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Industryweek 10440 Maple Syrup

Maple Syrup Regulations Sap Quebec Producers

Feb. 26, 2016
As demand for natural sugars increases, food manufacturers are busy adding maple syrup to everything from chips and Pop-Tarts to yogurt. But suppliers can't just crank up the tap.

It’s boom time for Canadian maple-syrup producer Ray Bonenberg, who is expanding sap output from his tree farm near Pembroke, Ontario. About three hours away in the province of Quebec--the Saudi Arabia of syrup--producers like Jim Dempsey can only watch in frustration.

Dempsey’s output is capped by the Federation of Quebec Maple Syrup Producers, a kind of government-sanctioned cartel that accounts for 71% of world supply. The Federation has excelled in its mission to bring price stability for the province’s 13,500 sap farmers. The trade-off has been a strict limit on how much can be extracted and sold. But Quebec growers are now demanding the shackles be loosened as they watch competitors in Canada and the northern U.S. boost supplies to meet rising demand.

“We can stay with our quota system all we want, but all we’re doing is hurting ourselves,” Dempsey, 48, said in a Feb. 19 telephone interview from his farm in Inverness, Quebec.

The chorus of complaints rose to a crescendo this month with the publication of a 70-page report commissioned by Quebec Agriculture Minister Pierre Paradis, who sought a review of how the Longeuil-based Federation regulates supply. Producers said the current system of quotas and strategic stockpiles is a "heavy, inflexible handicap to the province’s performance" and creates incentives for sales on the black market. Quebec’s share of global supply has declined by 10 percentage points in a decade, even as demand and output rose, according to the report.

“If nothing changes, another 10% will be lost by 2025," Paradis said Feb. 11 in a statement.

Eliminating the quota would cause extreme price variations and inconsistent quality, and would lead the industry "to ruin,” Federation President Serge Beaulieu said in a Feb. 16 statement in response to the report’s recommendations.

Beyond Pancakes

While the dispute swirls, food manufacturers are busy adding maple syrup to everything from chips and Pop-Tarts to yogurt in response to demand for natural sugars. Traditionally used mostly to pour over pancakes or waffles, maple syrup is following the same trend as other natural sweeteners such as honey, which saw sales rise 13% in 2015, said Jared Koerten, a senior food analyst at Euromonitor in Chicago.

“World demand is now increasing,” Caroline Cyr, a Federation spokeswoman, said in an interview. “We need to be able to keep our markets, to supply them. So that’s why we stockpile."

The Federation was founded 50 years ago, but it wasn’t until 2002 that a maple-syrup sales agency was created following a vote by members. Production and marketing quotas followed two years later, allowing the organization a level of market control that may exceed that of oil suppliers like Saudi Arabia, the biggest producer in the Organization of Petroleum Exporting Countries.

Every year, the Federation meets with buyers to set bulk prices, and unsold production is sent to a strategic reserve in Laurierville, Quebec--scene of a notorious 2012 heist. The warehouse stores about 60 million pounds in case future output is reduced by weather damage or pests. Demand for exports from Quebec have increased about 4% annually since 2010, according to Cyr.

By the standards of most agricultural commodity markets, which have seen slumping prices amid excess supplies in the past three years, maple syrup is remarkably stable. The 2016 price for the top two grades, A and AA, was set at C$2.95 ($2.16) a pound, 3 cents more than what producers got in each of the preceding three years, and 6 cents more than 2012, Federation data show. The average for all grades rose 34% in the past decade to C$2.88.

Syrup ‘Anarchy’

"The system before was anarchy,” said Normand Urbain, a third-generation sugar maker who has 7,000 trees tapped north of Montreal. One year during the 1980s, there was such a surplus that producers dumped syrup down drains, he said. “You didn’t know what to expect.”

Producers outside Quebec are “piggybacking” on the stability fostered by the Federation, according to Urbain. The number of taps in the U.S. increased by 45 percent to 11.9 million between 2007 and 2015, according to the Quebec report. That could rise considerably. In the U.S., where Vermont is the biggest producer, only 6% of the 200 million easily available maple trees are being exploited, and Ontario has a tapping potential of about 108 million trees, the report showed. By comparison, Quebec has the potential for 100 million trees, of which 43 million are already in use.

Ontario Expansion

At Bonenberg’s Ontario farm, known as Mapleside Sugar Bush, he plans to add 300 to 500 taps this year on trees that currently deliver sap from about 1,500 taps.

Private investors have purchased U.S. land for maple-syrup production, said David Marvin, a tapper in northern Vermont. Some producers are concerned the American expansion occurred too quickly and that profits may slide this year because of the weaker Canadian dollar, he said. Sales by U.S. farmers are effectively tied to the benchmark Quebec price.

Still, as Vermont producer Jacques Couture says, American farmers can make "all the syrup we want.”

In Quebec, extra output comes with a penalty. Selling outside the quotas--which farmers say has been happening for awhile--carries sanctions from the Federation that can include legal action, fines and asset seizures.

“It’s very restrictive,” said Dempsey, who has 10,000 tree taps on his farm in Inverness. “If they loosen up the rules and regulations, I think it would eliminate a lot of the black market.”

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