The great lobster crash
Friday, January 23, 2009 | 08:43 AM ET
by Kevin Yarr, CBCNews.ca
One of the scary things about recessions is how they have a tendency to spiral downward. For an illustration of this, consider P.E.I.'s lobster industry.
Lobster are worth $250 million a year to the P.E.I. economy, by far the biggest part of the fishery, which is one of the big four industries on the Island: fisheries, agriculture (potatoes), tourism (Anne of Green Gables) and aerospace (yes, aerospace).
While people tend to think of sticking live crustaceans in boiling water when they think of lobster, a huge part of the industry is processing and freezing it. In peak season, 7,500 people work in the Island's lobster industry on the water and in processing plants.
Like many businesses, lobster processors have a cash flow issue, in their case made worse by the seasonal nature of the business. They have to put up a big load of cash at the beginning of the season to buy the lobster from the fishermen, and then to run the plants. Money comes back in dribs and drabs as throughout the year as they sell the frozen lobster.
But this year those dribs and drabs turned into a trickle. As the markets crashed and consumer confidence went with it, luxury products are taking a big hit. A delicacy like lobster definitely qualifies as a luxury product.
So lobster processors on P.E.I. are now finding themselves sitting on $25 million worth of frozen lobster as the spring lobster fishery approaches. If you're a banker, carefully doling out funds in a market where credit is tight, opening up a line of credit for a business already chock full of a product nobody seems to want so it can buy more is not looking like a good option.
The processor's trouble is the fisherman's trouble. Prices for lobster on the wharf have dropped so low many fishermen are wondering whether they can break even if they drop traps this year.
So people stop buying because they are worried about their jobs and financial future, threatening the jobs and financial future of thousands. Multiply this same formula over an untold number of industries.
What food are you cutting back on to save money?
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From trends and culture to politics and nutrition, Food Bytes serves up tasty tidbits about food and the issues surrounding it that flavour our everyday lives.
About the writers
Amber Hildebrandt writes for CBCNews.ca in Toronto. Growing up on a farm in Manitoba, she acquired an insatiable appetite, but it was during a stint in Japan that she developed her discerning tastebuds and "foodie" ways.
Andrea Chiu is an associate producer at CBC Radio Digital. Though she loves to eat, cook and discuss food, don't ask her to bake. It never turns out well. She tweets as @TOfoodie on Twitter and organizes food and wine events in Toronto called FoodieMeet.
Tara Kimura is the consumer life reporter for CBCNews.ca, covering a wide range of issues that range from rising food costs and the growing organic movement, to new trends in the marketplace.
Andree Lau is a CBC web reporter in Calgary. Her journalism career includes seven years as a CBC-TV reporter. Her own blog called "are you gonna eat that?" chronicles her eating adventures (including sampling snake and camel hoof tendon).
Jessica Wong is a CBCNews.ca writer who loves to eat and cook, as well as discuss, read and watch programming about food, sometimes all at once.
Kevin Yarr, CBCNews.ca's writer in Prince Edward Island, wrote about food and beer for national and regional magazines before joining the CBC. He acquired a desire for new tastes on his first trip to Europe, and an appreciation of eating locally and in season when he finally settled down on P.E.I.
Elizabeth Bridge is a writer with the CBC Digital Archives in Toronto. She first ventured into the kitchen as a child to indulge a sweet tooth by baking cookies and making fudge. A student budget compelled her to be a vegetarian (for a while) and instilled in her an ongoing curiosity about food and cooking.
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