At 30 Times the Price of Oil, This Precious Canadian Commodity Tastes Great

June 30, 2017 James Virgo

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Here’s something to contemplate over breakfast this Canada Day weekend: That maple syrup you might casually drizzle over your pancakes is worth more than 30 times the price of oil.

At $1,700 per barrel of maple syrup1 versus a scant $50 per barrel of crude, this is a Great Canadian Commodity we think merits attention on this national holiday.

Move over Big Oil: it’s Big Maple

While Canada ranks sixth in oil production, our country dominates the global market in maple syrup, producing more than 70% of the world’s supply. Production regions include Ontario, New Brunswick, Prince Edward Island and Nova Scotia, but Quebec is by far the primary producer, driven by the powerful Federation of Quebec Maple Syrup Producers.

Often described as the OPEC of the syrup world, Quebec’s Federation keeps a tight rein on the market. It sets production quotas and prices to manage supply, coordinating a collective of more than 13,700 producers across the province.

Canada’s Global Strategic Maple Syrup Reserve

Should the taps run dry in this high stakes industry, we’re safe: Canada stockpiles a Global Strategic Maple Syrup Reserve—similar in concept to the emergency oil supply kept by the Strategic Petroleum Reserve in the U.S.

The Quebec Federation manages this multi-year inventory of “liquid gold” stashed in rural Quebec, using it to adjust global supply in response to consumer demand or harvest yields.

So valued is this commodity, the reserve was the target of a heist in 2012, in which thieves siphoned off some $18 million of syrup. As of last year, 78.4 million pounds was safely locked away in three locations that now rival the security of any commercial bank vault.

Will the U.S. rally for maple syrup independence?

More than 60% of Canada’s maple syrup exports go to the U.S. (Germany and Japan are the next biggest markets), where American producers have begun dreaming of self-sufficiency—let’s call it maple syrup independence.

For instance, a group at Cornell University in New York has been reinvigorating syrup production in America, focusing on new technology and production techniques. They’ve got lots to catch up on: Canada still produced more than three times the maple syrup as the U.S. in 2016. But it may be interesting to watch dynamics change as U.S. competition grows for this sticky commodity.

In the case of the oil cartel, we’ve seen OPEC increase supply and lower prices to a level that makes it hard for U.S. shale oil producers to compete. Could this happen for maple syrup? I imagine Quebec would continue to try to manage worldwide supply, cut costs or overhaul its export strategy to account for increases in U.S. production. Or, would they go the other way and flood the market?

Worth noting: this past season, Quebec boosted production to reap a record harvest.

But seriously folks: this sweet stuff is a big economic deal

I write this with some irreverence, but there’s no doubt the maple syrup industry delivers one of Canada’s flagship products and adds a sweet note to the economy: We export about $380 million a year in maple products.

The Federation of Quebec Maple Syrup Producers estimates the industry contributes $750 million annually to provincial gross national product. In addition to 10,000 direct jobs, producers invest in innovative technologies, such as reverse osmosis, evaporators and high-tech production equipment. Indirectly, through provincial bonds, MD fixed-income investments benefit from those contributions to the Quebec economy.

In recent years, it has become easier to invest directly in commodities, such as oil and metals, through exchange-traded funds (ETFs) that track the price of the underlying commodity. However, it’s quite difficult to invest in maple syrup directly—short of buying your own sugar bush.

For now—at least until someone devises a Maple ETF—I’ll just take mine on waffles. Here’s to celebrating a great Canadian commodity!

1Source: Federation of Quebec Maple Syrup Producers

 

About the Author

James Virgo, CFA, CFP, MBA, is Vice President and National Lead with MD Private Investment Counsel at MD Financial Management. He oversees the practice of investment counselling and delivery of investment advice across MD PIC.

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