EDITOR'S NOTE: Sugarmaker and commoditites broker Phillip Gudgeon of Westby, Wisc. submitted this article, sharing his thoughts on bulk syrup pricing as we enter a new season with global syrup demand at an all-time high.
WESTBY, Wisc.—It’s a sellers market. Don’t squander this opportunity!
Last season we produced the biggest global syrup crop in history. Now that crop is almost sold out.
It seems the pandemic has been very good for maple consumption.
This has created a need for a good to above average crop in 2021 to satisfy demand. If we have a poor crop, “Katy bar the door!”
Let’s talk about price.
The current pricing in the maple industry is much like pricing in the corn and soybean markets, which I am familiar with. In addition to being a syrup producer for the last two decades I have also been a commodity futures broker for the last 27 years.
We have had ample supply but only average demand. This created a buyer’s market.
This is the normal situation in the commodity trade. It exists 80 to 90 percent of the time because producers will always produce more than the market will use…if it’s profitable.
The current market pricing has been profitable for the packer.
He can buy large quantities of syrup and store it with almost no carrying cost due to extremely low interest rates.
Things have changed in maple in 2021.
Now we are entering a seller’s market because demand has been strong and we have reduced the supply.
That means the producer shouldn’t be bashful about asking for a better price.
What is a reasonable price for a producer to ask?
I think we should look to the commodity futures market to give us some perspective.
The supply and demand of the maple market are very similar to the corn market.
In corn, we trade a “futures price” for a crop that has not been planted.
Let’s look at the price for December 2021 corn (the corn that we will plant this spring that will be delivered after harvest).
In August 2020, this contract was trading for $3.60/bushel. Today, this contract is trading for $4.44, which is 23 percent higher.
We are in the same position as maple producers because the 2021 crop has not been harvested.
It’s my opinion that the producer should be asking for a price that is 20 to 25 percent higher than last year’s price.
When you ask for a better price and you are told the buyer is unable to pay it, let it fall on deaf ears.
Remember, it looks like we’re entering a seller’s market.
The buyer will use every tool he has to convince you otherwise, but at current market prices he should have the ability to pay that and still be profitable.
Don’t squander this opportunity!