Members of the Standing Committee,
Ladies and Gentlemen;
First, let me welcome you to Prince Edward Island. It is not often that a Commons committee of this stature makes the opportunity to visit our Island province. On behalf of the PEI Fishermen’s Association please accept our sincere thanks for the invitation to appear before you today. It is not often that we have the opportunity to do so.
The topic of today’s hearings is the growing concern over the 2009 lobster fishing season in Atlantic Canada. As the representative organization of some 1,300 core license holders in Prince Edward Island for whom the lobster fishery is the primary income source, we are especially concerned about the coming season. The global economic and financial crisis we face, the softening of some traditional markets, the growing pressures on harvesters by the processing sector, the ever-increasing costs of primary production – these and many more issues are cause for worry to our members.
Perhaps some background is in order. Inshore fishing is not a particularly lucrative mode of employment. Statistics from the Fisheries and Oceans Policy and Economic Branch published in 2006 show that fishermen in the three Lobster Fishing Areas surrounding Prince Edward Island earned the following before-tax incomes from all fishing sources: LFA-25, $7,082.00; LFA-26-A, $11,010.00; and LFA-24, $63,423.00. In 2008 fishermen endured a 25% decrease in the shore price of lobster, with price for canners as low as $4.00 and markets at $5.00, down from $5.00 and $6.00 the year previous. At the same time, costs-of-production (bait, fuel, gear, etc.) increased by some 37% over the previous five year average. With such an obvious cost-price squeeze it is clear to see that any decline in the shore price paid to fishermen will inevitably result in the bankruptcy or elimination of a solid number of PEI’s inshore fishing enterprises.
The industry around the world has heard the lament from PEI processors of an exorbitant inventory on hand this winter, mostly in the form of “popsicle packs” and “whole cooked.” Some estimates were as high as $25 million worth of inventory. The results, of course, were to be expected; wholesalers and brokers simply stopped buying, awaiting fire sale prices. While the PEIFA does not have access to processors’ figures, we do have solid industry intelligence that tells us that inventory on-hand is much less than the $25 million mentioned in the media and is gradually being moved. Nonetheless, this winter’s situation raises a number of serious questions for us with regard to the processing industry. For example, what is the standard amount of inventory on-hand during the winter months in most years? Does government or an independent third party have access to regular reports of the amounts of inventory held by processors? What is the formula for valuing inventory? What is the marketing and sales strategy employed by the processing sector? What efforts are being undertaken in terms of new product development? What is the business model used by individual processors? And, most importantly, why has there been a consolidation of processing facilities in both Prince Edward Island and New Brunswick?
We ask these questions because things are being asked of us; asked when we do not know what the processing sector is doing for itself. We have been asked, for example, to consider a reduction in fishing days early in the season. We have been asked to consider rotating buying days at wharves. We have been asked to limit landings in the event of a harvesting glut. We have been asked to support processors’ requests for government credit guarantees. These and more have been asked without mention of security or guarantees for harvesters, themselves.
Fishing is an industry of tradition. Lobster fishing is a competitive fishery. Harvesters fish the same area year after year. Most use techniques they have developed over the course of their years on the water. Most continue to sell to a buyer with whom they have had a long-lasting relationship; a buyer who provides bait and supplies as well as purchasing lobster. In the past two years these traditions have been challenged - processing plants have been closed, commission buyers are being eliminated, resource management proposals have been recommended by DFO that have caused concern and confusion amongst fishermen and, of course, all within the continuing litany of concern over the economic and financial situation we face.
Fish harvesters are economically dependent upon the processing sector. There is no regulatory regime that establishes the price to be paid to fishermen for their catch. Traditionally, the harvesting sector relied upon the inherent competition between buyers wanting to purchase lobster. Now, that competition is being eliminated – with the aid of government decision making – and fishermen are feeling the brunt as shore prices fall and input costs rise.
Lobster harvesters recognize that change in their industry may be inevitable. But, to adjust to that change willingly, fishermen demand a certain level of participation and protection. For example, Island lobster harvesters have long called for a license rationalization program that would see the permanent retirement of licenses from the fishery. For two brief years in 2004 and 2005, LFA-25, using funds from the sale of a snow crab quota, was able to permanently retire nine lobster licenses and shelve a number of others for one year at a time. Court rulings, unfortunately, prevented any further action along this front. Since then, Island fishers have been requesting government support and, most recently, have entered into discussions with federal and provincial authorities to develop a rationalization process with contributions from the two levels of government and the industry, itself. If agreement is reached we hope to see a process whereby primarily older fishermen will be able to exit the industry with dignity; those who remain will see improved access to a stable resource and specific assistance to younger, new entrants seeking to enter the fishery. We are also examining broader issues of eco-labeling, having gone through a Marine Stewardship Council pre-assessment, and the Ocean-to-Plate concept of harvesting for the market. These are long-term considerations that require time and discussion to determine.
Short-term concerns, though, face us immediately. The harvesting sector is receiving mixed messages from the processing sector. Some processors say the situation is enormously difficult while others state that 2009 will be similar to previous years. Confusion and fear is rampant.
If we are to assume that shore prices will be lower this year, what will be the effects? First, since most harvesters hire two helpers, one of them will not be hired. What does that person do to survive? Second, given the competitive nature of the lobster fishery, harvesters will necessarily increase fishing pressure on the stock in order to earn as much as possible in the short, two month season. This could have devastating effects on future lobster stocks in the region. And, third, as the incomes referred to previously become even less, many fishermen will be forced into bankruptcy, forfeiting not only their fishing enterprise, but, also, homes, property and investments they have already borrowed against simply to make ends meet.
The only protection against possible economic disaster in the lobster fishery this year is government intervention. The PEIFA submitted recommendations for inclusion in the recent federal budget including establishment of a stabilization fund for harvesters; financial support to rationalization; policy initiatives to ease access to credit for fish harvesters; funding support to a national agency to promote seafood marketing, eco-labeling and ocean-to-plate initiatives; reduction to certain fees such as licenses and observers; tax reductions for the application of green technologies to fishing enterprises; improved science, research, enforcement and small craft harbour programs by DFO; improved training assistance for fish harvesters; and encouragement to the provinces to initiate/improve fisheries loan board agencies and programs. In all of this we have seen a short-term marketing effort introduced, funding to small craft harbours and, hopefully, easing of credit restrictions by private lenders. However, there was nothing included in the budget that would ease the effects of a serious decline in the 2009 season.
An immediate problem to be faced by captains and crews in the event of low prices will be eligibility for employment insurance. If a system were implemented whereby a captain could qualify for EI based upon 2008 landings the situation could be eased. First, with the certainty of EI, the captain would not place additional pressure on the stock thereby contributing to conservation, and helpers would be able to fish the full season, being paid from landings and therefore qualify for their own EI support.
Fuel is a major input cost. In 2008 we saw the cost of fuel reach staggering prices, and there is nothing in place to prevent a reoccurrence. Canada’s primary industries must have a mechanism in place to protect primary producers from sudden and enormous increases in fuel costs.
Another major concern is the cost of bait, primarily herring, for the lobster fishery. The spring herring fishery is on the verge of being closed by DFO; this while adjustments were made to the harvesting plans of the large purse seine fleet in the Gulf of St. Lawrence allowing them to land smaller fish and changes to the small fish protocol that see this fleet landing ever larger percentages of spring component in the fall purse seine fishery. Without a spring herring fishery frozen bait must be purchased from off-Island corporations at exorbitant prices, adding to the costs of operation. Immediate steps must be taken to limit the destruction of the purse seine fleet on herring stocks in the southern Gulf.
We have seen and heard much of the stimulus approach taken by governments around the world to fight the present recession. Incentives should be in place to encourage fish harvesters to purchase needed equipment from local suppliers. If fishermen stop purchasing needed equipment, not only do local economies suffer, but it also leads to a growing threat to safety at sea for vessels and fishermen alike.
The Province of Nova Scotia has recently enhanced its fishermen’s loan board service to assist new entrants to the fishery. The development of a regional fisheries loan agency, supported by both provincial and federal governments, dealing only with the fishing industry, could easily be designed to ease the restrictions imposed by private lenders and adjust to changes in the industry on a year-by-year basis.
Specific to Prince Edward Island, the harvesting community is united in its position that the so-called “Ocean Choice Agreement” be annulled. While this is purely a provincial matter, the agreement limits competition and reduces processing capacity with the consequent effects on the harvesting community. The moral pressure that can be applied by this committee to the province can only assist in seeing this agreement revoked.
In closing, we thank you Mr. Chairman and members of the Standing Committee for this opportunity to address you. We look forward to taking any questions you might have for us.
Respectfully submitted,
Ken Drake, President,
Ed Frenette, Executive Director,
Prince Edward Island Fishermen’s Association.
