If you buy maple syrup you need to thank Quebec producers for stable low prices. Although the intention of that group was price stability, they didn't want it at low prices. For that they have to thank the perverse consequences of their maple syrup marketing scheme. About 10 years ago Quebec syrup producers decided to organize their marketing through a supply management system governed by provincial agricultural marketing legislation. That system may sound familiar; it's the same legislative basis every province uses to regulate the production and marketing of dairy, egg and poultry products in Canada. Those products, however, are supply managed on a national basis that includes not just price control but also production quotas and import/export restrictions.
There is no other way to control supply except through a national regulatory protocol. Unfortunately for Quebec producers their maple syrup supply management only applies to their own provincial production and marketing, and includes neither border restrictions nor compulsory retailer compliance. Without those marketing factors the system was doomed to failure. It's a lesson to our dairy and poultry industry, that is the system only works if every sector across the country is part of the regulated protocol. Any breach will cause it to break down.
No doubt Quebec producers had their best intentions at heart when they created their syrup supply management cartel. They presumed that because Quebec produced 80 per cent of North America's maple syrup supply they had almost monopolistic control of the retail market – at least that was the theory. The idea was this – and it is similar to other supply managed products – all Quebec producers would be required to sell their syrup to a central marketing agency that would then resell it to wholesalers and retailers at negotiated prices. If there was a surplus it would be stockpiled and sold at another date.
The idea should have worked but it lacked two elements – there was no control over how much Quebec producers produced, nor could it control how producers in other provinces and the USA marketed their syrup. The Quebec syrup marketing cartel was able to set higher prices, but out-of-province producers undersold that price, which caused the cartel to have to store surplus syrup at significant cost to Quebec producers. In effect Quebec producers ended up with lower overall prices and a surplus, with out-of-province competitors being able to sell everything they produced. To the chagrin of Quebec producers, that situation has increased maple syrup production outside of Quebec. The Quebec market share has now dropped by 10 per cent. Talk about shooting yourself in the foot, and its going to get worse.
There have been great advancements in maple syrup production technology. Production started to change 40 years ago with the introduction of plastic pipelines that directly linked trees to evaporation equipment. Today that technology includes vacuum pumps that literally suck the sap out of the trees and doubles production per tree. Sap is also sent through a reverse osmosis process that removes up to 70 per cent of the water content before being sent to evaporators for final processing – that has dramatically reduced the energy cost of syrup production.
These advancements have made syrup production more of a commercial enterprise than a farming sideline. Some operations now tap up to 70,000 maple tress by means of plastic pipelines and industrial processing. As admirable as that technological progress is, Quebec producers have become stifled because their marketing cartel cannot market the present production. Expansion has become restricted; in fact the marketing agency now wants to establish production quotas.
None of that applies to producers outside of Quebec and three years ago a massive production operation was established in northeastern Vermont. An investment company created a commercial production entity that last year tapped 100,000 maple trees and plans to expand to 750,000 trees over the next few years. Millions of dollars have been invested in industrial evaporation and processing equipment. The venture employs 12 full-time people, dwarfing any operation in Quebec, and more such massive operations in Vermont are being planned. Economies of scale make these types of operations extremely efficient and all of that expansion will undercut Quebec production.
There are lessons here, for other supply managed sectors there are American dairy farms that manage 5,000 to 15,000 milking cows. No such sized operations exist in Canada because of supply-management but they could and Alberta would be well-placed to establish such giant commercial dairy operations if supply management were weakened. More on maple syrup next time.wi