Route to Recovery

A trip through the epicenters of the recession

Downturn brings fresh pain to struggling Gulf Coast shrimpers

Nov 12, 2009 20:29 UTC

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BAYOU LA BATRE, Alabama – Long before America slid into recession in late 2007, shrimp fishermen here on the Gulf Coast had been struggling to make a living.

“Twenty-odd years ago, if a shrimp boat came in with 100 boxes of shrimp, they’d consider that a good catch,” said Avery Bates, vice president of the Organized Seafood Association of Alabama (OSAA). “Now if you come in with 400 you’re barely scraping by.”

The main problem that shrimpers down here say they face is farm-raised shrimp imported from countries like Vietnam or China, or government-subsidized shrimp from Mexico.

“We take it right on the nose,” Bates said. “A lot of our boats have went right out of business.”

Bates said that back in the 1980s, some 4,500 U.S. shrimp boats trawled the waters of the Gulf of Mexico. Now, that number is down to 1,200 and dwindling fast.

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The complaint here is similar to one you will here from manufacturers around the country: a cheaper imported product has undercut the market and left local producers fighting to stay afloat. Shrimpers in this small town known as the seafood capital of Alabama say they have had to catch ever more shrimp over the years to keep up.

“The last good year we had around here was 2000,” said Greg Ladnier, owner of Sea Pearl Seafood Co Inc., which processes shrimp delivered by local shrimpers. “Back then a lot of farm-raised shrimp was affected with diseases and we had a good year for catches. So we were able to make up the difference.”

“Since then things have been bad,” he said as workers cleaned his plant following the heavy rains brought by tropical storm Ida. “Unless something changes what’s going to happen is already happening all around us. “

“As the price of shrimp goes down it’s harder and harder to make a profit and keep on going.”

High fuel costs and high maintenance costs have added to shrimpers’ woes and the recession has only made things worse. Shrimp is a luxury item and prices have slumped as American consumers have cut their budgets.

“Shrimp is like steak or hamburger,” said Ernie Anderson, OSAA president as workers at his distribution facility box up frozen shrimp to be hauled to customers. “People don’t have to eat it and it’s something they can do without if they need to spend less money.”

While readying the shrimp boat that he works on for a trip out into the Gulf – Gulf shrimpers will often go out for 20 to 30 days and freeze the shrimp they catch as they go within 30 minutes of catching it – Bob McClintoc said that he had just been looking through the boat’s log back at the year 2000 and regretted that he had.

Back then, the boat would sell “1620s” – meaning shrimp that weigh in at between 16 to 20 to the pound – for $7.40 per pound. Now that catch sells for $2.80 a pound.

“It’s enough to make you sick,” he said. “This is killing us.”

Anderson said that the local industry’s hopes for survival are currently pinned on a state law, which will come into effect next January, that will require restaurants to tell customers where their seafood comes from when asked.

“We believe that given a choice, most people will prefer domestic wild caught shrimp to farm-raised imports,” he said. “That should at least allow us to increase our market share just enough to stay in business,”

He added that the U.S. shrimp industry is lobbying for a national bill along the same lines, but that the restaurant industry and retailers are resisting it.

“Restaurants are not keen to have American consumers know what they’re eating,” Anderson said.

In the meantime, shrimpers like Steve Patronas say that they are caught between the high costs and low prices for their catches that are slowly choking off their way of live.

“Come the spring if shrimp prices are where they are now and fuel prices go up,” he said, standing on the deck of his small boat for shrimping close to shore, “then my boat isn’t going out.”

Photos by Carlos Barria

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COMMENT

I have to agree with Al.Don´t forget the American innovative spirit.If we are getting undercut by cheap farm-raised, poor quality. That sounds like an opportunity to me. Define your product as wild caught, of course eco-friendly(fished with turtle extruder), better quality, fresher and better tasting shrimp. Then define your market and sell to those restaurants who understand the valuein your product. The marketing may take some work but I can almost guarantee that you can get the price you deserve especially if you throw in some of that american first class service. Let´s quit blaming others and get down to doing what we do best.

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Facing tough credit market, casino owner will go it alone

Nov 11, 2009 15:49 UTC

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GULFPORT, Mississippi – Before the recession hit, Rick Carter was hoping to borrow money to renovate a hotel damaged by Hurricane Katrina.

Now he says the stringent conditions and high borrowing costs banks want to charge him amid the ongoing credit crunch mean there’s no way he’d sign up for a loan.

“There’s  no way I can find anyone to lend me money at a reasonable rate,” said Carter, co-owner of the Island View Casino Resort just a stone’s throw from the Gulf of Mexico. “If we’re going to do anything we’ll fund it ourselves.”

Carter’s casino was originally located on a barge just offshore at Gulfport. But when Hurricane Katrina came through here in 2005, it lifted his casino off its moorings and dumped it on the beach some way off.

In the aftermath of that unparalleled storm, local politicians got together and lobbied for the passage of the Gulf Opportunity Act, which provided tax incentives for the return of developers and investors. Mississippi also decided to allow casinos to build up to 800 feet from the water in order to avoid a repeat of Katrina’s destruction.

Like other casino operators, Carter decided to reinvest on the Gulf Coast. He and his partner Terry Green invested $300 million in their casino resort and golf course.

“Thanks to our local politicians and the good people in Washington, we came back,” Carter said, sitting in a restaurant in the casino. “They saved the Mississippi Gulf Coast. If they hadn’t taken action then this would be a ghost town.”

Now, he is not so sure of the “good people” in Washington. The U.S. government has pumped trillions of dollars into the financial system to help keep it solvent, but he can’t get a loan without paying exorbitant interest.

“It’s amazing to me that after all the money that’s gone into bailing out the banks you can’t borrow money from them,” he said. “Instead of lending that money out they’re just using it to prop up their balance sheets.”

“I don’t get that.”

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Carter said that the only real alternative to mainstream financial institutions is borrowing from hedge funds. But they are even more demanding than the banks.

“The problem there is that they charge even more than the banks and they want a stake in your company,” he said. “And we’re not going there.”

So instead of borrowing money, Carter said he and his partner are trimming their sails by cutting back on unnecessary expenses. Casinos in Mississippi have seen their gaming profits slide 11 percent for the year to date, as the downturn has made people less willing to gamble. The Island View’s gaming profits are down, but not by as much as the rest of the state, Carter said, because the number of people coming had not dropped significantly.

The slot machines and poker and blackjack tables certainly seemed busy for a week night.

“But when they come in, they’re willing to spend $90 instead of a $100,” he said. “People are watching their money more carefully.”

Island View has not laid off staff – it employs some 1,400 people — but has cut overtime and postponed investments in order to fund projects like renovating the hotel, which was damaged by Katrina.

“We’re going to fund everything ourselves, even if it means we have to wait a while to do it,” he said.

He added that in the meantime casinos are going to have to get used to a new post-boom world in which there will be less money to go around as the days of easy credit are gone.

“This is going to take a long time to work itself out and the economy is not going to go back to where it was,” Carter said. “People are going to have to get by with a little less and they’re going to spend a little less, including when they’re at the casino.”

“Given the mess this country has ended up in, that’s probably a good thing,” he added.

Photos by Carlos Barria

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COMMENT

With all of the large commercial banks holding up the solid efforts of the USA growth one would think a casino with the flow of funds they have could make a bank in it’s self and flee the National they work with. I think it’s time for us to make a major change! Think about this for any business with client flows. They should IMO. Just find find a local non commercial (not a large National size Bank) yet a small local credit union, Small savings and loan type business and offer their clients specials to firm at that location for doing business with them. Then ask all the local small and large savers to switch over to the same small location so they can grow and loan to the local only business making it possible for firms like the one Rick Carter runs able to get loans at 1.5 to 2% over national rates. Yes kick our the fat cat’s and do business with the small firm. Built them up! Loans must be set up for open change as time passes just like passbook savings would. Drive business to the new bank location by 10 or 15 key business firms. It’s a county full of people helping one another to grow the locations of many a firm then not just of one but thousands so in the end you have both the large National moving out without any clients left and the same small bank growing large due to what a city needs to live out of the dark past. Control is only there due to you letting it be! Yes it will take time yet our Nation has that in spades on it’s hands right now. Make your plan and work the plan helping everyone in the process and you can save your city if you wish to yet the Banks who will not lend (from the past greed and fat bonus payments etc) need not stay in business no matter how large they are. It’s your chance to take back the old to a new life do it now and hold the hand of each person who makes your town one of jobs for life! Just think of what one year of your total work on helping your local town do this across our Nation with new jobs built in the process for others. As we must have this change, new ideas and a willing population ready across our country right now to get more back to peace within our lives and local homes, do it now it will grow and come to be as together we can make it work. Happy Thanksgiving to all who make it work! God Bless you all.

Posted by J.Nelson | Report as abusive

Four years after Katrina, high-cost insurance dogs Gulf Coast

Nov 11, 2009 15:09 UTC

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GULFPORT, Mississippi – It’s been more than four years since Hurricane Katrina lifted the casino barges of this Gulf Coast town at the end of August 2005 and dumped them on the shore, yet locals complain they are still paying a high financial price for that cataclysmic event.

The problem this area faces comes to one that is global – a lack of available credit – and one that is entirely local – a lack of available insurance.

“Insurance is a big issue here,” said Brian Sanderson, president of the Gulf Coast Business Council. “This has been a huge challenge to developing this area to its full potential.”

The local economy here has been sheltered to a certain extent by the presence of two large military bases in the neighborhood, but it is not immune. Unemployment in the Gulfport area is just under 8 percent, versus a U.S. average of 10.2 percent as of October.

“Yes, unemployment is lower than the national average here, but people are still hurting,” said Dave Dennis, president of Specialty Contractors & Associates Inc.

Sanderson said that the local long-term strategy for this part of the Gulf is to become a “Tier One” tourism destination. To attain that goal, the area needs businesses to come in and set up shop. But the cost of insurance effectively puts small businesses off from coming here.

“Insurance is generally available but it is not affordable,” Dennis said.

Insurance against wind damage is the main problem. Dennis said that he is currently paying  310 percent more to insure his home than he did before Hurricane Katrina hit.

“I’m one of the lucky ones who can afford it,” he said. “The cost of insurance means that the local real estate market is not reaching its full potential.”

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And he said that the biggest vendors of the contractor he works for are insurers, instead of any company that provides raw materials.

Gulfport Mayor George Schloegel said that after a major event like Katrina, it was only natural that insurers would be wary of this market.

“After a major catastrophe it generally takes years to get back to the norm,” he said. “As time goes by the market will come back. Insurance companies are always looking for customers and there are lots of customers around here who want insurance.”

Negotiations are underway with insurers on getting back into this market. Sanderson said that insurers need to come and see how construction on the Gulf Coast has changed since Katrina, as buildings near the shore are now usually built on stilts so that tidal surges in storms cannot cause extensive damage.

But there is still some way to go.

“Insurance is the key issue on the Gulf Coast that has kept us from a full economic rebound,” Dennis said.

Pictures by Carlos Barria

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