Spend Matters welcomes this guest post from Emma Jayne Smith, market analyst at Mintec.
Prices for U.S. lobster meat have climbed to a 15-year high in April, and are up 48% year-over-year. The main reason behind this dramatic rise in the past 12 months has been high demand for lobster products in U.S. food service and retail.
So why has processed lobster meat become so popular over the last couple of years? Lobster processing involves extracting the meat from the shell, making it much more consumer-friendly. Processed lobster meat has a longer shelf life and can be stored and shipped better than a live lobster. This, combined with low prices seen in 2014, made the product popular in food service and retail, leading to heavy and successful advertising of processed lobster based products.
Versatility and convenience of processed lobster meat appeals to consumers as their appetite for easy-to-prepare food continues to increase. All of these factors have led to a sharp increase in demand in 2015 and 2016.
Another factor that pushed prices up was constraints in processing capacity. Around 122,000 tonnes of lobster is caught on the Atlantic coast annually, predominantly in the New England area, from where it is exported all over the world, with Canada being the largest importer of U.S. lobster.
Fresh lobster, imported from the U.S., is processed in Canada and lobster-based products are then exported back to the U.S. Canada is the largest supplier of processed lobster meat to the U.S, responsible for 57% of all processed lobster meat supplied to the country. Excellent fishing conditions in 2014 resulted in high catches, with 160,000 tonnes of lobster landing in Canada and the U.S. Another good year was seen in 2015, although final figures are not available yet. However, production capacity for lobster processing has not expanded in line with demand. As a result, processed lobster availability has been unable to keep up with the increased demand, causing prices to soar.
As Canada struggles to increase its output, the U.S. is moving to process more of its own lobster catch as this becomes more profitable, in an attempt to keep up with higher consumer demand. This could potentially cause a shift in the industry away from Canadian lobster factories, leading to lower prices. However, uncertainty around the scale and pace of the capacity expansion in the U.S. makes it difficult to say when prices are expected to come down.