Americas / Maple Syrup

Cartels, Canada Style

For Americans, the word “cartel” normally conjures unpleasant images, such as OPEC ministers manipulating the price of petroleum, or drug lords executing rivals. The words “global strategic reserve” make us nervous, too, and the combination of “cartels” and “global strategic reserve” in the same paragraph is likely to send us running for cover.  The alarming truth is that a cartel has come to Canada, our normally benign northern neighbor. Fortunately, it is a Canadian-style cartel: the commodity involved is maple syrup, and much of it is held in something called the global strategic maple syrup reserve.

With the lion’s share of the maple syrup market, Québec is the Saudi Arabia of the sweet, sticky stuff, and the Fédération des producteurs acéricoles du Québec (FPAQ) is its OPEC. Their goal? To keep prices relatively stable. FPAQ is a private organization created to unite maple syrup producers across Québec and support their interests. FPAQ regulates the production and marketing of maple syrup and focuses on organizing an effective sales process inside and outside the province. Basically, FPAQ is a legal cartel—Canadian style.

The supply management system of FPAQ sets strict quotas for producers and requires them to sell syrup through the federation. To maintain stable high prices, the federation stockpiles every drop of syrup its members produce beyond their quota. In lean years, the federation dips into the reserve.

Since 1989, FPAQ has succeeded in modulating the supply to keep prices stable, and it has set aside maple syrup in good years and released it in bad ones. Relatively little maple syrup was produced from 2005 through 2008, largely because of inclement weather. But from 2009 through 2012, the syrup flowed fast and sweet, filling warehousses with reserves. This promised to benefit consumers, but an unexpected event intervened: The Great Canadian Maple Syrup Heist.

FPAQ maintains a strategic reserve of maple syrup, officially known as the International Strategic Reserve (ISR). It is located in warehouses in a number of rural Québec towns. The first two such facilities were built in Saint-Antoine-de-Tilly (which holds 14 million pounds) and Plessisville (which holds 3 million pounds). In 2011, when the production of maple syrup was exceptionally high, FPAQ expanded the ISR to a third warehouse in Saint-Louis-de-Blandford, which holds 10 million pounds of syrup. In total, the warehouses contain enough maple syrup to bury almost 10 football fields in a foot-thick layer of stickiness.

Inside the warehouse in Saint-Louis-de-Blandford, baby-blue barrels of maple syrup are stacked six high in rows hundreds deep. When full, each barrel weighs over 600 pounds. With grade A syrup selling wholesale at about $32 per gallon, each barrel is worth nearly $2,000, approximately 13 times the price of crude oil. In total, the warehouse can hold about 16,000 barrels, equivalent to about one-tenth of Québec’s annual production.

In July 2012, sixty percent of the stock, or 6 million pounds of syrup worth about $18 million wholesale, suddenly vanished in the Great Canadian Maple Syrup Heist. The bold and baffling heist counts as one of the largest agricultural thefts ever accomplished. Siphoning off and transporting so much syrup was no mean feat. The thieves clearly were major players who knew the business well.

Lieutenant Guy Lapointe of the Sûreté du Québec, the police force that led the investigation, said that the thieves rented another portion of the warehouse for an unrelated business. This strategy enabled them to drive large trucks into the building without raising questions. “They were basically inside guys,” Lt. Lapointe said in an interview with the New York Times, “The leader wasn’t with the federation, but he had access to the warehouse that would not attract any suspicion.”

Like many other thieves, the maple syrup gang faced the problem of unloading a large quantity of a hot commodity that is not easily sold. But unlike most thieves, Lt. Lapointe said, they found a way to get full price on the open market. The thieves set themselves up as legitimate maple syrup dealers in neighboring New Brunswick, a Canadian province with an open, if much smaller, maple syrup industry. From there, they shipped the stolen syrup to buyers in that province as well as in Ontario, Vermont, and New Hampshire. Investigators believe that the buyers were unaware of the syrup’s illicit origins.

The theft cut the strategic reserve substantially but is not expected to put the global supply of maple syrup at risk. However, it poses a threat by allowing the thieves to undercut legitimate producers. The FPAQ represents about 10,000 maple syrup producers in Quebec. The legitimate companies that are working in this industry have to compete with a supplier that did not pay the normal market rate for its maple syrup.

Although the stolen syrup was insured, many of the federation’s 7,400 members were not happy that it 6 million pounds of syrup were allowed to disappear. Despite the displeasure of members, however, Pascal Thériault, professor of agriculture at McGill University in Montreal, said in an interview in Time that the future of the federation was secure. For most producers, maple syrup is either a hobby, a second career, or a source of retirement income, but the investment required and revenue generated are not trivial. Many maple syrup producers would not be where they are today without the help of the FPAQ, which literally took the industry out of the backwoods. While the closed market system restricts the ability of large, commercial syrup producers to expand, the federation’s voting structure means that it is dominated by part-time producers, many of whom are also dairy farmers. They have no interest, Mr. Thériault said, in returning to an open market.

And so the Canadian maple syrup cartel remains; the reserve took a hit from the heist, but the goods from the North won’t stop flowing anytime soon.