I never thought I would use the terms “maple syrup”, “strategic”, and “reserve” in the same sentence. But then someone broke into the Global Strategic Maple Syrup Reserve in Quebec and made off with $30 million worth of Canada’s Maple export.
Probably you ask yourself: Why does Canada have a Strategic Maple Syrup Reserve? Why does it have to be pooled (in other words, why does it have to be global), and how many pancakes does one have to eat in order to consume such an amount of syrup?
Since the 1940s Canada is the global leader in production of maple syrup, churning out somewhere in the neighborhood of three quarters of the world’s supply, so why do they need to keep a global reserve? In this industry both demand and supply (i.e. the harvested quantities) are uncertain:
The trees need cold nights and mildly warm days to yield sap, meaning production can vary greatly year to year based on the weather. That’s a potential problem for the big syrup buyers, whether they’re bottlers or large food companies that make cookies or cereal. 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. (“Why Does Canada Have a Strategic Maple Syrup Reserve?“, The Atlantic)
One cannot manage maple syrup inventory the same way you manage inventory of consumer goods. Since you cannot produce natural syrup on-demand (with the emphasis on “natural”), and since the harvested quantities are uncertain and impacted by many factors, one has to store the harvested syrup to bridge the gap between demand and supply. So, it is clear why each producer needs to keep inventory to hedge this type of uncertainty, but why do all producers pool the inventory together:
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. “
Basically, the global reserve serves not only as hedge against demand and supply uncertainty, but also helps in regulating prices and simplifying the distribution process from many small producers to big buyers.
But of course, once you pool the inventory together you put this inventory at a greater risk of theft or other, say, weather related disruptions. Apparently, this was not really considered, otherwise, how can one explain that the thieves managed to steal enough maple syrup to fill one and a half Olympic sized swimming pools.
To some extent, similar to what DeBeers does (or used to do) with diamonds – pool production together into large inventories, so it could control supply and more importantly, prices.
Fascinating. Marcello, That could be done but since the pooled reserve is managed by a government sanctioned cooperative, I don’t think that price manipulation would be allowed by the government. DeBeers is a private company with more leeway in that regard. I have another theory. The theft was a “Goldfinger” strategy. In the movie, James Bond prevented Goldfinger from blowing up and irradiating the Ft. Knox gold stash. Goldfinger’s strategy was to take the Ft. Knox gold out of supply so his gold would become more valuable. Looks like whoever stole the syrup has just increased the price of syrup. They don’t have to sell the stolen syrup, they can just pour it out. This implies of course that the thieves were associated with some syrup producer.
Ed, you’re right on the Goldfinger strategy, no doubt about it – as the original text puts it “it’s got to be an inside job”. I guess what’s really fascinating in this story is how the “thieves” suddenly disappeared with 1 1/2 swimming pool of syrup… Tell me about an effective logistics network