IN recent decades the California Dungeness crab fishery has experienced a race for crabs, or derby, where approximately 80% to 90% of annual seasonal landings occur between late November and the end of December. Some processors have responded by developing large-scale processing and freezing capacity that can accommodate the pulse of crab landings and be used for processing other fish species at other times of the year. The combination of large-scale processing and declines in the groundfish and salmon fisheries has resulted in a more consolidated processing industry structure that features a small number of large processing firms.

Baseline economic information was collected on this processing sector in California for two Dungeness crab fishing seasons, 1999-2000 and 2000-2001 (Hackett et al. 2003). Our research methodology involved the use of confidential fish-ticket data from the California Department of Fish and Game, and interviews with key informants at six processing firms. These firms, located in California and southern Oregon, purchased 60% of the crab landed in California in 1999-2000. We found that:

• The estimated average wholesale price of various Dungeness crab products (adjusted for yield rates from the live crab) in 1999-2000 was approximately $3 per pound.

• The estimated value added by processors ranged from $8.45 million to $8.83 million. Value added by processors is measured as processed-crab sales revenue less the cost of crab purchased from fishermen, whereas value added by fishermen is measured as revenue received by fishermen for selling crab to processors.

• The estimated value added by processors ranged from 47.5% to nearly 50% of that added by crab fishermen.

• The value added by fresh and live products (based on yield-adjusted prices expressed as a percentage of the ex-vessel value) was generally less than that of the frozen and picked-meat products.

About half of the Dungeness crab catch is sold fresh or live, while the rest is frozen or processed into picked meat. This crab has two red tags; cooperating commercial fishermen return the tags so that researchers can estimate crab movements and collect other data.

Prices

If fresh and live product are perceived by consumers as possessing superior quality to that of the frozen product (much of the picked meat originates from the secondary processing of previously frozen crab), then presumably this would be manifested in higher prices per pound for the fresh and live product, especially if the pulse of landings suppresses this product. In fact, our analysis suggests that this was not the case — the frozen and picked meat featured higher yield-adjusted prices per pound than those of fresh and live product. Our estimates indicate that only about one-half of the Dungeness crab landed in California was processed into fresh or live product during the 1999-2000 and 2000-2001 seasons.

Value of picked meat

The superior yield-adjusted price for picked-meat product could be explained by the notion that many final consumers (such as diners at restaurants and on cruise ships) value convenience over freshness, since picking meat from a Dungeness crab is a somewhat laborious task. In fact, our estimates for percentage value added in 1999-2000 are consistent with the picked-meat product having the highest yield-adjusted value in the marketplace (though this was somewhat less evident in the 2000-2001 estimates). Processors in our interviews noted the importance of maintaining restaurant, cruise ship and other food-service accounts that serve as key market channels for picked meat. The importance of maintaining these picked-meat market channels is indicated by trends in the estimated share of total statewide Dungeness crab landings going into the picked-meat product. The percentage of crab processed into a picked-meat product generally increased in 2001, when landings had decreased, indicating the importance of protecting market channels for picked meat.

Employment

Hackett et al. (2003) were only able to get sufficient information on employment and capital stock in Dungeness crab processing from surveys to develop industry-wide estimates for the 2000-2001 season. Estimated total peak crab-processing employment in 2000-2001 ranged between 485 and 552 people during the weeks when the pulse of Dungeness crab landings is being processed. In contrast, off-peak “year-round” industry-wide employment (mostly picking lines) was estimated to range between 88 and 142 people.

Luxury/special occasion food

Most of the processors surveyed consider Dungeness crab to be a seasonal or a luxury food associated with celebratory events, with peak consumption of fresh crab occurring between Thanksgiving and New Years Day. Processors noted difficulty in moving fresh crab after late January (Super Bowl weekend). Because fresh or live crab is difficult for consumers to locate after late January, it is impossible to judge whether consumer demand would increase if it were available for longer. There is certainly substantial demand for the live product during the holiday season when it is available.

Frozen product

The large processors mentioned that target inventory levels for frozen crab are usually set prior to the season based on existing inventory and projected consumer demand. Processors base their demand estimates on overall economic indicators (economic growth, consumer confidence) and the price and availability of substitutes. Key substitutes were reported to be Dungeness crab products out of Washington, Oregon and British Columbia; snow crab products; and more generally, other seafood and meat products. As the season begins and it becomes clear that target inventory levels will be reached, production shifts to include fresh and live product. Processors noted that fresh product is easier to unload quickly. In years with low landings, large processors focus most of their production on frozen products, leaving more of the fresh and live market to smaller processors.

New markets

The processors interviewed reported considerable difficulty in moving large quantities of fresh crab product outside of the region due to the cyclical nature of the fishery. In years with large landings, the industry is able to develop new markets, such as East Coast restaurants. These processors report high product satisfaction in these new markets. But when years with small landings come along, processors report that rising ex-vessel prices put upward pressure on fresh product prices, and out-of-region markets are more price-sensitive than those within the region due to reduced product identity. Processors claim that this price sensitivity effectively eliminates fresh Dungeness crab products from being regular restaurant menu items outside of the region.