By Jamie Barrie
When you think of maple syrup on your pancakes or waffles in the morning do you envision something as complex as a cartel? Well a cartel in the simplest terms is an agreement between producers to control prices and keep new entrants out of the market. Members also use it to set minimum prices, control output, and a host of other activities designed to maximize individual profits for producers. When the government gets involved and manages the activity of producers it is called a public cartel and thus shielded from legal actions for things like price fixing.
For the past eight years the Federation of Quebec Maple Syrup Producers has enjoyed operating as a public cartel backed by the government. Their primary goal has been to control the supply of the sweet concoction in order to keep prices high. The producing members are responsible for 72 percent of the world’s maple syrup supply. However, after nearly a decade of operation their agreement is showing signs of falling apart. Pressure from within the cartel has forced members to approve an increase in production of 12 percent next year for the 13,500 sap farmers who operate in the province.
The group had little choice but to fall to pressure for two main reasons. The first is, to recover a 10 percent loss they have suffered at the hands of U.S. producers increasing production to capitalize on higher prices. The second is to end a rebellion by members who have turned to selling their product on what the federation call the black market. The increase in quota is welcome news to many as producers who have been seeing record output from their harvest. Farmer Alan Bryson of Notre-Dame-de-la-Merci in Quebec taps 45,000 trees and said the prospect of new sales should help ease the frustration of his peers. He wants to tap as many as 15,000 more trees this year and eventually increase his total to 75,000.
Quebec made 148.2 million pounds of maple syrup this year. With the new quotas, output may grow by 15 million pounds, according to the Federation. Caroline Cyr, spokesperson for the Federation, said the concern is finding a buyer for the new volume. The federation’s research indicates farmers received $2.88 per pound this year for their products which is up one cent from the previous two years, but increase supply could cause the price per pound to decrease, so it will have to be carefully analysed by the Federation.
Matt Gordon is the executive director of the Vermont Maple Sugar Makers Association and he says “it’s a lot of new production.” Gordon added “there are plenty of examples throughout history of agricultural crops where there’s been increased demand, so production increases. Then suddenly, it’s a little too much.”
U.S. producers are the catalyst for much of the discontent in Quebec. Their production this year was 4.2 million gallons. That is a 23 percent increase from last year with Vermont accounting for 47 percent of the total according to the U.S. Department of Agriculture. There has been steady growth in the U.S. with a 5 percent increase in tapped trees this year reaching nearly 13 million. The USAD data shows that between 2007 and 2015 there has been a 45 percent increase in U.S. production.
This growth has troubled Quebec farmers and many called for an end to the quota system. Quebec’s Agricultural Minister Pierre Paradis stated in a reported earlier this year the government-sanctioned cartel stabilized prices through quotas. However the report noted the system imposed on tappers a “heavy, inflexible handicap to the province’s performance.”
This sense of injustice forced some farmers to sell their product on the black market. In 2012 a theft of nearly 6 million pounds worth $18 million was discovered missing from the maple syrup strategic reserve warehouse in Quebec. The theft was blamed on frustrated producers missing out on sales. In his report Paradis said some farmers acknowledged feeling harassed by the Federation.
After a formal request from producers last year to the province’s agricultural marketing board, decision was made to let the cartel increase quotas as it deems necessary. Simon Trepanier, Executive Director of the Federation of Quebec Maple Syrup Producers, said the quota increase makes the system more flexible and should limit black market sales. Trepanier added “if we allow producers to add more taps and sell inside here, they will not be interested in selling on the black market.”
The Federation emerged as the main sales outlet for maple-syrup in 2002. They meet annually to set bulk prices. When syrup goes unsold it is sent to the strategic reserve in Laurierville, Quebec which is the scene of the large theft in 2012. A lot of growers have been unhappy with the program over the years but a majority continue to support the cartel.
Jim Dempsey is a smaller producer from Inverness, Quebec who says he is concerned that loosening the production quotas may not work the way farmers think. Dempsey feels that if the Federation does not focus on looking for additional new marketing for their product that the additional syrup will end up in the strategic reserve. Other producers feel the same way as Dempsey, stated that finding new markets, although difficult, is essential to the Federation and the industry. Dempsey added “with the increased production of New York, Vermont, New Hampshire, and Maine, they’re going to be buying less and less, and if we can find different markets in different countries it’s a frustration. I think most people would rather have the money than the inventory.”
Industry experts say that demand for the sweet and tasty syrup used both naturally and in many other products will soon correct any problems that over production will have on price. Supply and Demand is a simple theory, if you supply more that what the market demands, you will have to find ways increase demand, if not one of two things happen, either you decrease price or production.