Geoduck Market Experiences a Collapse: Washington considers it a junk clam for a reason.

The Junk Bond of Clams

They taste like they look. Unless you're Chinese.

Like the collapse of the junk bond market

so too is the market for geoduck collapsing.

(Picture from the Seattle Times)

Most Washington citizens have considered the geoduck clam to be little more than a junk clam. Beyond its size, there was little it had to offer. It was difficult to dig, difficult to cook, and difficult to chew. It had no intrinsic economic value beyond its odd shape.

The junk clam becomes a phallic symbol

with marketers in WA convincing Chinese men...

(From BBC)

I've got the cure for what ails you.
Then somebody discovered a weak point in the Chinese culture, men specifically, convincing  them a  Puget Sound clam was the cure. The junk clam became the item in China which would solve whatever it was Chinese men felt they were lacking. With a wink and a nod, and disbelief to  Washington State citizens, a market exploded in China and the junk clam experienced a demand never dreamed of. Like shark fins, Manta Ray gills, Black Bear gall bladders, a superstition was born. An extraction business in Washington's tidelands exploded. Geoduck over 130 years old (believed to be the longest living species) began to be clear cut from subtidal lands and commercial farms with PVC tubing appeared  in the intertidal areas. 

You too can become rich. 

We'll keep 85% of the revenue

and farm whenever we think it's best,

however much we think we should.

Your tidelands? No, you can't use them now.

That's fair, isn't it?

A fungus spreads in Washington's tidelands.

With the demand for geoduck came the demand for tidelands which never naturally supported the densities planted, let alone the plastic tubes and netting required for this mono-culture to take hold. Like the carpet baggers of the south, growers knocked on doors, left fliers and called tideland owners who were unaware of the value they had in those tidelands. Worse was the control they were giving away. Not known was when their lease was signed, the percentage of revenues paid was nothing more than an amount agreed on among a few growers as "fair"  (as low as 10%, predominantly 15%, maybe higher if someone signed a decades long lease). It is an oligopoly in the classic meaning of the word. Their properties became encumbered for decades, with the commercial operations in some cases reducing the value of their neighbors' property.   

"Don't I have some say

in when you harvest these clams?"

Didn't read the fine print in the lease.

If you don't know the value of what you have...

Of significance today, given up by tideland owners in their leases to these few growers was control over when their tidelands would be harvested, as well as use of them. Today, as written about in the Seattle Times, as a result of a tariff war between China and the USA, and changing "tastes", the geoduck market has collapsed. The "wild" geoduck are now fetching $6/pound versus $16/pound in the first quarter of 2016, a drop of over 60%. Cultured prices, depending on who you listen to at what point in time, have dropped from 25% to 45% from their peak.

Like a bank, geoduck growers are insulated

when a market collapses.

 "Why were geoduck on my tidelands harvested

at the low point of the market?" Good question, 

but a little late to ask.

A tariff war is never good, especially when product is available from other countries. 

In any business there is risk which, in theory, is taken on by the producers, or in this case, those leasing tidelands to grow geoduck or those bidding on wild geoduck. In the case of wild geoduck, Washington's Department of Natural Resources provided "financial relief" to the bidders when tariffs initially caused prices to drop. Those leasing tidelands weren't so fortunate. Instead, they found growers who had leased their tidelands were harvesting at the lowest price in recent history, and they had no say in whether they should wait for higher prices to arrive. That control they gave away, along with encumbering the title of their property for decades. Meanwhile, Canada, Mexico and New Zealand benefited from the battle between China and the USA, selling their geoduck, tariff free.

Think politics doesn't matter?

It will when it comes to tariffs.

He who put tariffs on

can take tariffs off and claim

a "great deal" has been made,

whether real or not.

Your geoduck are gone, but mine are just waiting for prices to rise.

Anyone who believes the current tariffs between the United States and China will remain in place as the election approaches is naive. Too much is at stake during election cycles, and this is no different. Between now and election time, there will be a "great deal" made between the US and China, and with it the removal of tariffs. And when those tariffs are gone, geoduck prices will once again rise to levels significantly higher than today. But those who leased their tidelands will have nothing to sell, having had them harvested by growers who, because prices were low, paid even less to those whose tidelands were leased (lower revenue times X% means less paid out to the lessor). On the other hand, geoduck growing on tidelands owned by the growers, tidelands purchased with the immense profits generated in years past, simply waited for higher prices to return, and can now begin harvesting.* A "great deal".

*Seattle Shellfish, Arcadia Point Seafood and Taylor Shellfish, directly or indirectly,  separately or together, have purchased large tracts of tidelands over the past decade in South Puget Sound, on which they have planted large tracts of geoduck. Examples include tideland parcels purchased in Spencer Cove on Harstine Island; Totten Inlet's Totten Shores; and Fudge Point on Harstine Island. Even well paid "scientists", involved in creating studies, purchased tidelands along the shoreline of Totten Inlet. All tidelands growing geoduck which don't have to be harvested at low prices because all have leased tidelands which have geoduck which can be harvested, and from which a lower rent will be paid. 

Banks don't lose and tideland owners likely aren't too happy. But business is tough.
The two markets - wild and cultivated - have experienced a significant loss in revenue and with it planning. Bank loans made based on prices now driven down by the current tariffs are in question. The Seattle Times article mentions salmon restoration projects being impacted because DNR's revenues are expected to be lower, leading to less in the Aquatic Lands Enhancement Account (ALEA).* (The Times notes $28 million from geoduck auction, of which the LEAP legislative document shows $6.6 million being allocated to ALEA.) And tideland owners wonder whether that lease they signed and encumbered their property with for, in some cases decades, was such a good deal after all. But that's business.

*A portion of revenues received by DNR from aquatic leases and wild geoduck harvest are allocated to the Aquatic Lands Enhancement Account (ALEA) which was intended to enhance public access to aquatic lands and for "restoring shorelines for salmon habitat." The LEAP document for 2019 shows projects in the ALEA account totaling $6.6 million. The Seattle Times notes revenues from geoduck auctions for wild geoduck totaling $28 million. It's not known where the $21.2 million difference was allocated to.

Business is tough. Products whose price is artificially inflated are laden with risk. Risk which has now come home to roost in the geoduck market.