Macro-economics and Melted Butter

I just picked up a bunch of lobsters for tonights dinner. My oldest son leaves for his Junior year at Quinnipiac University in the morning, so we thought we'd all splurge. But are we really splurging?

This past Monday, August 18, Daniel Gross posted a piece on Slate.com titled "The Great Lobster Mystery." (http://www.slate.com/id/2196990/) On a recent Maine vacation, he discovered that the retail price of lobsters has lowered since last year, while almost everything else is more expensive. Why? According to Mr. Gross, a couple of converging forces are at play.

Lobstering is a local business, with product coming from numerous small, independently owned lobster boats. Most lobsters are consumed locally. Lobster retailers, i.e., restaurants and markets, are facing higher cost-of-goods sold for everything not caught/made/raised locally, due to increased energy costs. Most of this increase is passed on to customers. So, what has this to do with lobsters?

Apparently, local lobstermen have few variable operating costs, other than fuel. They use no fertilizer, and their machinery is relatively simple and requires little maintenance. Retailers know this, and are squeezing the lobstermen for better prices to make up for decreasing margin in other areas; and, some of these savings are passed down to consumers.

Since lobstering is not a global market, the lobstermen predominantly depend upon local buyers for their livelihoods. Sure, some lobsters go to commercial processors, and some end up in lobster tanks in restaurants in Ohio and Colorado, but the main share is distributed locally.

At least this is Gross's thesis. He may be correct, but I can't help but assume that there is a strong market for Maine lobsters in Dubai. On the other hand, I don't feel like researching the economic data on the lobster industry, so I'll take his word for it. And I'll enjoy my lobster this evening, even though it doesn't seem like I've paid less than last year.

Don