There is definitely a hiccup in the live lobster market.

Historically, April is usually the time of highest live prices for the year.

This is because new Canadian seasons have not yet started — they open May 1 and cold water generally inhibits catches for areas that are open, along Southwestern Nova Scotia and the Bay of Fundy and those who held lobsters in tanks and tubes are nearing the end of their inventory.

But this year, April prices for 1 1/8 lb hard shell chicks in New England are $2 to $3 below their prices at this time for the past three years. For the week of April 8, Urner Barry quoted live lobster at $10.03 in 2016, at $11.50 in 2017 and at $10.88 in 2018. For this year, current prices are quoted at $7.75 and at $7.50 in New England.

Urner Barry quotes wholesale prices from lobster dealers. But this decline ripples back to the shore price as well.

After reaching well over $9/pound (CA) in January, Canadian shore prices have fallen to $7 in the Bay of Fundy and Nova Scotia and some in the industry think they could be $6/pound (CA) by early May.

Three reasons have been advanced for the sharp fall in price.

One is collusion. Fishermen often complain that buyers get together to keep prices lower than they should be. Although not impossible, this is unlikely as lobster buying on the wharf is one of the most competitive arenas regarding fish prices as anywhere in the world. The reason is that there are very low barriers to entering the industry and it does not require much capital to buy and flip a live product when the demand is there. Live lobster prices are volatile because they are very sensitive to supply and demand.

A second reason is good fishing. There are actually a limited number of dealers and processors who can handle live lobster. When landings come in more heavily than expected, some of these buyers are limited by their capacity, either of holding tanks, financial ability or number of customers. When these capacity limits are hit, prices on the shore fall rapidly. We have seen this in Maine and in P.E.I. And we see it work in the opposite direction when catches are lighter than expected.

So, some people have suggested that catches in Nova Scotia’s spring season must be heavier than expected. But industry sources say this is not so. There have been plenty of gales to keep boats in port, and furthermore, relatively cold water has kept the lobsters quiescent. Instead of moving into traps to feed, they simply stay put in their hiding places. It is unlikely that any surge in landings is causing the price weakness.

The final reason, and what I think is going on, is that those who are holding lobsters from the December – January fishery are frantically dumping them on the market, as the quality deteriorates and the new season gets closer.

Just as what happened when lobster meat jumped from $18 to $30 and then collapsed due to lack of demand, something similar seems to be happening with live lobster.

Last December, there was a true buying frenzy in Nova Scotia. Shore prices that started at $6 to $6.50 rapidly shot up to $9 and even higher, as it seemed that Chinese demand was insatiable. Given the run-up in price, many harvesters thought they could make even more money by holding lobsters until the spring when prices would be even higher. Hundreds of thousands of pounds of lobsters were held over the winter in lobster cars by fishermen.

This does not even count lobsters held in tube and tank farms that normally supply high quality demand during the spring.

Now those holding lobsters are facing a moment of truth. Prices are far below what they paid, yet the quality of the lobsters being held is deteriorating as well. At the same time, a new season is approaching where prices are likely to be far lower than the $9 price at which these lobsters were bought or held. So basically, those holding lobsters are forced to sell at increasingly lower prices into a market where demand is pretty soft.

Another reason why so many lobsters were held is that processors were priced out of the market. So, the normal percentage of December landings that went to processors never happened in 2018, adding to the volume of live lobster by as much as 25 per cent.

April prices cannot be used to predict shore prices later in the season.  In other years, as can be seen in our chart, record April prices were followed by the lowest prices of the last three years in June. And if this is a true inventory liquidation, prices could snap back somewhat once it is over, and only new landings are determining volume.

This article was republished with permission of John Sackton and seafood.com.