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Quebec’s Sweet Gift To Vermont

This morning I am in Vermont, where some parts of the state awakened to subzero temperatures while the neighborhood near my weekend home basks in the positive single digits.

It may sound like midwinter or worse to you, but as Vermonters see it, spring is just around the corner – so it’s time to turn maple sap into highly profitable syrup and sugar.

This year’s mild winter, which was also less snowy than usual, worried some farmers, but experienced sugar makers know that annual variation is to be expected. An early start to the season is no guarantee of a premature end. It is also easier to move among trees when you don’t have to wade through deep snow, a fact that has allowed some tappers to get a head start on production this year.

Overall, Vermont’s sugar makers are expecting a good year – thanks in no small part to their counterparts from Quebec. The province, which Bloomberg recently described as “the Saudi Arabia of syrup,” produces about 70 percent of world supply. All of that production is controlled by the Federation of Quebec Maple Syrup Producers, a government-sanctioned organization that attempts to provide price stability. The Federation does not call itself a cartel, though its leaders do compare its function to that of OPEC. At the moment, however, it is doing a better job supporting sugar and syrup prices than OPEC is doing in the oil market.

The Federation was founded 50 years ago, though production quotas were not instituted until 2004. When times are good, sugar makers in Quebec are required to cut back their production or to keep product off the market. This helps keep prices from crashing; the Federation claims that removing the quota would destabilize prices and lead the industry “to ruin.” One third-generation sugar maker, Normand Urbain, described the system before the Federation-instituted controls as “anarchy.”

But as things stand today, much of the benefit from these controls flows to producers in other places – mostly the Canadian province of Ontario and the Northeastern United States, from New York to Maine. These producers benefit from the stability created by Quebec’s market without the constraints that prevent Quebecois farmers from taking full advantage of spikes in demand. Conversely, in years when production is poor (such as 2012, when a freak March heat wave decimated the season in the Northeast) prices are high anyway, but producers don’t have much product to sell.

The Federation’s control in Quebec is backed by law, and it has slapped heavy fines on producers who dare to violate the quotas. In extreme cases, the Federation has even seized the means of production or posted guards on the properties of farmers it suspects of breaking the rules.

The arrangement in Quebec gives rise to such oddities as “black market” maple syrup, and even to maple syrup heists. In 2012, when highest-quality grade A maple syrup was worth about $32 per gallon, 60 percent of the Federation’s stockpile went missing. Someone had made off with about 6 million pounds of syrup. The idea may sound strange if you grew up in the Northeast or upper Midwest, but in other parts of the country and elsewhere in the world, North American maple syrup is regarded as a delicacy.

But market forces always place practical limits on cartels, which is why they seldom work for very long. Maple syrup can be produced in such a wide variety of places that Quebec ultimately has little leverage to get the price very high. You can find maple trees in natural forests and suburban backyards as far south as Tennessee, and there are thousands in the New York City suburbs. My daughters made their own maple syrup as a nursery school class project in Westchester County, New York. And there are other species of maple that have sap that can be boiled down to produce syrup, or boiled further to make sugar.

For now, maple sugaring in the Northeast U.S. is carrying on pretty much as it has for generations. Just a few miles from my Vermont weekend house, hillsides are tangled in plastic tubing that carries sap downhill to the sugar houses on various family farms. There, the sap is boiled and bottled to make what is probably Vermont’s most famous product, one for which tourists will pay a pretty penny. These small-scale producers can’t match Quebec’s output, but they don’t have to in order to benefit, indirectly and unintentionally, from the French-speaking province’s sugar cartel.

Now if you will excuse me, it’s time to round up some breakfast. Pancakes sound about right – with maple syrup, naturally. Up here there’s no other way.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s book, Looking Ahead: Life, Family, Wealth and Business After 55. His contributions include Chapter 1, “Looking Ahead When Youth Is Behind Us” and Chapter 4, “The Family Business."

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