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Global Supply, Demand and Markets for Lobster

What are the Opportunities for N. American Lobster

John Sackton Seafood.com

Halifax Oct 14, 2007

World Lobster Species

Homarus (N. America)

Homarus (Europe)

Panulirus spp (Brazil, Australia)Jasus spp (S. Africa, Australi

Overview of Global Supply of LobsterWorld Lobster Producton 2004

American Lobster

Spiny Lobster44%

Rock Lobster6%

European Lobster2%

c

48%

Source: FAO Globefish

Major Lobster Producing Countries (2003)

Canada37%

USA25%

Australia12%

Bahamas7%

Indonesia4%

Brazil4%

Cuba4%

Mexico2%

Nicaragua

New Zealand2%

Canada and U.S. have 60% of world productionSource: FAO Globefish

Lobster Producton By Major Species

0

10

20

30

40

50

60

70

80

90

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

AMERICANSPINYROCKEUROPEAN

units: 000’s metric tons

American Lobster Landings Doubled in 25 years

Source: FAO Globefish

Growth in Global Value of Lobster Imports

0

200

400

600

800

1000

1200

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

$ U

S M

illi

on

frozenlive

Value of World Lobster Imports Rising FasterThan Production Increasing

Source: FAO Globefish

7

Summary• N. American lobster is primary lobster species

by volume

• Production of Homarus Americanus has doubled in 25 years.

• Spiny Lobster/ Rock lobster is next largest category.

• Spiny Lobster Production has increased 40% in 25 years.

• Spiny / rock lobster names are used interchangeably in the market

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8

Price relationships among lobster types in U.S.

• Cold water lobsters command highest price

• Warm water spiny lobsters, sold as frozen tails, often higher priced than North American frozen lobster tails

• North American lobster has most variation in both product form and price

Cold water lobster tails

•Used almost entirely in foodservice•Considered best tasting by many chefs•This is what justifies higher price

Warm water lobster tails•Sources: Brazil, Central

America, Caribbean•Some regional preferences, in California and Florida where local lobster is spiny lobster•Some live spiny lobster imported from Mexico

$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

$35.00

$40.00

Jan-

04Ap

r-04

Jul-0

4Oct

-04

Jan-

05Ap

r-05

Jul-0

5Oct

-05

Jan-

06Ap

r-06

Jul-0

6Oct

-06

Jan-

07Ap

r-07

Jul-0

7Oct

-07

Live

4 oz tails

2 lb vac pk CK dry

Brazil 5 oz

Aust 5-6 oz A

Relative Pricing of Major lobster Products(US Market)

Source: Urner Barry Publications

Legal Seafoods and Gorton’s frozen tail meat

In most years, N. American fzn tails sell at the lowest prices

N. American

Tails 5-6 ozBrazil 5 oz Australia 6-

8 oz

2005 $17.85 $16.98 $22.48

2006 $18.37 $20.06 $27.56

2007 $20.28 $22.07 $30.70

3 year avg prices

Brazil

N. AmericanCaribbean

Australia

Source: Urner Barry Publications

Valuing N. American lobsters

• Live and whole cooked

• Frozen Lobster Tail

• Claw, Knuckle, Leg meat

• Prices vary due to market demand in all 3 segments

Darden Restaurants

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Issues in valuing our lobster

• Spiny lobster:

• Small live market in Asia, some in Mexico and U.S.

• Most sold as Frozen tails

• Tail represents entire value of the lobster

• No need for meat production

N. American lobster

•Large live market

•Frozen tail represents only a portion of the lobster

•Value varies based on market demand in three markets: live, tails, and meat

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Review of Lobster Supply to N. American Market

• Canadian Total Supply (landings plus imports)

• Canadian Production by product type

• Domestic sales in CA

• U.S. supply

• landings, imports of Homarus, imports of spiny Lobsters

• Exports: to Canada; U.S. exports overseas

• Usage by product, product type

Total Canadian Landings and Imports (live)

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

2000 2001 2002 2003 2004 2005 2006

Source: DFO and Stats Canada data from World Trade Atlas

Total Canadian Supply of Live Lobster

Imports Plus Landings

0

10,000

20,000

30,000

40,000

50,000

60,000

2000 2001 2002 2003 2004 2005 2006

Live for ExportLive for Processing

ve Exports and Domestic Volume Available for Processin

Exports

Processing (live weight, domestic landings)

units: Metric tons

Source: DFO and Stats Canada data from World Trade Atlas

Total Live Wgt Avail for Processing

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

50000

2000 2001 2002 2003 2004 2005 2006

Local Production

Imports

Total Lobster Available for Processing including imports

Source: DFO and Stats Canada data from World Trade Atlas

Fzn Meat incl CKL packs and Cooked

shell off tails27%

Meat Other1%

Meat Canned2%

Meat fresh

Fzn in Brine incl. popsicles

14%

Fzn Cooked & Raw including boiled in

shell56%

7 year average breakdown of Lobster Exports

Avg live weight for processing =39,000 tons

Source: Stats Canada from World Trade Atlas

2006 N. American Fzn Lobster in shell imports

N. American Whole & Tails43%

Coldwater Tails11%

Warmwater Tails38%

Other8%

U.S. frozen lobster imports by type (2006)

Source: US Customs data from NMFS

Canadian whole fzn and tails = 43% of market

Shell on products only

N. American Whole & Tails33%

Coldwater Tails9%Warmwater Tails

30%

Other6%

Meat22%

Source: US Customs data from NMFS

U.S. shell on imports plus meat

Canadian market share 55%

N. American Whole & Tails19%

Coldwater Tails5%

Warmwater Tails17%

Other4%Meat

12%

Live43%

Source: US Customs data from NMFS

Total U.S. Imports: Live, fzn in shell and meat

Canadian total import market share for all lobster products: 74%

Legal Seafoods marketing live Lobster as haute cuisine

US 2006 supply showing Main Canadian Products

CA Live34%

Other Live24%

CA fzn14%

Other fzn & tails19%

CA meat9%

Total US Supply inlcuding domestic landings

Canadian Mkt share 57% US Domestic share 24%

Other lobster imports 19%Source: US Customs and data from NMFS

Total CA origin Ca Percent Product78,071,901 45,060,858 57.72% Live

19,441,256 19,441,256 100.00% Fzn in Shell

17,312,984 Warm Water Tails

5,235,592 Cold water tails

12,569,007 11,579,150 92.12% Meat

3,668,729 Other tails136,299,46

9 76,081,264 55.82% Total

Canadian products by volume (2006)

Source: US Customs data from NMFS

Major Overseas Markets for Live Lobster 2006

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

ITAL

Y

SPAI

N

FRAN

CE

JAPA

N

S Ko

rea

GERMAN

Y UK

BELG

IUM

TAIP

EIHon

g Ko

ngSW

ITZE

RLAN

DNET

HERLA

NDS

CAUS

Overseas markets for Live N. American lobster

Source: US and Canadian customs data

Seasonal Live lobster Shipments from US to Spain, France, Italy

0

100,000

200,000

300,000

400,000

500,000

600,000

Janu

ary

Febr

uary

March

April

May

June

July

Au

gust

Se

ptem

ber

Octob

er

Novem

ber

Decem

ber

FranceItalySpain3 Yr Avg France

Seasonal patterns of live lobster shipments

30Benchmarking Study on Canadian Lobster by Gardner Pinfold - Agriculture & Agrifood Canada

Issues in Valuing Lobster

Tail - 20-24%

Claw knuckle leg meat:9% to 13%

Live - 100%

Whole Cooked - 86%(average cook loss, can be reduced about 5% with STP

Yield is key to understanding processed lobster

Raw Frozen Tails Frozen raw split lobster body and ta

Yield issues make it important to “sell the shell”

Lobster Price at

Dock

Tails @ 23%Meat @ 14%

Tails @ 20%Meat @ 10%

$5.00 $13.51 $16.66

$6.00 $16.21 $20.00

Impact of yield on price

Lobster processing line at Ocean Choice PEI

Production breakdown of Processed Lobster78% is in-shell product

Frozen Products Breakdown (Gulf Region 2001)

meat15%

raw tail in shell31%

cooked in shell42%

blocks5%

in shell raw2%

KC tail meat

knuckle claw in shell3%

Source: DFO Policy and Economics Branch, Moncton

Darden’s menuing of cooked shell on frozen American lobster tail

Western Australia rock lobster production breakdown 2000-2006

(100% in shell)

Live, Frozen Whole Cooked, Raw go to Asia (China, Japan,

Taiwan)

Fzn Tails go to U.S., some to

Europe

Raw tails

Whl cooked

Whl raw

Live

Canner vs Market pricing in Canada3 Years of Lobster Prices

$-

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

$14.00

$16.00

1/6/

04

3/6/

04

5/6/

04

7/6/

04

9/6/

04

11/6

/04

1/6/

05

3/6/

05

5/6/

05

7/6/

05

9/6/

05

11/6

/05

1/6/

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3/6/

06

5/6/

06

7/6/

06

9/6/

06

11/6

/06

1/6/

07

3/6/

07

5/6/

07

7/6/

07

9/6/

07

CA Mkt NSCA MKT NBCA CN NBUS 1/4 in $CA

Source: PEI Dept. of Fisheries and Aquaculture and Urner Barry

Australia

South Africa

4 oz.5 oz.6 oz.7 oz.8 oz.9 oz.10 oz.11 oz.12-14 oz.14-16 oz.16-20 oz.20-24 oz.

Brazil, Caribbean

Size is key to pricing of lobster tails

3-4 oz. $18.50-19.004 oz. $19.75- 20.004-5 oz. $20.50- 20.755-6 oz. $21.50 - 22.006-7 oz. $22.50 - 23.00

N.American(w/ pricing)

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Why lobsters go to processing

1. Too small for live market in U.S. (cannot sell lobster under 1 lb - 82 mm carapace)

2. Soft shell will not survive shipping or pound storage

3. Live market is saturated, further production depresses price, making price attractive for processing

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Canners very sensitive to price

changes• A 20 cent change in dock price is equal

to

• $1.43 to $2.00 change in meat cost

• $.83 to $1.00 change in fzn tail price

• A $0.22 to $0.24 cent change in whole cooked price

Use of lobster claw knuckle meat by Darden

Popsicle packs containing a small whole lobster are mostly sold overseas, while canned lobster meat is a

small volume item

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U.S. Live Market• Largest lobster

market

• Selling live is most cost effective way to sell lobster - no loss of yield.

• Market very volatile depending on supply

• Price varies by quality level: hard shell & soft shell

• Market channels are stable; little innovation or new presentation

• Retail is most price sensitive; takes soft shell

• White tablecloth foodservice takes highest quality

• Risk of dead loss from transport

• Not all lobsters suitable for storage in pounds

Hydrostatic pressure processing

Tray Pack of hydrostatic treated lobster

Issues: delicate to cook, has moisture loss, expensive

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U.S. Fodservice Market for Frozen Lobster Products

• Frozen tails: mostly foodservice; chef’s tend to stick with what they know; regional preferences, takes major price swings to create adjustments

• Coldwater tails perceived as best quality and value

• Warm water tails and Am. lobster tails have been competitive lately

• Lobster meat bought extensively by Darden and regional distributors

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U.S. Retail Market for Frozen Lobster

Products• Live sales of lower quality lobsters made at retail

• Many specialty retail products for use of claws and legs

• Also there is small market for lobster meat but cost is very high

• Processor must sell claws and knuckles in order to sell tails

• Any oversupply in any of these separate markets can cause problems

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Summary• Live lobster sales are stagnant

• US Market is less attractive due to currency issues

• Live markets subject to oversupply/price collapse

• Growth is likely to be in value-added products and non-U.S. export markets

• Value added products require stable raw material prices

• Canadian industry not well structured to support growth of processed lobster industry