Home > Market Structures > Maple syrup cartel under pressure

Maple syrup cartel under pressure

December 18, 2015 Leave a comment Go to comments

FPAQThere is the oil cartel, OPEC, but little is written about FPAQ which is The Federation of Quebec Syrup Producers. The FPAQ was created in 1966 under the Professional Syndicates Act. Affiliated with Union des producteurs agricoles (UPA), it’s mission is to defend the economic, social, and moral interests of Quebec’s 13,500 maple syrup producers who operate 7,300 maple syrup businesses in 12 regional maple syrup producers’ unions. Each producer is subject to a quota and any excess syrup is put into FPAQ’s stockpile, and producers only get paid for it when it is sold which can be years later. Between 2010 and 2014 Quebec accounted for 72% of world production – see graph.

The FPAQ’s intention is to keep prices high and stable by limiting supply of syrup on the market. However there are concerns about FPAQ’s long-term viability:

  • As with the oil industry the higher price has encouraged other suppliers to entry the market.
  • Across the border the US has increased its maple harvest from 7.2m litres in 2012 to 12m liters in 2014. This may mean cuts in members’ quotas and stockpiling more syrup to maintain a higher price.
  • With maple syrup becoming increasingly expensive substitutes are being sought in the from of toppings made from corn syrup.
  • Supply is outpacing demand and FPAQ’s strategic reserve has increased to 25m litres which is equivalent to one year’s sales.

Saudi Arabia has been able to drive high-cost oil producers out of business by allowing the price of oil to fall. However the FPAQ don’t really have this option as the operating costs for maple syrup plantations are very low and US producers are unlikely to cease production like the high-cost oil producers.

A barrel of maple syrup from Quebec is worth more today than a barrel of crude oil. Producers are reaping the benefits, but not all agree with the tactics that whipped the supply chain into shape. Below is a very good video from The New York Times.

 

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