Growers question potato pricing

Tuesday, January 19, 2016

by SUSAN MANN

The Ontario Potato Board is looking into whether some provincial growers, people from other provinces and the United States are selling fresh market potatoes in Ontario well below the generally accepted market price.

Board member Shawn Brenn, who represents District 3 (encompassing Norfolk County, the Burford/Woodstock region and the Hamilton area), says his district had passed a resolution asking the board to look into the issue.

Brenn says the resolution was prompted by a complaint from one farmer.

“The whole notion came up because there are some issues in Simcoe and there are also some issues on the pricing of potatoes coming in from other provinces,” says Brenn, who farms near Hamilton.

One official who asked to remain anonymous says he has heard of 10-pound bags of potatoes being sold at $1 each.

Currently farmers receive $1.70 for a 10-pound bag that will cost consumers almost $5 at the grocery store.

Don Brubacher, the board’s general manager, says the board will probably seek a legal opinion into whether the activity is happening and if the pricing is considered predatory.

Predatory pricing, he says, is “where someone will undercut what is generally accepted as the market price and will take a customer away from someone who’s had a history of supplying that individual.”

It’s the first time the board has been asked to investigate predatory pricing in the province, he notes.

Brenn says a farmer in his district “believes there’s another grower out there that is blatantly selling well below cost of production.” The cost of production for fresh market potatoes varies by region and grower and depends on a farmer’s management skills and yields plus other items such as land costs.

For fresh market potatoes, the cost of production typically ranges from $2,500 to $3,000 per acre, Brenn says.

There’s always competition among growers to move their product but this year was the worst for farmers jostling for markets. Brenn says there were big yields in the 2015 growing season, and “you can only push so much product through the marketplace in a certain timeframe.”

However, it’s one thing to undercut someone else’s price by 10 or 15 cents and quite another to charge 50 to 70 cents or at times 80 cents below the generally accepted market price, he says.

The Simcoe-area farmer or others selling below Ontario’s production costs may not be breaking any rules.

Brenn says there used to be a legislated price in Ontario but it was getting difficult to enforce because many farmers were selling below that price. The board’s regulations were changed three years ago to a “recommended price away from a legislated price,” he notes, adding the system is more flexible now and enables growers to work with retailers to put potatoes on a featured price for a period of time.

The recommended price is based on market conditions and “what a realistic price should be” for the grower to make a decent return, Brenn says.

In the matter of the predatory pricing, the first thing the board has to do is get a proper definition from its legal representative. Brenn says the board has been asked to investigate if farmers selling potatoes at an extremely low price fits the definition of predatory pricing.

“If it is, I don’t know what the next steps are,” Brenn says. “That would be something we’d have to discuss as a board.” BF