Cartels: They're not just for drug dealers and oil producers anymore-maple syrup producers have one, too

See Maple Syrup Cartel Battles a Black Market Rebellion: Canadian production is set to grow 10 percent in a push for market share by Jen Skerritt of Bloomberg. Cartels are producers who get together and all agree to reduce output. That raises the price and profit (more or less, price goes up more in percentage terms than quantity goes down). But the higher price creates incentives for some producers to sell more than their quota or for other businesses or entrepreneurs to enter the market. This has happened with both oil and diamonds.

This is a government sanctioned cartel and they even have a strategic reserve (the U. S. has a strategic petroleum reserve). Excerpts:

"The cartel that produces 72 percent of the world’s maple syrup is starting to crack.

After eight years of tightly limiting output to keep prices high, the Federation of Quebec Maple Syrup Producers next year will boost its quota by 12 percent for 13,500 sap farmers who operate in the Canadian province. The goal is twofold: Reclaim the 10 percent of market share lost to the U.S. over the last decade, and quell a rebellion by producers increasingly turning to black market sales for growth.

Boosting the quota now is “almost perfect timing” as farmers are seeing record output, according to Alan Bryson, 41, who drains sap from 45,000 taps on trees in Notre-Dame-de-la-Merci, Quebec. The prospect of more sales “outweighs the frustration” felt by farmers in the past, he said."

"Bryson wants to add as many as 15,000 taps this year and seeks to expand to 75,000 eventually, he said. Overall, Quebec produced about 148.2 million pounds of maple syrup this year. Under the new quotas, output could grow by 15 million pounds, according to the federation."

"The unanswered question is where all this additional product is going to go. Tappers this year will be paid C$2.88 ($2.20) a pound, based on a weighted average, federation data show. That’s up a penny from the previous two years,

“It’s a lot of new production,” said Matt Gordon, executive director of the Vermont Maple Sugar Makers Association in Waterbury Center, Vt. “There are plenty of examples throughout history of agricultural crops where there’s been increased demand, so production increases. Then suddenly, it’s a little too much.”

U.S. production this year totaled 4.2 million gallons, a 23 percent boost from a year earlier, with Vermont accounting for 47 percent of the total, the U.S. Department of Agriculture said in June. The number of taps rose 5 percent this year, to 12.55 million, after increasing 45 percent from 2007 and 2015, according to the USDA.

That growth frustrated Quebec farmers, who have been urging an end to quotas. While the government-sanctioned cartel kept prices stable by limiting output and maintaining strategic stockpiles, tappers complained that the system imposed a “heavy, inflexible handicap to the province’s performance,” according to a 70-page report commissioned by Quebec Agriculture Minister Pierre Paradis, released earlier this year.

That frustration was leading some farmers to sell on the black market, and some said they felt harassed by the federation, according to the report.

After a formal request from producers last year, Regie des Marches Agricoles et Alimentaires du Quebec, the province’s agricultural marketing board, authorized the cartel to increase quotas as it deems necessary, said Caroline Cyr, a federation spokesman.

The quota increase makes the system more flexible and adaptable to the free market and will curtail black market sales, said Simon Trepanier, executive director of the Federation of Quebec Maple Syrup Producers.

“If we allow producers to add more taps or at sell inside here, they will not be interested in selling on the black market,” Trepanier said in a telephone interview. “It will help to have a clean market, instead of a black market.”"