Company's financial woes a 'shell shock' to pepper and cucumber growers

Thursday, May 3, 2012

by SUSAN MANN

If Fred Froese and his siblings don’t find a customer for their hot banana and jalapeno peppers by June 1, they’ll have to kill the plants currently growing in their greenhouses.

That’s because the company they were growing for, Strubs Food Corp., announced May 1 they weren’t buying any peppers and cucumbers this year. On April 27, the company filed a notice of intention to make a proposal under the Bankruptcy and Insolvency Act.

Froese says the pepper situation on their Straffordville-area farm “is financially a huge burden.” So far, they’ve spent $40,000 in seed and greenhouse costs for the peppers they planted April 1. They’re searching for customers in the United States but finding one for hot banana peppers “is almost impossible.”

They must decide what to do with the peppers before it’s time to transplant them outside because “once we put them out into the field the expenses grow very exponentially,” he says.

For peppers, Froese says they have 800 tons of hot banana peppers and 300 tons of jalapeno peppers.

According to documents on the website of the company that agreed to act as the trustee under the proposal, BDO Canada Limited, Strubs owes creditors $14.4 million, including $4.7 million to the Royal Bank of Canada, $434,806 to the Business Development Bank of Canada and about $3 million to a numbered company, 1743234 Ont. Inc. (c/o Howard Hanick of Toronto).

“This is the first step in the restructuring of the affairs of the company,” it says on BDO’s web site.

Froese is owed about $69,000 for grading work done for Strubs last year. He doesn’t expect to recover any money.

Froese says up to last year they grew 600 tons of cucumbers for Strubs and roughly 1,600 tons for licensed greenshipper Hartung Brothers Inc. of Madison, Wisconsin. Al Krueger, executive assistant to the Ontario Processing Vegetable Growers, says Hartung is not a processor but a buyer of cucumbers for processing.

Froese says this will be the first year in 23 years they won’t be grading for Strubs. But they’ll continue doing custom grading for Hartung.

Krueger says Strubs’ decision to not buy cucumbers and peppers this year affects 33 growers in Ontario. Many of those growers have dual contracts and were also growing for Hartung “so they’re still in the cucumber business just not to the same extent.”

Froese says he’s confident Hartung will pick up the tons that were to be contracted to Strubs probably partially this year and hopefully 100 per cent by next year.

Krueger says last year Strubs bought about 1,500 tons of cucumbers to make pickles at its Brantford facility.

Processing Vegetable Growers board member John Lugtigheid, who grows cucumbers but not for Strubs, says “the company’s done, I think, unless somebody buys it out.”

Lugtigheid says there has been a lot of pressure on the industry with competition coming from India where labour prices are $4 a day. “Over half the pickles sold in Ontario come from India.”  

Growers were told in person and in a letter dated May 1 that Strubs “will not be in a position to buy and process cucumbers or peppers this year.” The letter, signed by Strubs operations director Harry Knabenschuh, was posted on the Ontario Processing Vegetable Growers web site.

Froese says two Strubs company officials attended a growers’ breakfast May 1 in Straffordville and told farmers they weren’t handing out any contacts this year. Ten or 11 farmers had contracts only with Strubs, he notes.

Some growers were “quite shell-shocked,” he says, while others were trying to sell their equipment as everyone was sitting there eating their breakfast.

What does it mean for the industry that Strubs isn’t buying cucumbers and peppers this year? Froese says families currently on their way from Mexico to Canada to take up jobs transplanting peppers and picking cucumbers and peppers will be out of work.

For growers, some will get out of the cucumber business while others will switch to growing other things, such as fresh market or cash crops.

Froese says for farmers deciding to stay in the cucumber industry someone will still pack the cucumbers they grow.

“The fact that we have a niche on the hand harvested pickles will help us in our area,” he says. “I imagine sooner or later we’ll regain these tons just with a different processor.”

Krueger says in effect now there’s one buyer in Ontario buying the vast majority of cucumbers in the province and that’s Hartung Brothers. This year they’ll contract 30,000 tons that they will broker to processors in the U.S. There are also two very small processors left in Ontario who contract with provincial growers.

There are 200 to 250 cucumber growers in Ontario, Krueger says.

Strubs officials couldn’t be reached for comment. BF