Lobster pounds perform a vital role in the U.S. live lobster market. Because lobsters can be stored in pounds for relatively long periods of time, pound owners can buy, hold, and sell inventories during the fall/winter season which is September to March. These buying and selling activities affect ex-vessel prices and revenues to lobstermen.

Keith Casey, a graduate student in Agricultural and Resource Economics at the University of Maine has been conducting research on how pounds operate and to what extent they affect the market.

By interviewing pound owners throughout eastern Maine, Casey discovered there are several factors, other than price, that determine the quantity of lobsters put into the pound and when lobsters are bought and sold. These include the holding capacity of a pound, seasonal water temperature, and the molting process of lobsters. In addition, there are economic considerations that go beyond short-term profits. Pound owners decide when to buy and sell in an effort to maintain long-term, reciprocal relationships with a limited number of buyers and sellers.

The capacity of pounds is greatest in the fall when the water temperature is colder than in other seasons. Cooler water reduces the risk of disease, contains more dissolved oxygen, and slows the metabolism of lobsters. Fortunately for the lobster pound industry, pounding capacity is greatest in the season that provides the best opportunity for profits.

Water temperature also affects when lobsters can be placed in pounds. Most pound owners fill their pounds during September and November to take advantage of lower prices. This coincides with the optimum water temperature since temperatures in pounds from December through March are generally too cold for new lobsters to adapt. If landing patterns should change in a way that makes it more attractive to fill a pound later in the season, pound owners will still be confined to filling by the end of November.

The molting cycle also has a significant affect on when pounds buy and sell lobsters. This is especially true in the spring pounding season when pound owners must sell their inventory before lobsters molt. After molting, lobsters are more cannabalistic which could cause a disastrous shrinkage level. For spring pounding, most Maine pounds inventory Canadian lobsters from the Gulf of St. Lawrence because these lobsters molt several weeks later than lobsters from the Gulf of Maine and they can be held longer in pounds.

Within the Gulf of Maine, shedding times vary. This makes it very difficult for pound owners to know when new shells (shedders) will become abundant on the market. In general, pound owners prefer to sell all of their spring inventory before new shells in the western regions of Maine become abundant. Once new shells are plentiful, the hard shell price for pounded lobsters generally declines.

In addition, market factors affect the quantity of inventory held in pounds and when lobsters are bought and sold. In recent years, banks have reduced credit lines for many lobster pounds. Because of this, pounds have had to reduce their inventory levels. This was particularly true for the 1991-92 fall/winter pounding season.

Pound owners' expectations of market prices is another factor influencing inventory levels. Pound owners are generally confident that prices will increase enough during the winter months to provide a profit margin. Over 50 percent of the pound owners surveyed said they fill their pounds to capacity regardless of their expectations of the New England economy. This suggests that ex-vessel demand from lobster pounds during the entire fall season is fairly fixed.

Casey states, "In general, pound owners are less confident about spring pounding margins. Consequently, they tend to reduce their spring inventories or not spring pound at all if market conditions indicate there is poor chance of having a profitable pounding season. If May prices are abnormally high, pounds will generally hold less inventory or not pound at all."

Finally, Canadian fishing seasons affect when lobster pounds buy and sell their inventories. Two major fishing areas in southwest Nova Scotia open at the end of November, with much of the catch from these areas being exported to the U.S. during December and January. This generally depresses prices and pounds usually hold onto their inventory. However, when the flow of Canadian product declines in late January and early February, prices rise and pound owners sell their inventory from February through April.

In mid-April and early May, fishing areas open in Prince Edward Island, Cape Breton, the Magdalen Islands, and Newfoundland. When the number of lobsters exported to the U.S. increases, there is usually a decline in the U.S. ex-vessel price. With lower prices in May, pound owners always sell their inventory before the end of April.

It has been estimated that from 1982-91, the buying and selling activities of lobster pounds from September through March have, on average, increased revenue to fishermen by 8.73 million dollars per year. Casey's study suggests that, if the market is supplied only by fishermen, supply will be more volatile. This results in more volatile prices. Since many restaurants will not carry live lobsters on the menu if the prices are extremely variable, the demand for lobster could decrease if there were no lobster pounds.

It should be noted that Casey's study is based on the sales and purchases of a very small sample of pounds. Although the pounding data is limited and there is inevitably a margin for error, Casey concluded that "the buying and selling activities of lobster pounds during the fall/winter season has caused a significant increase in ex-vessel revenues to U.S. lobstermen."