Cartel flexes maple syrup muscle in battling Black Market sales

Cartel flexes maple syrup muscle in battling Black Market sales

Quebec farmers were frustrated by growth in U.S. production.

by Jen Skerritt

The cartel that produces 72% of the world’s maple syrup is starting to crack.

After eight years of tightly limiting output to keep prices high, the Federation of Quebec Maple Syrup Producers next year will boost its quota by 12% for 13,500 sap farmers who operate in the Canadian province. The goal is twofold: Reclaim the 10% of market share lost to the U.S. over the last decade, and quell a rebellion by producers increasingly turning to black market sales for growth.

, Quebec produced about 148.2 million pounds of maple syrup this year. Under the new quotas, output could grow by 15 million pounds. (Photo: Marc Bruxelle/Thinkstock)

Boosting the quota now is “almost perfect timing” as farmers are seeing record output, according to Alan Bryson, 41, who drains sap from 45,000 taps on trees in Notre-Dame-de-la-Merci, Quebec. The prospect of more sales “outweighs the frustration” felt by farmers in the past, he said.

After maple sap is removed from a tree, it’s boiled down to remove most of the water, producing the sweet, sticky syrup that’s poured on pancakes, turned into candy, and even used in barbecue sauce. On average, a tapped maple tree will produce 10 gallons to 20 gallons of sap per tap, according to the New York State Maple Producers Association. It takes about 10 gallons of sap to make 1 quart of syrup from a harvest, which occurs in late winter and early spring.

Bryson wants to add as many as 15,000 taps this year and seeks to expand to 75,000 eventually, he said. Overall, Quebec produced about 148.2 million pounds of maple syrup this year. Under the new quotas, output could grow by 15 million pounds, according to the federation.

The unanswered question is where all this additional product is going to go. Tappers this year will be paid C$2.88 ($2.20) a pound, based on a weighted average, federation data show. That’s up a penny from the previous two years,

“It’s a lot of new production,” said Matt Gordon, executive director of the Vermont Maple Sugar Makers Association in Waterbury Center, Vt. “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. production this year totaled 4.2 million gallons, a 23% boost from a year earlier, with Vermont accounting for 47% of the total, the U.S. Department of Agriculture said in June. The number of taps rose 5% this year, to 12.55 million, after increasing 45% from 2007 and 2015, according to the USDA.

That growth frustrated Quebec farmers, who have been urging an end to quotas. While the government-sanctioned cartel kept prices stable by limiting output and maintaining strategic stockpiles, tappers complained that the system imposed a “heavy, inflexible handicap to the province’s performance,” according to a 70-page report commissioned by Quebec Agriculture Minister Pierre Paradis, released earlier this year.

That frustration was leading some farmers to sell on the black market, and some said they felt harassed by the federation, according to the report.

After a formal request from producers last year, Regie des Marches Agricoles et Alimentaires du Quebec, the province’s agricultural marketing board, authorized the cartel to increase quotas as it deems necessary, said Caroline Cyr, a federation spokesman.

The quota increase makes the system more flexible and adaptable to the free market and will curtail black market sales, said Simon Trepanier, executive director of the Federation of Quebec Maple Syrup Producers.

“If we allow producers to add more taps or at sell inside here, they will not be interested in selling on the black market,” Trepanier said in a telephone interview. “It will help to have a clean market, instead of a black market.”

The federation became a maple-syrup sales agency in 2002 and meets every year to set bulk prices. Unsold syrup is sent to a strategic reserve in Laurierville, Quebec, the scene of a notorious 2012 heist. The warehouses there store about 60 million pounds of syrup, in case future output is reduced by weather damage or pests.

While a lot of growers weren’t happy with the restrictions over the years, “the majority of maple syrup producers in Quebec have voted to work collectively and have voted to put these marketing tools in place,” Cyr said in an e-mail.

Jim Dempsey, who has 10,000 taps on his farm in Inverness, Quebec, said the looser restrictions may not work as planned. He’s concerned that the additional syrup will end up in the group’s strategic reserve, unless the federation can find more markets to sell into or lowers its prices, which he believes they won’t do.

“With the increased production of New York, Vermont, New Hampshire, and Maine, they’re going to be buying less and less, unless we can find different markets in different countries,” Dempsey said. “It’s a frustration. I think most people would rather have the money than the inventory.”

To contact the author of this story: Jen Skerritt in Winnipeg at [email protected]

To contact the editor responsible for this story: Simon Casey at [email protected]

 © 2016 Bloomberg L.P

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