Maple Markets: International Trade Snap-Shot

US-Canada

Update: On October 1st 2018 the new United States-Mexico-Canada Agreement (USMCA) was announced…details are still emerging (10/4/18) Original post written on 9/30/18. Canada placed a 10% tariff on US maple syrup exported into Canada in 2018. While some US syrup or US finished maple syrup goods do get sent to Canada the volume is small. This trade dispute retaliation from Canada is not expected to have huge impact on US maple syrup distribution. Canada exports far more syrup into the United States. The overall US-Canada trade situation that include steel, aluminum and other products  will have a more pronounced impact on maple equipment and manufactured goods crossing the US-Canada border.

Roughly 62% of Canadian export syrup reaches the United States. The result is that over half of maple syrup consumption in the United States is Canadian syrup. The UVM Extension Maple Business team ran a rough calculation on the 2017 value of Canadian syrup imported into the United States. The Canadian imports represent roughly 18 million maple taps at the prevailing US maple yield per tap.

A look at recent and defunct trade agreements…..

European Union

Comprehensive Economic and Trade Agreement (CETA) was approved in 2017. CETA includes Canada and the European Union.  The agreement removes tariffs on Canadian syrup imported into the European Union. The US is not part of this agreement and US syrup is subject to an ~8% tariff when imported into the EU.

Trans Pacific Partnership (TPP) Trade Agreement

This agreement between many nations was set to eliminate the 17.5% tariff on US (and Canadian) maple syrup entering Japan. Japan represents a significant existing export market for Canadian maple syrup and a possible growth area for US exports in the future. The United States pulled out of this trade agreement in 2017 and the tariffs on US maple remain in place.

The New Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) This agreement was made by the remaining TPP nations without the United States. Under that deal the tariffs on Canadian syrup imported into Pacific nations will be phased out in the next few years.

 

Vermont Maple “In the Middle”

Credit: Mark Isselhardt

As global maple syrup production increases the markets, communities, and business owners are facing changes. Vermont has a long cultural heritage of syrup production ranging from subsistence production to commercial activity for over 100 years. 2018 is no different… for every new maple enterprise setting up to tap 50,000 trees we are likely to have 10+ new hobby producers making their own syrup and selling the excess directly in their neighborhood.

Research on farm economics has demonstrated how farms can often get caught in the middle of the push and pull of dynamic business environments and consumer preferences. The 2008 text Food and the Mid-Level Farm (Lyson, Stevenson, Welsh) explains the dilemma that faces “agriculture in the middle.” The super-small farm can often maintain a specialty niche that serves local or direct clientele. It’s common that these farms might be part-time or lifestyle farms. They may be profitable but it may not matter. The largest scale farms  are  producing goods at low costs and high volumes and they are  serving broader markets that value uniform product, lower price points, and require sophisticated supply chain logistics. What’s left is the farm “in the middle”. These farms are full time jobs for their owner -operators that need to earn a livelihood from risky business activity. They are too big to be accepted in niche markets and too small to compete with the big players.

The recent maple price downturn has begun to reveal where the “middle maple producer” may be. Four years of maple finance benchmark analysis has shown how a reasonable owner livelihood can disappear as the business environment shifts. A small sample of 7,500-15,000 tap maple producers in VT has demonstrated the looming risk for a formerly viable owner-operated bulk syrup enterprise that can’t break even if market prices stay below $2.10 per pound. These businesses can be a too big to pivot into niche direct marketing and too small to compete in the larger wholesale markets. We don’t know where the sweet spot for a commercially viable “middle” operation will be but we do know not to assume it will stay in the same place forever. We also wait to see if a group of informed consumers that value the people and practices of “ag in the middle” will persist.

Trade wars, price uncertainty and agricultural branding

Photo Credit: Mark Isselhardt

Escalating trade disputes are reverberating through US farm sectors and our US specialty products. Farming sectors could become minor bargaining chips or worse, collateral damage, as high impact manufacturing interests drive the policies. In Vermont the two primary ag drivers of dairy and maple may get caught up in the fuss. Ironically, our suffering US dairy economy and dairy families have been pitted against Canadian farm owners and a supply management system that has facilitated viable milk prices for smaller farm operations. The liquid gold of maple flows freely across the US/Canadian border. At least it did. In 2017, 62% of Canadian syrup exports came to the United States ( US Maple Statistics)

Have Canadian imports been flooding US markets with cheap syrup? Until recently most US bulk syrup was purchased on parity with Canadian market price after currency exchange adjustments. Again, Canada has a market management strategy to stabilize prices (for better or worse) and US producers received the benefits of price predictability.

Branding could be equally important in future trade policy. In Vermont we have enjoyed an explosion of artisan cheese in the past 20 years. Vermont makes darn good cheese. But we fall prey to a cultural delay on developing the necessary protections to promote or protect our regional foods. For years many award winning Vermont cheeses have been “cheddars” “tomme” “french alpine”. Now we are seeing regionally named products like Rupert . Will US producers organize themselves to adopt the legal process verification that European food-rich regions have mastered with Champagne (the legal process)  and Cheddar (the verb!)?

New Vermont Maple Business Benchmark Report

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Photo Credit: Mark Isselhardt

UVM Extension has published the newest 2016 VT Maple Benchmark report. This report shows financial analysis and profitability for a group of syrup businesses that range from 2,500 to 20,000 taps. Download a copy of the 2016 report now. 

In 2016 maple market prices had dropped significantly but very high production yields for many participants resulted in stronger profitability for 2016 compared to 2015. Bulk maple producers showed a wide range of cost of production from $1.62 per pound to $2.52 per pound with an average cost of $2.00 per pound. Overall costs on a per pound basis declined in 2016 due to high production yields. Several historically high performing businesses, however, will be challenged to stay profitable as market prices drop below $2.25 per pound and/or they experience only “good-to-average” yields. This is a growing concern for maple sugar makers from 8,000-15,000 taps that rely on maple income for household income.

Many maple businesses have already or plan to diversify market channels. There is no guarantee that higher wholesale or direct market prices can compensate for the costs and time associated with serving those new customers. The reality, however, is that bulk maple businesses that drop below financial break-even levels will seek to find alternative ways to market syrup in order to stay in business. Several participating businesses in this project have demonstrated that a mixed marketing plan that includes bulk sales and some direct sales can preserve profitability and reduce the risk of uncontrollable bulk market prices.

The VT Maple Benchmark project will continue in 2018! Starting in May our business educators will begin completing 2017 financial analysis with maple sugar makers and sap only enterprises. Contact Mark Cannella for more information (Mark.Cannella@uvm.edu) . This year the project specifically needs more producers from 15,000 taps – 50,000 taps to register.

UVM Extension is also offering maple business planning assistance from May- December to Vermont sugar makers. Contact Mark  for more information on maple financial analysis and business planning assistance. Mark.Cannella@uvm.edu

 

Online Maple Sap Price Calculator

For many years maple sap and syrup producers have referenced the print version  sap buying pricing sheet that is regularly posted in industry publications like the Maple News or the annual Maple Syrup Almanac. There is now an online Sap Value Calculator developed by Cornell and Ohio State available for use. Cornell also has the Cornell Sap Buying Spreadsheet available for download (excel version) from their website.

Some sap sellers had historically used a 50% or 60% value share to price sap but those percentages are not necessarily current to all regions. Fast growing maple regions are  cited for up to  65% – 70% of final syrup market value being paid to the sap producer. The online Sap Value Calculator and the Cornell Spreadsheets offer more flexibility to target a specific crop share percentage for sap pricing.

Are you looking for more online maple business planning tools? UVM Extension has been awarded a new grant to develop online business planning tools and financial calculators  for maple producers. The project starts in June 2018. If you have ideas please contact Mark.Cannella@uvm.edu

 

 

Maple Survey: The University of Vermont Extension Seeks Input to Develop New Maple Business Programs

UVM Extension wants to develop new maple business and economic resources to assist producers and industry leaders across the United States.

Take this short 3 minute online survey to tell us what you think. We need to know what topics to work on and how to make  programs most accessible to producers.

Maple Business Resources Survey

The Maple Business Benchmark has provided detailed financial analysis to maple producers since 2013. As the industry changes there are many more economic and business management topics to focus research and educational effort towards.

What are the key issues facing the industry?

What are the major constraints that your business wants to overcome?

What are the best resources that will help you manage forward?

Maple Business Resources Survey

Maple Business and Industry Update

What do Fortune 500 investors, folklorists, family farmers and Harvard Business School all have in common?

vacuum-on-3-16ths

All these people were at winter maple conferences and investigating ways to get in on the maple industry expansion. UVM Ag Business was able to attend maple conferences in NY and VT to witness the blend of old-school sugaring and new industry innovations. Here is a quick recap.

  • Industry Overview

Representatives from Butternut Mountain Farm, Bascom Maple Farms and Leader Evaporator Co. provided data and insights on maple supply, demand and pricing in the US and overseas. Consumers are making a shift towards “healthy” sweeteners. Maple syrup is a pure product with a very short processing chain that appeals to customers seeking pure and natural products. That being said, the industry is aware they are selling sugar and they don’t want to overstate health claims to promote maple. The panel estimated that global maple sales are split like this: 25% farm gate sales , 50% mass markets wholesale and grocery and 25% to manufacturing (sugar, cream, food product flavoring). Now with bulk maple prices hovering at $2.10-$2.20 per pound (down from almost $3.00 6 years ago) they predict an increase in the manufacturing portion of demand as maple becomes a more affordable ingredient for mass produced foods.  We are seeing that, new maple products and more products with added maple for flavoring. There is tremendous product innovation at all levels, big and small: maple sap beverages, infused syrups and sports recovery products

Is there still a place for table syrup? Everyone think’s so. Even with increasing global sales they cite the room for growth in domestic consumption in the US. Canadians consume ~ 1 quart of pure maple each year while Americans only consume 4 ounces. Promotional goals will work to increase consumption for those that already love pure maple.

  • Storytelling

Michael Lange, Associate Professor at Champlain College, delivered a keynote address blending folklore, storytelling and graphic design themes for maple producing regions in Vermont and beyond. After completing hundreds of interviews with maple producers he explained that the “Vermont” maple experience is something truly unique to our state. It blends a combination of nostalgia, cuisine, hobby and commercial economic impact in our state. He continued with the practical aspects of maple marketing and explained how storytelling through product promotion and branding is perceived differently outside maple producing regions.  People in urban areas and other countries are attracted to different element of the maple story.  Take the time to know your audience and don’t assume they care about the same things we do in VT.

  • Finances and Business Management

Mary Peabody, UVM Extension, explained current direct market trends and how to target the right customer. Increased demand for ethnic foods highlight expansion of spicy flavors in USA food products, and spicy flavors are often best complimented with sweet flavors (hint….Maple).

Yankee Farm Credit discussed how sugar bush real estate is appraised.

Business investors from other industries are attending sessions as they explore investing in new maple ventures. Even academics from other business schools are taking notice of maple. All the topics are there to entice a business student: a strategic reserve and quota system, free expansion in the US, technology innovations, risk and profit potential.

Producers are watching their finances! Declining bulk markets have producers nervous about short term cash flow. Many producers continue to get organic certification and enjoy the $0.15 – $0.20 premium, it helps! Find more on maple finances at our Maple Benchmark webpage.