Thursday, 23 May 2013 12:32

The maple heist (1 of 2)

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You may have seen it in the news recently - "sticky fingered thieves steal a half a million gallons of maple syrup out of Quebec's strategic maple syrup reserve" (the Daily Show got it mostly right).   Wait, what?  A strategic maple reserve?  In Quebec?  From which thieves stole almost as much syrup as Vermont produces in a year?  What’s going on up there, eh?

I will break this down into two blog posts - first, how did Quebec's maple industry come to be completely controlled by a single agency, and then I will get into the theft itself.

So - why is there a strategic maple reserve in Quebec?

The short answer is that their maple industry is huge (as a percentage of the world market and as a percentage of their agriculture) and it is controlled by an OPEC-like cartel that oversees production, sales and marketing.

The province accounts for about 75% of the world's maple production (Vermont makes up almost half of the rest), and plays a critical economic role in the province.  Maple is the largest crop (non-dairy or livestock) in the province and accounts for 12% of Quebec's agriculture ($258 million out of $2.2 billion total) compared to 5% in Vermont ($40 million out of $757 million). Its economy is affected by all aspects of maple production and marketing; landscape - farmers tap 30% of all maple trees in the province (by contrast, in Vermont 3% of trees are tapped); manufacturing - CDL , Lapierre and Dominion & Grimm (D et G?), three of the big four maple equipment makers are Quebecois (the fourth, Leader Evaporators , is in Swanton, VT); and Quebec's syrup is exported all over the world .

The story of how the Quebec maple industry ended up so tightly controlled started in 1958 with the formation of the Federation of Quebec Maple Syrup Producers as a maple marketing cooperative of the producers in the Beauce region of Quebec (along the Maine border).  In the late 80's the provincial government, looking for ways to stimulate economic development, proposed expanding that cooperative to cover the whole province, allowing for stable prices and a greater commercialization of the industry.  A unanimous vote in 1989 maple producer referendum ed to the adoption of the "Plan Conjoint ", governing the production and marketing of syrup in the province.

The Plan gave the federation the power to control sales (either as the buyer and reseller, or as a broker between producers and large retailers), place a per pound tax on all barrels of syrup and to set production limits.  Producers, granted the opportunity to adopt the Plan by a Canadian law designed to protect food producers, were interested primarily in the marketing and price stabilization aspects of the plan, while the other major players in the industry - syrup packers (packers are syrup re-processors - they buy syrup in bulk, and bottle it, brand it, market it and resell it - the creameries if you will) - who (at times) benefited from price instability, had no choice but to accept this new regime (at the time there were eight major packers in Quebec and over seven thousand producers).

None of these elements are unheard of.  The sale of milk in the United States is subject to a variety of price controls and subsidies (not that the dairy industry is necessarily the model of stability ).  And many agricultural products have checkoff programs , where a tax is assessed on each bulk unit of sale and the revenue goes to fund promotional programs (maybe all Pure Maple needs is Matthew McConaughey's voice and whoever this guy is).

The only part of the Plan put into practice initially was a dollar per gallon tax for general maple marketing (a big part of this was to develop Quebec quality and grading standards).

Continued price instability in the bulk markets through the 90's, however, led to the implementation of price controls by the Federation in 1997.  The Federation set the price that buyers were required to pay for bulk syrup and made buyers financially responsible for carrying any surplus (effectively requiring them to buy the entire crop).  Ideally, this would limit packers' abilities to take advantage of producers by playing fluctuations in the market, buying up syrup when prices were low in years of high production and not buying when prices went back up later.  This can lead to a much larger discussion about the "invisible hand ", but the bottom line was that highly variable revenue was difficult for producers (and felt to be unfair).

In reality, things were a little different.  Price controls allowed producers to make as much syrup as they could without worrying about the effect of oversupply on prices.  The spring of 2000 brought a bumper crop, initiating a rebellion by packers who took legal action to force the Federation to activate the clause of the Plan that called for production limits.  For the 2004 production season each producer would have a quota of syrup based on their past three seasons' production.  Every gallon of syrup over the quota was required to be sold to the Federation at a much discounted rate.  Syrup sold directly to retail customers by farmers was exempted.  Initiation of new commercial operations was effectively banned, although the Federation helpfully noted that new operations could be started by selling the entire crop direct to consumers.  Syrup consumed by the farmers and their immediate families was also exempted - a 2005 study estimated 1% of the syrup crop in Quebec was consumed that way.  And, the cost of any carrying over unsold syrup was shifted from packers to producers, communally paid for by an increase in the per pound levy.

This was a big deal.  At public meetings in the wake of the announcement Federation representatives needed police protection.

But the change went through, extending the Federation's mandate over virtually all aspects of the maple industry in the province.  Over the next seven years there were a few developments.

Packers, allowed to buy syrup only at Federation prices, protested that they were being forced to compete with the direct sales by the Federation in international markets and that the Federation was using what were supposed to be generic maple marketing dollars to increase sales of their own syrup stocks.  Some smaller packers stopped re-selling syrup outside of Quebec altogether.

The rules governing over-quota syrup changed.  Surplus syrup was still required to be delivered to the Federation, but producers would only be paid for that syrup when it was sold out of the Federation's stocks, and, until it sold, farmers had to pay an annual storage fee.  This cost was enough that producers often received little or no compensation when their surplus syrup eventually sold.

Fast forward to 2011.  Years of increasing production led to a stockpile of close to 3.5 million gallons stored in three warehouses including one in St. Louis-de-Blanford.

Read 8495 times Last modified on Wednesday, 29 May 2013 13:11

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