The Maple Syrup Cartel

Quebec produces more than 70 percent of the world’s maple syrup and the Federation of Quebec Maple Syrup Producers is a cartel every bit as rapacious as OPEC or De Beers. The Federation is government backed and all producers must sell to them. From an excellent piece in the NYTimes:

maple-syrupAfter the spring harvest, farmers from around the province send their syrup to the federation.

…To keep prices high, the federation enforces strict quotas for the province’s 7,400 producers. Instead of flooding the market during years with bumper crops, all syrup produced beyond that amount is stored in the federation’s warehouse, which helps prop up prices by limiting supply. When seasons are lean, it releases the syrup, to maintain stable supply and pricing.

…When the federation suspects farmers are producing and selling outside the system, it posts guards on their properties. It seeks fines from producers and buyers who do not follow the rule. In the most extreme situations, it seizes production.

Addendum: The NYTimes video about rebel maple syrup producers is excellent.

Comments

The 'Federation of Quebec Maple Syrup Producers is a cartel every bit as rapacious' as every other successful cartel that has ever existed.

Because first noted by Smith, cartels are designed to maximize profit for a cartel's members at the obvious expense of their customers. A fact reflected in all successful cartels, of course.

Is the Maple cartel really as 'rapacious' as OPEC? Is the maple cartel exporting theocratic terrorism and jihad around the globe?

You have obviously not interacted with Quebecois tourists while on holiday.

Just asking, but when did Angola, Ecuador, and Venezuela start 'exporting theocratic terrorism and jihad around the globe'?

Ecuador was a supplier of FARC before the Colombian military bloodied their nose over it.

Iran and (in an odd way) Libya have been the only OPEC members with a history of that. The Iraqi and Algerian regimes were fascist and quasi-communist, respectively.

What about Saudi Arabia. I seem to remember some Saudis causing trouble in 2011

And they were working for an exile living in Afghanistan and estranged from his family.

Come on. As much as you want to protect your masters, it is common knowledge that Sunni terrorism is backed, funded and headed by the Saudi regime, as even their American patrons had to admit-- behind the curtains.
https://wikileaks.org/plusd/cables/09STATE131801_a.html

it is common knowledge

It is a meme promoted by idiots.

How many people more must die before we are allowed to openly say what American leaders themselves admit-- when they think they are far from them muggles' ears--, that is, modern Sunni terrorism is financially and ideologically a Saudi creature? Well, be of good cheer, they are the it is the best terrorism money can buy--and did.

* it is the best terrorism money can buy–and did.

I'm not sure if Islamisc terrorism is so much a conscious creation of the Saudi government, as it is a kind of byproduct of a devil's bargian that maintains their own grip on power. The Sauds financially back conservative Imams in exchange for their political support, and the side effect of that is having financed and created an extremist version of Islam which has developed over the last 100 years - since the House of Saud took power.
I don't think they *set out* to create radical Islam or deliberately fund terrorist activity, though. They just can't untangle themselves from their political relitationship to Wahabbi Islam.

Watching the video earlier this week all I could think about how fast these guys complaining would come looking for a government hand out the first time the price collapsed in a freer market.

Except that Opec is multinational and there is quite a bit of extra Quebec maple syrup production.

It seems obvious that the Quebec Maple Syrup Producers can't be "as rapacious" as OPEC, because there are many more substitutes for maple syrup than there are for petroleum.

A ground turkey "hamburger" may not taste as good as a beef one, but many will accept the substitute if the alternative is $100. for the real thing. Whereas in the short-to-medium run at least, users of petroleum products (e.g. for trucking, automobiles, aviation) have few if any available substitutes.

do libertarian economists condemn all cartels on general principle, or only the government-backed ones?

Only government-backed ones are likely to survive for any substantial time.

De Beers did a pretty good job there for a while.

De Beers was the most successful cartel in history, prospering because it was enforced by the government of South Africa in the dominant geological center of world diamond production. But even De Beers cartel superpower eroded over time as outside competitors (Russia, Australia, Canada) entered the raw diamond market; De Beers world market share dropped from a high of 80% to now 45%.

Cartels are very difficult to sustain in a market, unless enforced by government. U.S. government enforces numerous cartels (aka 'Trusts'). The U.S. Federal Reserve System is a prime example of a huge government backed cartel.

A cartel/trust occurs when 2 or more private firms agree to restrict the supply or fix the price of a good/service in a particular industry. There's nothing inherently unethical about it and libertarians do not object to private (non-coercive) cartel agreements. Business mergers are often similar to cartels, and are not at all unethical.

Market producers naturally tend to associate and restrict production whenever they discover an inelastic demand curve, so they can produce less and yet get a higher price. But producers (and non-government cartels) are always subject to market forces eventually-- they cannot keep raising their price without prompting demand elasticity and attracting outside competitors.

Oh, sure it eroded. After a very, very long time. Did not need SA government to do it. It was a global phenomenon.

A decent counter-example, but wasn't it backed by the governments of South Africa and the Soviet Union?

Only government backed ones can trespass to post guards on non-conforming producers, impose fines and seize production. Without government those acts are crimes: trespass, extortion and theft.

Don't confuse yourself. The cartel is simply government-approved. It wasn't conceived by the government; it isn't a product of the government. It is the federation and the people who elect their representatives who have allowed the cartel to exist.

You should familiarize yourself with Quebec politics. These cartels characterize the economy and are legislated.

Yeah, I believe that. So do the people of Quebec not have any control over their government? The typical voter must want it this way or he/she just doesn't give a damn.

A lot of things about government must confuse you then, Jan. Do you think we have a pure democracy?

But isn't it government enforced? And isn't the issue the potential for corruption of the elected representatives that provide that enforcement?

See the law:

"Order Granting Authority to the Fédération des Producteurs Acéricoles du Québec to Regulate the Marketing in Bulk, in Interprovincial and Export Trade of Maple Sap and Maple Syrup Produced in Quebec"

http://laws-lois.justice.gc.ca/eng/regulations/SOR-93-154/page-1.html

"Don’t confuse yourself. The cartel is simply government-approved. It wasn’t conceived by the government; it isn’t a product of the government. It is the federation and the people who elect their representatives who have allowed the cartel to exist. "

Your statement is the only confused one.

Ok, did a bunch of lawmakers and public agencies just get together and decide to implement and enforce a cartel?

Theory: Jan is a troll.

Jan always says the maximally irritating thing for readers of this blog. If this blog or it's commenters take one position, Jan will take the other side in the most intentionally ignorant way possible. She can only be eclipsed in trollishness(?) by prior_approval.

Jan makes statements/asks questions that keep the conversation going.
His/her tone is far from trollish.
But really, Jan, governments don't do what people want; they do what people let them get away with.

Everyone here is ignoring my point. This isn't the product of the government. It is fundamentally a product of small industry who lobbied to put these policies in place. The populace approves. Else they would have voted out the responsible legislators. Unlike corporations, "government" isn't the same as a person. It's the stupid voters that allow it to happen. Unless you want to tell me that all Quebec elections are rigged and free speech about poor governance aren't tolerated.

It's as much a "product of the government"...government being the politicians and bureaucrats whose livelihoods are enhanced...as it is a product of the industry that lobbied for it. And the populace doesn't necessarily approve and the voters aren't "stupid", as a group they just don't care enough to mobilize against it...it's a minor corruption and a minor cost. But it is still a corruption...the use of government to promote private interests at the expense of the broader public...and because it exists the argument against larger more damaging corruptions are weakened.

Stop digging, Jan.

An act of a democratically elected government is still an act of government.
Obviously, the beneficiaries of a government enforced cartel are in favor of the cartel and lobby in favor of it.

That doesn't make it a "prviate" cartel. A private cartel is one that exists without the benefit of state enforcement. Jeez.

What industries, where the majority of all production is within a single political entity or 'value system', are not cartels?
Olive oil, champagne, roe, caviar, some liquors…?

Olive oil? We have Italian, Spanish, and Portuguese in the kitchen. We used to have some from NZ.

Champers? The name is protected but we've had delicious Methode Champenoise dry sparklers from Oz, NZ, and England, plus elsewhere in France. Some of the English ones have been exceptionally good, being grown on the same geology at about the same latitude.

What does "rapacious" mean? Is it different than "profit maximizing"? If not, why is the former considered pejorative and the latter laudatory?

Who says that Quebec is not a firm? There is evidently not free entry within Quebec, but Quebec is plausibly maximizing the revenue of its own residents, thus vitiating criticism from locals, and doesn't limit entry from non-locals who also would seem to have no right to object.

Another issue here is whether the value is inherent or created by scarcity. If the latter Quebec is creating value. Must defer to the foodies on this one. Can you guys tell the difference between genuine and ersatz maple syrup? Is the latter really better tasting?

In a hypothetical world where this cartel does not exist, is maple syrup still produced in meaningful quantities? Or is Aunt Jemima the only normal option, and maple syrup is available primarily at "artisanal" shops in northern New Hampshire at $25.00 a pint. (And I wonder what Tyler thinks of this, as opposed to Alex?)

You can get it mail order from the Vermont Country Store. Just remember that if you order around Christmastime, they're out of inventory and their customer service is useless.

We usually think that cartels restrict quantity supplied in order to increase price. So, it would be an odd outcome that eliminating an effective cartel would lead to lower output and higher prices. Of course one could argue (and many ag marketing cartels do argue) that the real purpose of the cartel is to engage in market development activities, which need to be funded by assessments on the cartel members; hence the need for the cartel. I believe that my skepticism of these claims is widely shared by economists.

"...the real purpose of the cartel is to engage in market development activities...hence the need for the cartel."

Same rationale for the Export-Import Bank...and the same skepticism.

Ever make your own maple syrup? Try it some time, you'll be happy to leave the process to the Quebecois. Of course, you will need access to some sugar maples.

Any old maple tree will do, you'll just need more energy to boil out more water from the sap if it isn't a sugar maple. You can also tap a walnut, box elder, and hickory.

Wisconsin has a lot of maples and syrup, but as Chuck said, once you try it yourself you'll leave it to the sugar bush people to make it for you.

What is the usage for those teeny-tiny handles on the maple syrup bottles?

Usually, no matter in what country you are, maple syrup will most likely be presented to you in those uniquely shaped bottles. Like the Coca-Cola bottle, just with this redundant appendage, which most well-meaning imaginative rationale would be some evolutionary regression, like our tailbones.

The bottles in the picture are smaller versions of traditional stoneware jugs which would hold one to five gallons. In the traditional size, the little loop is plenty big enough to be a reasonable handle. They've kept the loop as a signal of 'maple-syrup-ness'. It is indeed a vestigial icon.

Can anybody really tell the difference between sugar water and genuine Canadian Maple Syrup (TM)? I think so, but as they make "fake honey" (in China) that's hard to tell from real honey, as well as adulterated olive oil that's hard to tell from un-adulterated olive oil, I would not be surprised if there's no real difference to 70% of tasters.

PS--they had a huge maple syrup heist a while ago in Canada--clearly an inside job--something like a couple of million liters/gallons went missing from the warehouses.

Well I have a colleague from Quebec who complained once that the province had only two Mass Spectrometers but they were for detecting fake maple syrup and not for any other purpose. Purposes like analyzing criminal evidence, medical matters, or in her case they were off limits to the faculties of McGill and Laval Universities even when working on provincially funded research. The only exception was a mineralogist whose work involved mapping the VT/NH/ME border.

So apparently the stuff is actually different from not just sugar water but even the sugary tree sap is found in Vermont, because apparently through this good man's work the Federation can determine not only if a suspect jug has been watered down, or fabricated from corn syrup, but also if it is adulterated with the foul and utterly inferior product of the infamously depraved maples of Vermont.

So no longer will the nation be fouled by such dark treacle!

Je me souviens!

"have a colleague from Quebec who complained once that the province had only two Mass Spectrometers" Extraordinary - I once had two mass specs.

Exactly I know of community colleges that had a couple ten years ago, but Quebec is hollowed out and more like a second world country these days. There are people living on tribal reserves in Saskatchewan that have faster and more reliable access to trauma care than someone in a car accident in a Montreal suburb. Quebec has medical statistics that are second only to Newfoundland, NWT, Yukon, and Nunavut.

The food is still better though.

There's a real taste difference between real and fake maple syrup. The odd part is that for people who did not grow up with the real thing, it's a bit of an acquired taste. My Canadian mother-in-law always brings some to us in Texas whenever she visits (she acts as if us running out of maple syrup would be worse than having every known cancer all at the same time.) We don't use it too much, so we tried giving away a bunch to friends, but very few seem to like the real thing.

That's Texas. The real thing is standard in Upstate New York.

Yes maple syrup is vastly better than imitations. The fake maple flavor tends to be far too carmelly and too little light wood. The real thing is outstanding even in low grade forms.

What you like seems to depend on what you had as a child. I grew up in NY with real maple syrup and it's what I still use on the few occasions I use syrup; my children grew up in NH but were given 'fake' syrup as the default by their mother because her family had used it in PA and its what she likes. As a result, my now-adult children prefer the fake stuff.

a cartel every bit as rapacious as OPEC or De Beers

Maple syrup is not an industrial input and constitutes a tiny fraction of household budgets.

Are artificially high prices why most syrup in America is "maple-flavored" but made from corn syrup? Or is that just American corn subsidies (or both)? Maybe it's just a taste thing. Actual maple syrup is a lot thinner than the Log Cabin / Aunt Jemima stuff that is standard here, and having grown up on the latter, I myself prefer the fake stuff.

I bought some Maple Syrup at Walmart recently it was $15. A bottle of Aunt Jemima is $3. There aren't a lot of families that can afford the "real" thing. As the population goes up and the supply of Maple Syrup remains static, it is becoming a luxury product.

No, they can afford the real thing. They choose not to.

Everybody can afford one luxury product. They just don't have the luxury of always buying the luxury product. When I was a child we lived next door to a man with a Ferrari. He was a fitter and turner. Of course his three children shared a single bedroom. No colour tv. Outside bathroom. No holidays. But he was happy.

The price differential he quotes is $12. You can buy 2,500 bottles of maple syrup for what a Ferrari will cost you. I might buy one bottle a year. Very few people 'cannot afford' $12 a year.

"Very few people ‘cannot afford’ $12 a year."

It's irrelevant what people could potentially afford. Instead it's a matter of what they choose to buy. We've got a family of 6 and a bottle of syrup probably won't last a quarter. So it's an extra $50+ per year. We may well choose to spend the money somewhere else. As the prices rises, fewer people will choose the "real" syrup option.

I hope he (they) kept it, as they would probably be millionaires now. Perhaps he was just saving or their future!

I always buy real maple syrup. I don't eat pancakes that often so when you smooth the cost out over my rate of pancake-eating, it's not that big a deal.
Families that buy the cheap stuff must eat a lot of pancakes.

The syrup stored in the federation’s warehouse is a strategic reserve maintained for reasons of national security to ensure adequate supplies in case Canada goes to war.

We can laugh at the maple syrup cartel.

Canada's "supply management" for milk, eggs and chickens is a much bigger deal economically.

The quota that allows a Canadian farmer to own a milk cow sells for ten times the price of the cow itself.

Yes and these political arrangements are extremely difficult to dislodge. The Wheat board in the prairie provinces mandated that all production of certain grains was to be sold to them. Finally the Conservative got rid of it. The bc fruit marketing cartel was dismantled a couple decades ago. They are all over like cockroaches.

"these political arrangements are extremely difficult to dislodge"

I remember in the mid 1970s the Fraser Institute was publishing calls for the abolition of the marketing boards.

The problem with marketing boards is that the quotas create an asset that can and is sold. The original farmers are all gone and the current farmers rely on the quotas. Eliminating the quotas would destroy their biggest asset.

It is long past time for the Canadian governments to start phasing out supply management in some orderly fashion. Even just grinding down the price paid for milk to reflect just the real cost of production (rather than including an implicit allowance for the cost of the quota as seems to be happening now) so that the price of the quota per cow is about equal to the price of the cow itself would be a big step in the right direction.

Not uncommon. The price of a NYC taxi medallion is 20 - 30 times the cost of a taxi.

The price of a NYC taxi medallion is 20 – 30 times the cost of a taxi. .
The distribution is interesting too, with ~20% of medallions owned by the operators of the taxi and ~70% owned by those who own more than 20. The price of a medallion has increased by more than a factor of 5 in the last 10 years. Uber may change that and ultimately destroy car ownership altogether.

A new Uber service where private drivers bring barrels of syrup across the border and sell at a reasonable price

Alex makes it sound as if the victims of the tariff are the rebel producers. Not really.

I haven't seen any serious argument against the cartel's most successful outcomes, demand has grown substantially since 2004, despite the price increase. It turns out that a steady supply, as the article itself admits, was more important for buyers than the absolute lowest cost and allowed them to keep it stocked on shelves permanently It also, as the artcle points out, allowed a lot of farmers that did this as an extra source of income to make it a full time job and do things like expand production or get capital from banks to buy new equipment

The counterfactual isn't a collapse in prices. It is a move away from a price fixed undifferentiated commodity. There is value there, but only a government bureaucrat would see it in gallons of identical amber fluid packaged in odd shaped glass containers.

Vermont and Ohio make vast quantities of maple syrup for U.S. consumption. I can't even get Quebec maple syrup where I live. The prices, while high, reflect the high cost of production. This is a tempest in a teapot.

>I bought some Maple Syrup at Walmart recently it was $15. A bottle of Aunt Jemima is $3. There aren’t a lot of families that can afford the “real” thing. As the population goes up and the supply of Maple Syrup remains static, it is becoming a luxury product.

It has always been a luxury product. I wonder what these "families" spend on whiskey?

There's something I'm missing here. The article says "to keep prices high", but then describes the workings of a revenue-smoothing mechanism. Assuming the main variable affecting maple syrup supply is weather, it does not sound crazy that producers would democratically decide to adopt such a scheme, and consumers have nothing to complain about since it won't change the average price they pay for maple syrup over time.

(Which does not mean that there's no incentive to deviate in the favorable-weather states of the world, hence the use of "rapacious" methods (which, I should add, I do not condone). )

So... what is the fuss all about? And in fact, how large really is the distortion?

Yeah, I've never understood why smoothing out good and bad years bothers some people so much. Boom and bust is much more disruptive to markets than managed supply.

What is described in the article is not a cartel : it's a fairly common price control mechanism used for many agricultural products, the supply of which cannot adjust as fast as demand. If you reread the article carefully, you will see that it is pointed out that inventories are used to supplement supply when it falls short of demand, which is of course detrimental to the producers (since prices are then lower than they would have been otherwise). Without the buffer inventories to keep prices stable, downswings in prices would ruin producers, leading to shortages when demand grows, followed by upswings in prices due to the inability of remaining producers to make maple trees appear out of thin air to increase supply immediately. This would lead to too overproduction, leading in turn to a downswing in prices and so on.
This is 1930s, Mordecai Ezekiel's cobweb stuff. That's how long it's been demonstrated that in the real world markets do not necessarily lead to equilibrium. One of the necessary conditions for that is that supply can adjust as fast as demand, which is not the case when adjustments in supply is dependent on the speed at which plants or animals grow.

If it's so beneficial for the producers, why does it need government enforcement?
Just let the non-participants ruin themselves in the bad years.

Cobweb models have always been weak. There are two problems with them. The inability of supply to "adjust as fast as demand" occurs in most markets: car manufacturers cannot suddenly produce hybrids or the hot car of the moment; oil producers cannot simply turn a spigot and produce more oil; etc. But those markets don't need a central quota mechanism and neither does maple syrup. The gyrations of market supply and demand are precisely why we have inventories and futures markets, to give people incentives to store and sell from inventories and to allocate risk to whoever wishes to buy or sell it.

It's almost exactly the same sceme as the raisin reserve, and we know how that worked out for the Hornes.

"maintain stable supply and pricing"

Usually, I favor market solutions. However, when it comes to syrup, shouldn't we expect that supply will be sticky? :)

Exactely ! COBWEB !

If the objective is to increase supply, wont that just encourage non Quebec syrup producers to produce more?

The maple syrup cartel is just another example of whenever a market acts like the economist's perfectly competitive model the producers will try to find some way to protect themselves from the discipline of the market.

This could be the start of a new series -- "Cartels in Everything."

Kalifornia regulates raisins.

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