Canada's maple syrup 'rebels' | Hacker News Reader

Canada's maple syrup 'rebels'

bbc.co.uk

45 pointsblowski58 comments

I won't argue that the Federation should exist, but I will argue that these producers are idiots for wanting it to stop existing. It's giving them their livelihood.

Maple Syrup prices continue to rise year after year (addicts like myself will tell you all about it). Supply is highly variable- some years the weather just doesn't work well, and there's little produced, other years there's an abundance. The Federation's cartel powers and large reserve mean that they set syrup prices (increasing, always) and they make supply constant. They also market it, increasing demand.

As an individual producer, the lack of the Federation is problematic: have a bad year, and you have nothing to sell; have a good year, well, so does everyone else- so now the price of syrup is rock-bottom, and you make very little profit, unless you decide to store it yourself and wait for a bad year.

Demand can also drop with supply variability. What company would start depending on pure maple syrup, knowing that next year it's price may double?

These guys want to have the prices that only exist because of the Federation's cartel powers, but refuse to follow the their rules. I have little sympathy.

Yeah, god forbid they should be able to do what they want with their own property.

Morons, who wouldn't like giving away 12%/pound for the privilege of someone doing price fixing for you.

Don't misunderstand me, I agree with you- I think it's a bit oppressive that laws like this exist.

But I can't understand why, now that it exists and these producers are making so much more money from it, they'd want to dismantle it.

Edit a moment later: in regard to "who wouldn't like giving away 12%/pound for the privilege of someone doing price fixing for you.".

A: Someone who gets 13% (or 113%) more because of the price fixing.

Sounds like the mafia. Except jail instead of being maimed/killed.

I suppose Mrs Grenier would like her free market system like the one we have in the UK with the Milk production industry where dairy farmers are bullied by the Dairies and large supermarkets for ever lower prices, and is pushing the family run farms to consolidate into massive argi-businesses, controlled by a few people.

Maybe she would? "We're threatening her with jail for her own good" doesn't sound particularly appealing.

> Yeah, god forbid they should be able to do what they want with their own property.

Those choices of what they can and can't do with their property is inextricably tied with the existence of the cartel. The cartel does the work to keep prices up, so that's why producers want to grow maple syrup. If there were no cartel, then they wouldn't want to grow maple syrup, or at least they wouldn't be able to make as much money with it.

Nobody is helped by these guys rocking the boat. Not consumers, not producers, not the government, not the food industry that wants a steady supply and standards.

Yep. Either go with: a free market approach - facing the full force of globalisation and international politics, where one year you could be producing at a loss and another year a good profit; or be protected by a nationalised system that's predictable and, well, mediocre. No in between, as that will undermine either system.

Cartels in the long run lead to the expansion of activities outside of the sphere of influence near the cartel. Also, futures markets generally cover variations of price, especially with a highly storable product like maple syrup. But in the short term, it's probably in the interests of small suppliers to have the cartel. Of course there is always a market incentive to defect, but since the cartel is backed by QC, I highly doubt that she'll get away with this.

Having governments enforce your cartel certain helps keep the outside activities to a minimum.

A free market system with futures, and competition, etc, can indeed help deal with variation of prices and supply. But it still is a free market, in which price is determined by supply and demand. Producers are at the whim of the market in terms of what they make.

With a cartel, supply is controlled near-absolutely, and therefore price can be controlled. The cartel can choose the price at which expected revenue/profits are maximized- often a price that lowers total sales, but increases total revenue (as revenue is price * sales).

This is why I say that the Federation is terrible for consumers (who don't seem to care much) but great for producers- even the ones being told to cut back how much they produce. The Quebec government has an incentive to enforce the cartel- higher syrup prices means higher exports, more money coming into Quebec, which is all taxed.

Yep. It's awful for guys like me who want to goddamn soak their pancakes in the gold stuff. It's great if you happen to own 100 acres of Maple trees. Even if you're told to pretend you own 80.

Yes, exactly this. Across the border in the US, farmers are starting to produce a lot more maple syrup. And there is no cartel here.

http://www.economist.com/news/finance-and-economics/21677990...

As the article points out: "keeping maple syrup expensive limits demand and encourages substitution" (of corn syrup). Meanwhile, "production is outpacing what the Federation can sell. Its “strategic reserve” has swollen to 25m litres of syrup—almost a year’s worth of sales. As America’s output grows, the organisation will have to cut its members’ quotas, stockpile ever more of Quebec’s harvest, or allow prices to fall."

> What company would start depending on pure maple syrup, knowing that next year it's price may double?

That's kind of why the futures market exists.

First law of a cartel: everybody has an incentive to defect.

Yes, which is why legalized cartels are one of the most heinous abuses of regulation that exist.

You're mixing up two separate things which the cartel offers: insurance and quotas.

You can also roughly split the "membership dues" into to parts. The 12% can be thought of as a fee for "all-in" crop insurance, which pays for things like storage for later sale during bad years of production and so on. Production quotas can be thought of as the fee for cartel membership.

The insurance issue is a purely financial problem, it can be fixed by financial products like crop insurance and futures contracts. That's how modern agriculture works. With a competitive market, the cost of this insurance would go down for farmers, since it would be provided at competitive market rates. 12% is an enormous fee. (The fees of financial products are harder to measure, since they are measured implicitly through things like futures prices and so on. But they would be much less than 12%.) 25 years ago these financial innovations not as developed as they are today. Quebec is still relatively isolated from these markets in all likelihood, but I bet we'd see good alternatives being marketed to farmers if FPAQ were dismantled.

The only benefit to farmers of a cartel vs. competitive markets is price-fixing. That is wretched and immoral, and self-destructive by its nature, as we see here. The fact that farmers can freeload on both the fees and the insurance makes it even worse.

Favourite quote:

> He says: "People who say that our practices are totalitarian should go see what happens in China, North Korea, or Africa."

i.e. If you compare us to to North Korea, then we look good.

This is the problem with rules, laws and organizations created during, or as a result of, a crisis. There really should be an expiry date, or review system for when circumstances change, but there never is. So we end up with the Maple Syrup Mafia in the case of a maple syrup crisis and we end up with an increasingly restricted internet and increasingly reduced privacy because of terrorism fears.

The seasonal production volume of maple syrup is very sensitive to temperature patterns. One year you have a huge production and the next few years almost nothing, and it's not about efficiency, only about freezing/defreezing patterns. In such a "market", where the production side is practically random, it will cycle from boom to bust forever. I don't see other solutions than a cartel to solve this. What they do is accumulate surplus during "boom" years, and release it during "bust" years, the offer becomes a smoother curve. Without such a mechanism, no rational investor will invest beyond a "hobby" scale production.

An investigation on how industries subject to "random like" production variations can solve the price unpredicability problem would make a more interesting article. Presenting it as an "evil cartel" story, is more sensationalist and involves much less research for the journalist.

As far as I know, the way the rest of the agriculture producers solve this is with futures.

Cartels have some advantages, but they are often unstable, and so they have to be enforced with threats of jail, as in this story, and which helps the characterization as "evil".

Unfortunately, this sort of cartel is not unusual in Canadian agriculture. I have mixed feelings about Stephan Harper, but abolishing the Wheat Board and pardoning protestors [1] was a definite achievement in my books.

[1] http://www.cbc.ca/news/politics/harper-pardons-farmers-arres...

Nothing is stopping entrepreneurs from stockpiling tanks of syrup in good seasons to sell at a profit in bad seasons.

If the extremes are like you say, it would be good business and would help stabilize prices somewhat.

No insane cartel required.

That only works if a sufficient majority of producers do it, and do it in a coordinated manner. If they manage to do this, then there is a strong incentive for individual producers to go against the "coordinated group", i.e. sell when the production is high, while the "coordinated group" is stockpiling.

I don't understand your only. Absent a cartel, why can't Warren Buffett (or anyone with a big fun pile of money) buy during high production years, store the syrup and then sell it in low production years?

I totally agree it will be more profitable with the coordination, but that is a big part of why there are frequently laws against coordination.

> why can't Warren Buffett (or anyone with a big fun pile of money) buy during high production years, store the syrup and then sell it in low production years?

Isn't that a price fixing scheme ? The only difference is that it uses a huge pool of purchasing power to acquire the ability do dry the market.

The only difference between price fixing by "buying power" and establishment of a cartel is that the profitability increase goes to oligarchs instead of farmers.

How can that be more acceptable ?

I am against cartels in general, since they are a form of monopoly, and I am against monopolies in general.

However I think that in some cases, they are the "less worst" solution. And I totally think that the fact that a government can "legislate into existence" cartels is problematic, and creates plenty of room for dirty politics.

Now that I think about it, my opinion on the "evilness" of a cartel is that it's proportional to how much the "legislated good" is necessary for survival. The less something is essential the less you can pressure the price upwards.

In this case, we're talking of a luxury good, which is why I see no scandal in the situation, or perhaps a minor one.

The point of the example was that it provides a way to match current supply with future demand without any extra coordination between the sellers. All it requires is that each be willing to sell to any buyer, which is not coordination in any meaningful sense.

Your comment said That only works if a sufficient majority of producers do it, and do it in a coordinated manner., so I asked about another way that I thought would work (in fact, the way proposed in the parent of your first comment).

It needs no coordination, that's why futures markets exist. We get estimates of future prices of these products. If the future prices make storage attractive, speculators can purchase syrup to store for sale in the future, each based on their individual assessment of the prices and risks involved.

One other side effect of this mafia is that it is almost impossible to get any grade of maple syrup other than dark amber seen on grocery store shelves. There are actually many different grades of maple syrup, depending on when syrup is extracted from the trees. The maple syrup mafia mixes all of the different grades together as that's easier/better for them. If you ever get the chance to try some of the other grades, its worth the treat.

This is a system that doesn't tend toward Nash equilibrium. If everyone is permitted to maximize their production then it floods the market, prices drop and everyone loses. You could argue that you should let the strong survive. Wipe out the higher cost producers and leave yourself with a factor syrup producing industry.

Yes you can (arbitrarily) value market efficiency over this, but the vast majority of products chose otherwise. They put together a system that benefits their interests. We do this all the time when we create laws.

Now you have a few free-riders who benefit from the higher prices created by restricted supply, but who don't want to pay the cost. If the market was left to it's own devices, they would probably be out of husiness altogether or they would be running a factory sapping operation.

And let's be clear, unlike water, energy, syrup is a luxury good not an essential commodity. The additional cost of inefficient production will be a rounding error for most consumers.

> The additional cost of inefficient production will be a rounding error for most consumers.

You can say this about almost any single consumer good. If this crap is allowed to proliferate, it would represent a material increase in the cost of living.

> Yes you can (arbitrarily) value market efficiency over this

What's arbitrary about preferring low-cost syrup?

Monopolies are illegal for good reason, they unfairly enrich the monopolist at the cost of the consumer.

You're making a very strong value judgement that cheap goods and low cost production trump tradition and the ability for people to make a living. I simply don't accept your premise as a blanket statement.

This is such narrow minded logic. I know you're referencing the logic of concentrated benefits and diffuse costs. Saying for any individual consumer, paying an extra 5% for their maple syrup on average is a drop in the bucket, so if sales are $1 billion USD, we're basically letting the farmers extract $50 million from consumers, and that's not too much money, so who cares?

Well, I think $50 million is a lot of money, but that is seriously neglecting the other, bigger cost: the blocking of incentives to maximize production quantity and develop innovations.

If the cartel were dismantled, it's not just that prices would fall for existing consumers, but total supply curve would increase as well, since farmers would each have the incentive to produce as much as possible. Maybe it would turn from a $1 billion market to a $1.25 billion market. Whatever the particular number, it's bound to be a huge amount of value destroyed.

But the most violent sort destruction is that production quotas kill the incentive to innovate. Look at publications like this - there is very little incentive to experiment with new techniques like this in Quebec, because even if you could double your production, you wouldn't be allowed to sell anything past your quota. http://modernfarmer.com/2014/01/maple-syrup-revolution/ Destroying the incentive to innovate is murdering the future.

Welcome to Quebec, the province intent on shooting itself in the head. Check out their language laws if you really want to see totalitarian, it destroyed their economy and has likely set them back forever. Beautiful place to visit, just beware of falling concrete.

I live there, it's fantastic. Moved from London. Please god don't make me go back.

My maple syrup is slightly more expensive than it might be. Boo hoo. Wake me up when you have sorted out all the corrupt banks that make UK land hideously expensive, then you can get onto small stuff like this.

First time I see Quebec bashing here.

Not bashing. Just frustration, the province is a fraction of what it was destined to be, derailed by a bunch of terrorist lunatics in the 70s. The same regionalism plays out across the country, but their "leaders" just have the benefit of a language barrier to maintain their position and fables.

We are on a thread about maple syrup and you're speaking about language laws and corruption in the construction industry. I can't see how you would not consider that bashing.

> derailed by a bunch of terrorist lunatics in the 70s.

Do you mean the FLQ?

> The same regionalism plays out across the country, but their "leaders" just have the benefit of a language barrier to maintain their position and fables.

What do you mean by that?

You know, "the economy" does not have to be this deity that you absolutely have to sacrifice every aspect of culture, history, socializing, and every part of living an enjoyable life to.

Québec still has the third highest GDP in the Canadian provinces [1]. Québec lost a lot of manufacturing and automotive sector jobs in the last decade or two. So has most of the western world. I don't think it has much to do with the language.

As for the infrastructure, I'd posit that crappy infrastructure at high costs is largely due to corrupt politicians (ever hear of another place where money played too big a role in electoral campaigns?) and construction companies being run by the mafia [2].

Which, of course, all are problems of their own, and in no way is Québec a utopia. It's just a bit tiring to always hear the easy intellectual shortcuts that blame everything on law 101.

[1] https://en.wikipedia.org/wiki/List_of_Canadian_provinces_and... [2] http://www.theglobeandmail.com/globe-debate/editorials/the-c...

> As for the infrastructure, I'd posit that crappy infrastructure at high costs is largely due to corrupt politicians (ever hear of another place where money played too big a role in electoral campaigns?) and construction companies being run by the mafia [2].

To add on that, people always think Québec is more corrupt than anywhere else because of a number of events in the last years, but I'm quite sure this is not unique to Quebec and you have the same phenomena everywhere else. We only heard about corruption in Quebec because people were interested to investigate.

Exactly, they have actually arrested some people. How many in the UK were arrested for huge corruption that would make anything in Quebec look like a pin-prick? Zero.

It's not perfect here but it's good.

Uh huh, Quebec is enjoying it's 'culture' and nice laid back lifestyle at the expense of the uncultured Anglaise as the highest recipient of equalization payments: Quebec ($7.833 billion)

From wikipedia

Do you even know of the equalization payments are calculated? Also, back 20 years ago and before, it was Québec that was paying the equalization payments to Alberta and the western provinces.

I remember the news from 20 years ago, 1995, and my recollection is that Quebec was a have not province back then.

I think Quebec has pretty much forever been a have not province.

http://news.nationalpost.com/news/time-for-quebec-to-end-equ...

Québec is only receiving equalization because of the money AB and SK are (were) making off oil. Given that even Ontario is receiving equalization, and that Quebec's payment is about half (per capita) than NB and PEI's payment, I'm still not sure I understand why language has anything to do with it. If that was even your argument.

> 'People who say that our practices are totalitarian should go see what happens in China, North Korea, or Africa.'

'We're not as bad as North Korea!' is hardly compelling.

Why not set up a system of maple syrup futures, rather than sending in police and raiding people's homes?

I wish, that every time I saw a quote like this in a news article, the journalist would put a caption referencing the fallacy type.

When I first finished reading the post-capitalism article, I was feeling some sort of hope. Now, after this, it's just emptiness.

Some time ago I read some metaphor a guy who build something that people really wanted, and then came another man with clubs and took it from him, build walls around it, and charged for it.

This exists in the US too for a handful of products. Raisins are the ones I remember (NPR's Planet Money did a story recently that is almost like this one but about raisins).

One issue with the Federation is that cheating is really rampant, even among its board members.

Part of the problem is that maple syrup harvesting is essentially a seasonal activity, with quite a short season, so it's a side activity for almost all producers, except the very largest ones; when they see high prices, they really want to make the extra money, unlike dairy farmer who sell year-long.

This was absolutely hilarious, but how comes the federation has power over people who don't want to have anything to do with it?

Because of its entrenched political power.

Can any Canadian lawyers shed some light on how this is legal?

I'm Québécois but only a lowly engineer;

Not sure which law applies, but agricultural monopolies are pretty common here. Milk and dairy products is the other well known one. So much that the productions quotas are the single most valuable part of most farming operations.

Chicken and egg production is another big one.

The Quebec government passed laws enabling it in 1990. It was modelled after the Canadian Wheat Board.

The relevant legislation is called "Loi sur la mise en marché des produits agricoles, alimentaires et de la pêche" but it's all in french.

In English it's called "An Act Respecting the Marketing of Agricultural, Food and Fish Products": http://www.canlii.org/en/qc/laws/stat/cqlr-c-m-35.1/latest/c...

I see no 'mafia' there. It is typical democracy.

You're downvoted but you're right. There are laws that protect the federation. If people really didn't want that, the laws would be abolished.

> If people really didn't want that, the laws would be abolished.

Not at all. 95% of people could be against the cartel and it would still be law unless it was such a priority that it would actually change votes, which is not going to happen for a small issue like this.

Similarly for laws like those preventing Tesla from opening retail stores in some states. Pretty much nobody except dealerships and their families are for those laws, but there's no incentive for a politician to change them since they would lose donation money and hardly gain any votes.

That's why I prefer a republic to a democracy. Some things shouldn't be allowed even if a majority want them.

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