record. The US is Canada’s top export destination, with 63% of lobster exports in 2020 going there.

Since regulations for the control of the lobster population are in place, it is hard to increase the supply of lobster. As a result, with demand for Canadian lobster soaring, prices are following. In July, the market price of lobster was more than USD 10 per pound, already 81% higher than in 2020. There is more than a month to go before the next lobster catching season starts, and even then, with consumer demand as it is, prices are expected to continue getting upward pressure.

Source: FFAW


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