Tuesday, September 4, 2012

Mapple syrup stockpiles raided, how will prices react?

Canadian Maple syrup producers have a problem:  supply is dependent on the weather (you need warm days and cold nights), which varies quite a bit.  Fluctuating supply leads to fluctuating prices which deter producers from developing new products:

Quaker can't pour a bunch of time and money into developing a maple-and-brown-sugar-flavored version of Life, only to find out it won't be able to get enough of its ingredients, or that they'll have to pay through the nose for each liter of syrup.

The solution?  A strategic reserve of maple syrup.

The reserve makes sure there's always enough syrup for the market. As Farrell explained, each producer sells its harvest in bulk to the federation -- a government-sanctioned cooperative -- which turns around and deals it to bulk buyers. When production is high, the federation siphons a portion off to store in steel drums for future use.
But now someone has stolen 25% of the reserve, worth about $30 million.  I expect prices to come down soon.

HT:  JC

4 comments:

  1. The stockpiling seems to be a wealth destroying transaction since it's used as a price control method. If in years where maple syrup is abundant, then individual buyers could buy at a lower market cost and store themselves. When supply is scarce, the market price would naturally rise until it curbs demand. The buyers who bought cheap could eventually sell at a premium. The Federation is controlling price by controlling supply.

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