COVID-19: Maryland Crabs versus Maine Lobsters: Two crustaceans, Two different problems

I read this really interesting article in the NY Times about the Maine lobster industry. The lobster market is struggling due to a dramatic decline in demand as fewer people are traveling to Maine during the pandemic. The industry has actually been struggling for years (which I’ll get to later). All in all, this drop in demand has amounted to decreases in the price of lobster.

As I was preparing to make some crab dip (recipe), I did a quick search to see if the same issues were occurring in the crab market. Surprisingly I found that unlike the lobster market, the demand for crab has not been crashing down and has remained fairly robust during the pandemic. However, they are faced with a completely different issue: lack of employees who usually come over on H2-B visas. Prices for crab are actually rising.

As with most things, what I thought was going to be a simple story of a shift in demand actually turned into an investigation into visas restrictions and trade wars.

Maryland Crabs

Supply Issues

There has been lots of news recently about the various types of short-term visas that foreigners can get to temporarily work or study in the United States. The H2-B program, specifically, allows companies to hire temporary foreign workers for non-agricultural jobs (USCIS website). To hire these workers, firms have to show that they are not displacing American workers. (For more definitions of the various types of temporary visas see the DOL website).

H2-B visas are typically for jobs in construction and lawn care, as well as cooks, ski instructors, and hospitality. (Jobsandvisasusa.com). They are also an important source of labor in the crab industry. In the past, half of the Maryland crab workers were foreign employees on H2-B visas, usually from Mexico (The Daily Record).

Each year there are 33,000 H2-B visas awarded for jobs starting October 1st and 33,000 visas for jobs starting April 1st. Because the demand for these visas outstrips the quotas, the H2-B visa program assigns visas based on a lottery. In January there is a three-day window when employers can submit requests for visas which are then randomly awarded for the time period starting in April. In 2020, over 100,000 jobs were requested over these three days for the 33,000 visas available (The National Law Review). Quick math should show you that firms wanted three times as many visas than were available.

After the H2-B visa lottery in 2020, only around one-third of the needed visas for the crab industry in Maryland were granted. This article reports that just 3 of the 9 crab processors got visas with around 150 of the requested 450 jobs filled.

To emphasize the importance of the visas on the crab industry, the Maryland Department of Agriculture and the Chesapeake Seafood Industry Company released a report in March of 2020 outlining the importance of H2-B visas to their industry and economy. Eight out of the nine crab processing companies reported that they would have to shut down if there was no H2-B visa program. Further, without the visa program it could cost 1,000 jobs (by Americans) and potentially over $100 million loss for the economy.

This was not the first year that crab industry struggled to have enough visas available. In 2019 they were similarly short workers. Fortunately for them, an additional allowance of visas was released and they were able to keep their processors going (Forbes).

Sure enough, just like in the past, there was a plan in March this year for additional visas to be released: 35,000 to be exact. Things were looking up for the crab industry (Dorchester Star).

Then COVID restrictions hit in full force. Before those visas could be released, the visa extension was put on hold (Murthy Law Firm and National Law Review).

Why were these additional visas put on hold? Unemployment was high in the U.S., so it seemed sensible not to bring in additional workers. However, the problem with that logic is that many Americans do not want to work in the crab picking industry. It is in remote locations and the techniques for pulling the meat out takes skills that take time to develop. In short, high unemployment rates weren’t going to help the crab industry.

In the meantime, crab processing plants are shutting down… (WUSA9)

Demand Issues

We know that fewer people have been eating in restaurants with dine-in restrictions and caps on capacity (as well as people’s fear to eat in a restaurant) (World Economic Forum). While this is hurting the seafood industry generally, the crab industry is doing surprisingly well. According to this local Bay area article, people are now steaming their own crab – a time intensive process (Bay Journal). Additionally, crab cake orders from across the country are also up (WTOP News). Overall, the demand for crabs have been high (Chesapeake Bay Magazine).

Prices

So what happens when supply is down but demand is high (or at least not falling)? Prices increase. That’s exactly what people are finding. Some in the industry are claiming Maryland crab prices are the highest they have ever seen (Chesapeake Bay Magazine and Seafood Source).

With warmer weather, apparently more crabs will be out – increasing the supply. This should help lower the price. Additionally, in May, there were changes to the H2-B visa program to allow visa holders who were IN the country to extend their work, even if they had gone past their original timeline (Seafood Source). Crab companies are looking into this.

The future effect on prices remains to be seen.

Maine Lobster

Demand

While the Maryland crab industry is struggling with supply issues, problems with the Maine lobster market revolve around demand.

Over the last 10 to 20 years, the lobster market had been benefiting from an increasing demand for lobster in China. From 2009 to 2014, lobster imports into China went from 3,637 tonnes to 17,410 tonnes. That’s over a 450% increase! (Food and Agricultural Organization of the United Nations)

However, that rise came to a halt as the U.S. and China entered a trade war. In retaliation for tariffs that the U.S. put on Chinese goods, China increased tariffs on lobster (among other goods). At one point the tariff was as high as 35%. To make matters worse for the lobster market, China actually decreased tariff rates on Canadian lobster. If you are importing lobsters in China, where are you going to buy from– Maine or Canada? Well, Canada, if they are cheaper. From 2018 to 2019, exports on Maine lobster to China almost 50%! (News Center Maine and Seafood Source)

Then came 2020…

First, good news. China lowered the tariffs on U.S. lobsters from 35% to 30%. This decrease could potentially increase the imports of U.S. lobster into China. (Whitehouse.gov)

Then, bad news. As I mentioned, demand for restaurant food has been low over the last few months. Further, people are not traveling as much. Where do people typically go in the summer on vacation? Cooler locations: Colorado, Montana, Maine…. And what do you eat in Maine? Lobster, of course. On top of that, people are not lounging on cruise ships where you also eat – you guessed it – lobster.

Suddenly you have an abrupt decrease in demand for lobster. While the industry started the year with potentially good news, the year has not been going as hoped.

Prices

What happens when demand falls? Prices fall too. As mentioned, this NY Times article does a beautiful job discussing the decreases in prices when there is a greater quantity supplied than quantity demanded. Further, lower prices reduce the incentive to go out and fish: if the revenue from getting fish does not cover the variable cost of going out to fish (think bait), then don’t go out.

There may be some hope for the lobster industry. President Trump has promised to help support the industry and has “ordered” the Department of Agriculture to use some of the $30 billion bail out program which was initiated to help farmers that were also hurt from the trade warm with China (WashingtonPost and WhiteHouse.gov).

Crab Dip

I had been eyeing this Crab Dip on Sally's Baking Addiction for awhile now. I finally made it, and it was delicious! I didn't change a thing, so I'll just refer you to her website. One thing we did do which was delicious: We sliced up flour tortillas and fried them in hot oil (for just 20 - 30 seconds - until they were very light brown). The perfect chip for a delicious dip!

I also made the Defined Dish street corn. Awesome. Try it! I followed the recipe exactly except boiled the corn for 5 minutes instead of grilled it because I didn't have access to a grill.