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Top Story: Sold!

Display auctions help keep New England's beleaguered groundfish industry in business

By James Wright
September 01, 2010

The volume of sea scallops on the Whaling City Seafood Display Auction is predictably low for a mid-July Friday. Big scallops harvested from the Nantucket Lightship Closed Area off southeastern Massachusetts, a fishing area that was re-opened to the trawler fleet this year, have been coming in heavy all summer after being left alone for a few years to grow and reproduce. Most fishermen know to bring their jumbo-sized shellfish to the New Bedford, Mass., auction by Thursday, because by that time, suppliers are filling big weekend orders for restaurants and retailers.

On some days of this banner season, up to 35,000 pounds of U12 scallops arrive at the docks. And in the span of just a few minutes, more than $3 million worth of seafood will be purchased on an online qualified-buyer auction, a system intended to bring fair market value to New England fishermen. For years, they have been hit hard by strict regulations and dwindling opportunities to fish in a government-led effort to restore stocks of cod, haddock, flounder and other commercially important species. It's a system that buyers say still plays a vital role in the overall supply of fresh fish in key U.S. markets, despite cutbacks in fishing and the fact that about 85 percent of the nation's seafood supply is imported.

On this day, however, only 1,600 pounds of scallops are available, in four 400-pound lots that Boston distributor Sousa Seafood's quality grader earlier that morning rated as either B-plus or A-minus. Sousa's inspector also noted that the fishing vessel Bada Bing, which brought in that day's entire available product, is a day-boat that strictly goes on short trips to sea. Armed with this knowledge as well as his 30 years of experience buying fish every way imaginable, company president Mike Sousa now knows where to set his sights.

When the scallop auction kicks off at 9 a.m. sharp, Sousa sits at the desk in his office on the Boston waterfront - some 50 miles away from the auction itself - with eyes fixed on his computer screen. With a carefully timed stroke of the space bar, he bids on one of the A-minus lots at $10.85 a pound. But he's short by a nickel and the product now belongs to a competitor.

That's O.K., he says, because he only buys according to need.

"I don't really need anything [today]," says Sousa, whose interest in the day's limited offerings could be described as nonchalant. "We're very particular about what we buy. And I'm not going to buy for the sake of buying, because I've got plenty of fresh scallops on hand and 100,000 pounds in the freezer."

By his own description, Sousa's company is not a power player in the scallop market but it is a big factor in New England's strained commercial fishing industry. Day-boat fish - cod, haddock and striped bass - is what he's after this summer. The auction for those species went off hours ago, at 6 a.m., and Sousa made sure he got what he needed.

"Day-boat fish, we're one of the biggest buyers, no doubt," Sousa says. "We buy the best fish every day."

As does Bill Holler, VP of seafood operations and purchasing for Legal Sea Foods, a Boston-based restaurant chain with 33 units along the East Coast. Holler's office, located across the parking lot from Sousa on Boston's industrial Seafood Way, is where he purchases fish from auctions in New Bedford, Boston and Gloucester, all of which are conducted online (as is a fourth in Portland, Maine). Nearly every day, Holler and Sousa participate on two auctions at once, a practice that keeps them on their toes - left hand on the desktop computer, right hand on the laptop.

And while they may not be at the auction in person, with a clipboard and numbered paddle in hand, they always know what fish is available by the time the sun comes up.

"Gloucester has the biggest day-boat fleet and I gotta get quality," says Holler, explaining his strategy. "I [bought from] 300 day-boats five or six years ago. We're down to 100 of them on the entire eastern seaboard."

While buyers like Holler and Sousa are advocates of the auction system, they acknowledge that it's only a part of how they source product these days and that most of the product bought on the auctions remains in East Coast and Midwest markets. Landings are down in the region from yesteryear - as is demand - but nearly everyone who harvests or buys fish in the Northeast is hoping for better times ahead, and they know that the auctions are where the freshest stuff will be found.

"Five years ago there wouldn't be as much fish and we would be calling in more supply from Canada," says Holler. "With lack of demand, for obvious economic reasons, supply is 
just adequate."

Going through changes

New England's seafood display auctions have undergone significant changes in recent years. None is more obvious than the fact that they are no longer conducted in person with a gavel-toting auctioneer at the podium and all the players in the same room, rubbing elbows and wearing poker faces to either get the best price or drive up the cost for their competitors. Buyers can now sit patiently and anonymously in their offices or with their laptops, anywhere they have access to the Internet, ready to pounce. They're still clued in to other buyers, however, when they suspect one has a customer with a certain species "on ad" and is going to bid high to guarantee sufficient supply.

The first auction to go electronic was the Whaling City Seafood Display Auction, owned by brothers Raymond and Richard Canastra. The Canastras founded the auction in 1994 and evolved it into a remote-access system, through dial-up modems, three years later. By 2000 it was fully operational online through Buyers and Sellers Exchange (BASE), a company also based in New Bedford. BASE offers buyers information like species, weight and vessel name. All of the auctions now operate on similar systems, require buyers to post a line of credit (typically about $25,000) and also pay a membership fee that encourages them to buy enough fish to cover the cost.

According to Richard Canastra, the electronic auction was intended to provide fishermen exposure to fair market prices for their products as well as orderly, open access to buyers across the country. That is precisely what happened: Canastra says there are now about 70 participating buyers on the New Bedford and Boston auctions (both of which are owned by the Canastras), as opposed to about 25 in the old system.

Since there's no escaping the fact that fish landings are down in New England, the display auctions are more important than ever, even as some of them struggle. Fishermen and buyers alike depend on them to set market value.

"Regulations are what's keeping the volumes down on the auctions. [Fishermen] have been managed by days at seas, and in the last couple years, they're only fishing 48 days a year," says Canastra. Fishermen tell him that new sector-management regulations that took effect May 1, which include individual catch shares, are a good idea, "But the government isn't giving them enough fish to make it work. I'm seeing a 65 percent reduction in effort due to the new system."

While volumes of fish this year at Gloucester, Boston and New Bedford have been light to moderate, the Portland Fish Exchange (PFE) is struggling. The last to eliminate the live-auctioneer system in 2007 before switching to a proprietary system online, the PFE has cut payroll by 70 percent, leased a third of its warehouse space and is now storing lobster traps and bait to generate revenue. Leased by the city of Portland, the nonprofit exchange is facing its mortality if there continues to be a paucity of product coming through its loading doors.

"We have been your partners in the fish business for 25 years and you have been able to trust the Exchange for fair, open trading," stated a July letter the city's mayor and the fish exchange's president mailed to owners of more than 60 fishing vessels that target groundfish. "Now more than ever before, your support is needed for this important institution to remain operational. We need your fish."

Many Maine boats that historically brought fish to Portland have turned to Massachusetts ports, either for their proximity to fertile fishing grounds like Georges Bank or so that they can sell the lobsters that unintentionally end up in their nets. Maine law prohibits the landing of any lobsters not caught by traditional traps.

Bert Jongerden, GM of the PFE, says the New England fishing fleet is down to about 500 boats, but he remembers a time when it numbered 7,000.

"Now they go out and they don't see a soul out there," Jongerden says, illustrating the acute impact of the new management regime. Historically, 20 to 30 million pounds of fish would come into Portland, but landings fell to about 8 million pounds in 2008, says Jongerden, adding that 9 million pounds is what the nonprofit auction needs to "live well." Unfortunately, he projects PFE landings to total only half that this year.

"We're all optimistic, but it's in the hands of the government, and if [the National Marine Fisheries Service] opens up allocations," he adds. "Our fortunes are tied to the boats."

Still, the PFE remains an important part of Rod Mitchell's day. Mitchell, president of Portland-based distributor Browne Trading Co., and his purchaser Steve Bowman go there as part of their "daily ritual" in search of high-quality fish that will end up on dinner plates in New York's top restaurants.

Portland's auction takes place at noon Sunday through Thursday, if there's enough fish to bid on. On Sundays, typically the heaviest day of the week, it's not uncommon for up to 40,000 pounds of fish - cod, haddock, grey sole, hake, pollock, monkfish and lemon sole - to show up; typically it's much less.

Mitchell echoes Jongerden's worries about the auction's future, but since the exchange is literally steps away from his waterfront business, it's always worth checking out (Browne Trading is not active on New England's other auctions).

"We've gotten so tuned in because there's so few boats and we know what boats are better than others so we'll say, for example, if the Deborah Ann's come in, let's go look at their fish. If The Pretender's come in, let's go look at their fish," says Mitchell. "They've obviously got limited days as to when they can fish. And you know, they're taking care of codfish much better."

Quality and transparency

Increased quality is perhaps the best thing to come out of the anonymous, electronic buying system, at least from the buyer point of view. A couple of decades ago, buying fish was conducted mostly sight-unseen and based strictly on a boat's reputation. It was, however, far from foolproof.

Such a method is still carried out on a limited basis on the Boston Fish Pier, but that traditional old-style auction, conducted by the New England Fish Exchange, only occurs about twice per month.

"It's a dying way to buy fish," says Sousa. "Everybody wants to see the fish before they buy it; that's where the display auctions come in. The old way is sight-unseen. It's become obsolete.

"Quality standards have increased. Fishermen's harvest methods have improved and their handling methods have improved, which is a huge part of the picture. They bleed 'em and slush 'em at sea, which they didn't used to do," adds Sousa. "With the drop-off in quantity, the boats have had to up their game. The No. 2s, the less desirable fish - there's not a lot of players who will deal with that anymore."

"I still need to see [the fish]." adds Holler, who's been buying fish for more than a quarter-century. "I can't just jump and say, 'Joe Blow's boat is in, I'll buy what he's got.' I make damn sure I have someone in every auction telling me about quality and volume."

An industry that was once rife with eyewinks and backroom deals is now largely above board, Sousa says. What the display auctions and the increased access to them haven't done, buyers say, is keep prices down.

"Do I like the auction? I love it," says Holler. "But I don't like the fact that a guy who buys 100 pounds every other day and companies that buy thousands of pounds every day are competing on the same auction. I come from a fishing background, so I want what's right for the fishermen, and I believe that the system works in the long run. It should just be different sectors of [buyers] involved in them. I like everyone playing with the same deck of cards."

Holler, Sousa and others agree that display auctions have increased the transparency of the industry - collusion among auction player to keep prices low would be virtually impossible. For the seafood industry, constantly seeking to polish its image, it's simply good business.


Associate Editor James Wright can be e-mailed at jwright@divcom.com



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