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The Waterfront Fish Auctions Nationwide - Is Portland's Star Rising? By John Taylor.
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Fish Auctions Nationwide -Is Portland's Star Rising?
By John Taylor
The Boston Fish Auction: Going, Going - But For Some Reason Still There
Of all the fish marketed in New England, only about 10 percent is sold at auction. Perhaps little more than 5 percent transits the auction held on the Boston Fish Pier. In bygone days of abundance the Boston pier used to handle upwards of 50 percent, as many as 3 million pounds a day. Twenty million pounds a year has since become the norm. Yet the Boston auction continues to determine the price of New England fish, as if over the years nothing much had changed. Given this apparent incongruity, it is scarcely surprising that in the fish trade these hand-me-down arrangements still in effect provoke controversy.
To grasp the points at issue, let us begin with the prior question: why in the first place should so much as a single scrod be sold by means of auction? What is it with fish that they get themselves auctioned off, not just in Portland and Boston but round the world? How many of those who are blessed with a passion for seafood, whose satisfactions are influenced every day by something called the Boston price, can explain the basic purpose of an auction? No more than a few, if th~ research done for this article is any indication. It would appear, then, that this should be our point of departure.
The auction is a marketing mechanism, one of many different kinds. It is ancient and nearly universal. The Babylonians used to auction brides, and in China Buddhist monks would periodically hold auction sales to raise money for temples and monasteries. The Praetorian Guard in A.D. 193 auctioned off the entire Roman Empire to one Didius Julianus for 6,250 drachmas (the Boston price?), and then for good measure crowned hUn emperor. Two months later the legions had him beheaded, an awkward moment for the auction business. In Mexico, by contrast, a society which in Aztec times was no less sanguinary than imperial Rome, almost no'thing is sold at auction. No one seems to know why.
Auction stems from the Latin aUGtio which means increase, and this promotes confusion right from the start since the "public sale of property to the highest bidder (as by successive increased bids)," to quote Webster's, is only one type of auction among many. The Dutch, for example, open high and bid down, whereas the Japanese favor simultaneous bidding. In their formal writings econom-ists tend to ignore the auctioil, apparently because it declines to fit received economic models. Even the word auction, let alone any discussion of the practice, is nowhere to be found in Paul Samuelson's standard text, Economics. Yet nearly every type of property that can be sold is routinely "knocked down" at auction.
But why adopt this method of sale rather than some other? What circumstances make the choice appropriate? For those who care about the price they must nowadays pay for fish - fresh fish especially this questioin if pivotal.
An auction is' the way to go when the value of the goods to be sold is uncertain or unknown. If honesty on the part of all concerned can be assumed, the auction is a method of establishing value in public so as to satisfy the seller, the buyer, and all other interested parties that justice has been done, that the price paid was fair. Suppose you need to know what that· Picasso on your living-
room wall is worth in dollars. For a hefty fee the experts will name you a figure that mayor may not be dependable. But you can never know for sure until you schlep the picture to Sotheby's for auction. It is this heuristic feature of the auction that makes it indispensable to the sale of a broad variety of goods, most of them second-hand or older.
Since new manufactured goods are of known value - current model
Hondas, for example - they are auctioned seldom if ever, but among dealers it is common to auction used cars wholesale. To auction, in short, is to reach agreement on value so that an exchange can take place. This is the purpose of any auction, regardless of local customs or the nature of the goods on offer.
It remains the ostensible purpose of the New England Fish Exchange auction in Boston, however vestigial those proceedings may have become. .
But why, it would at this point be reasonable to ask, should the value of fish be so much in question? Are the boats that offload at the Boston Fish Pier trafficking in second-hand merchandise? ("Hey Tony, how many miles on that swordfish you got over there?") Well, not exactly .• . Though the old saying has it that "eggs is eggs," they too are sold at auction and for the same reason that applies to fresh, fish. That reason reduces to a single word, namely, quality. As the economists put it, widgets of the same brand and specifications are homogeneous, like most other manufactured products when new, but fish emphatically are not, even within a given species. No one in the bu.siness is ever heard to say that "fish is fish" because the quality of fish varies and the variation can be extreme.
Two variables render quality and therefore value - uncertain:
Nature and the fisherman. Fish like the rest of us have life cycles to swim through, which means that at one time or another some are either too big or too small for the market; others turn soft while recovering from the effort required to spawn; and some will migrate into waters where they soak up chemical pollutants or become infested with worms. These and other vicissitudes in the life and times of yonder cod have bearing enough on quality, but then he falls afoul of the fisherman's net.
No new-caught fish was ever known to acquire antique value on the way to port, a trip that might not even begin until 10 days after he is welcomed aboard. Fish are perishable and therefore the treatment they receive from fishermen does much to determine their quality by the time they reach the dock. Some boats are clean and their holds adequately refrigerated, others are not. Since quality has to be demonstrated, fresh fish are sold at auction where their number and condition can be assigned value so as to set a price that all parties will accept as satisfactory. Sound reasonable? Let us consider, then, what goes on in Boston.
Time was when the New England market for groundfish was the biggest in the country, and in those days it seemed appropriate that Boston should dominate the trade. Remembered preeminence is notorious, however, for fostering delusion, and even today one prominent buyer calls Boston "the hub of the wheel," in serene refusal to acknowledge that times have changed. More than half the groundfish consumed in this country is now consumed outside the New England market, and those newer markets are growing faster than any others. Though only small quantities of fish pass through the Boston auction these days on their way to white tablecloth restaurants, history, geography, and inertia combine to make the Boston auction price the basic reference for the entire groundfish industry. It sets the price in Gloucester, where most New England fish is landed, it affects all of the northeast, including the Maritimes, and it impinges on markets clear across the country which would otherwise be unconcerned with doings in The Hub. This is the first reason the Boston price is controversial. There are those who believe that Boston has more to say about the price of fish than its relative position in the industry now warrants.
But there is another objection raised against inherited procedures that may be more serious and is in any case more interesting. Critics assert that the Boston price is ambiguous, that they can never be quite certain what it means, that it distorts the spot market, and that as an indicator of market conditions it is unreliable. A market - any market - runs on information. Without it traders have no grounds for deciding whether to sell, buy, or go back to bed. It follows that the quality of the information propagated by a given market determines the accuracy of prices, that is, whether prices really do reflect current conditions. Boston prices, aver the dissenters, do not.
But what could the critics be grumbling about, why should their complaints merit notice when those fish landed in Boston are sold at auction? Is it not the function of a public auction to discover value so as to arrive at a price acceptable to all? Is it therefore implied that the Boston auction somehow falls short? Indeed it is, claim the critics, because it does. It fails to do, so they argue, what an auction is supposed to do, or at least fails to do it properly. Fish brought by boat to the Boston auction remain aboard until sold. This means, of course, that buyers purchase their fish sight unseen, guided by personal knowledge of the fishermen. "We know the boats," one buyer explains, "so we know what to expect." Though no doubt convenient for the insiders, this practice creates, among those who are unacquainted with the skippers and seldom present at the auction, uncertainties about volume and quality. How close is a given "hail," or skippper's estimate, to weigh-out? How can you tell which buyers renegotiated the auction price when their fish turned out to be less than first quality? How did they choose to define first quality on a given day and what was the price renegotiated? What incentives, if any, have the buyers to report actual volume and final price to the Blue Sheets published by the National Marine Fisheries Service? Can they, in any case, be relied on to remember? So what, ask the critics, does the Boston price really mean?
It has meant, and continues to mean, dissatisfaction with the way things are done in Boston and consequent attempts, from time to time, to establish alternatives elsewhere. Whether those transactions on the Boston Fish Pier qualify as an auction or should be viewed as a private sale would be a matter of merely local interest were it not for the per-
sistent and pervasive influence of the results. An estimated 1 million pounds of over-the-road fish is trucked through Boston every week, much of it from Canada. One Canadian official denies that the Boston auction is the real thing "it looks to me more like a private club" - and doubts if the volumes reported in the Blue Sheets are accurate since « no one really knows what's in the pipeline." Yet the Boston auction sets the price from which OTR fish is discounted. For reasons both historical and geographical, the Maritimes have always carried on more trade with New England than with the Canadian interior, and for the time being see no way to get along without do with quality? All that matters is how you take care of the fish. And anyhow, all Gulf of Maine cod are wormy." Would a display auction work in Boston? No one consulted expressed enthusiasm for any such novelty. Many pointed out that a display requires floor space and labor which, to be sure, it does. With waterfront condos rising left and right, elbowroom for fisheries and allied maritime trades is increasingly hard to come by, and labor is indeed costly. Even so, no one wondered aloud, when questioned about the new ventures in Portland and New York, whether it might be in their interest to make the status in Boston just a bit less quo.
Perhaps what appears to be the
The short answer, it seems, is everyone, perhaps the consumer most of all. The display has released fisherman and buyer from a traditional relationship in which quality of product suffered because it was never explicitly rewarded. Instead of supplying as before a product no better than what he knew his particular buyer would deem acceptable, the fisherman now finds himself in competition with other skippers to deliver the best fish on the display room floor. This built-in bias in favor of quality attracts buyers who in competition with one another bid up the price. Thus fishermen learn that quality means money in the bank, while buyers come away with a product good
their American neighbors. Whether something like an international market for the entire northeast may yet emerge, a market that might be decentralized and tied together by video and telecommunications, remains at this point conjectural.
Meanwhile, the Port Authority of New York and New Jersey plans a new fresh fish auction at Fishport in Brooklyn. Like the auctions in Portland and Honolulu, Fishport will offer a display so as to verify weight and quality before bidding begins. If successful it might conceivably have some bearing on the future of the fish business in Boston.
Yet the buyers queried for this article seem content on the whole to carryon with business as usual. One complains that "everyone criticizes the Boston auction, but they never suggest an alternative. I don't think there is one. At least if there is, I can't think what it would be." Another scoffs at the year-old display auction in Portland, calling it pointless. "I can't take time to go up there for a look," he says, a twohour drive north. "So you throw a fish in a tub and lay it out on the auction room floor. What's that got to prevailing mind-set was best expressed by Gerry Fratollilo, president and manager of the New England Fish Exchange. After 24 years on the pier she affirms that "the Boston auction is the greatest." Asked to single out the distinguishing feature that sets it apart and makes it special, her reply was unhesitating: "Me!"
Portland's Display Auction - A Surprising Newcomer
Bold innovation has been limbering up the mussel-bound coast of Maine since mid-1986 when the Portland Fish Exchange introduced New England to the display auction. Though not the first in the country - in Honolulu an auction of this type has been in operation for about 50 years, providing the local sashimi trade with fresh tuna - it is no less impressive for being second. It is the first change of any consequence in the marketing of fresh fish to have overtaken New England in quite some time, and it appears to be well received. The question is why. Who benefits? enough to win new customers for seafood. The display auction is standard procedure in fresh fish markets the world over and has been for years. It is at least conceivable that lack of such markets in the United 5tates has had something to do with the notably moderate quantities of fish Americans consume ..
The Portland Fish Exchange, operating squarely in the black, handles well over half of local landings for an average of about 1.3 million pounds a month. That share is growing. Whereas buyers numbered less than 20 at the outset, there are now 4 times as many, some coming from as far afield as Buffalo, Pittsburgh, and Baltimore. One buyer is reported to have plans for the export of Portland Exchange fish to Hong Kong. At least two boats that used to sell on the Boston Exchange now offload in Portland. What accounts for this response?
Not all the answers are in yet, but a preliminary assessment is nevertheless possible. It appears that the Portland display auction materialized at the right time, meeting the needs of fishermen and buyers alike. As fish become scarce, it takes
longer to catch a given quantity. Boats now make trips lasting seven days and more, rather than two or three, before they can fill their holds. To bring in a product worth buying, despite the extra time spent at sea, fishermen must take better care of their catch than ever, which means more work and higher costs. The display auction furnishes an unequivocal incentive to invest the effort and money necessary to deliver quality, and this seems to be the chief reason it has caught on.
Whether anything like it should be attempted elsewhere is a question guaranteed to trigger argument in New Bedford. Opponents of change insist that even if the Portland venture can be termed a success - a big if according to some traditionalists - it proves nothing except that the conditions necessary to a display ~uction happen to prevail down east. The decisive difference betweehthe two ports, they argue, is volume: simply because the
Portland auction has succeeded in moving fish at the rate of about 16 million pounds a year, there are no grounds for concluding that the same kind of auction could be made to work in New Bedford, where an- • . nual landings average 65 million pounds. "But it can be done," says
Republican state representative John
Bradford. "We know it can be done because the Dutch are doing it with their computerized display auction at Scheveningen. they handle 62 million pounds a year. Why can't we?"
New Bedford holds an auction of sorts in which the high bidder buys the whole trip. That is, he buys fish by the boatload, not by species as in
Boston and Portland. A given trip may and often does include one or more species he does not want and would not buy if he were free to choose. In consequence the meaning of prices paid is obscure and quality, Bradford maintains, "is incidental to this system. The dealers know which boats are good and they bid for the top of the catch. But this does nothing to promote uniform quality throughout all landings, and that's what we should be after." Accordingly, Bradford is seeking support for a feasibility study which he only considers the first step. "This project," he concedes, in tones of resignation, "will take years."
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