Ontario's processing vegetable growers prepare to take a hit in some contracts

Thursday, March 6, 2014

by SUSAN MANN

Processing vegetable growers are getting the same prices as last year for many of their crops but in some cases they’re taking a deep cut as the Ontario Processing Vegetable Growers wrapped up negotiations and reported results on several crops.

One exception to that trend is processing tomatoes, the largest crop based on farm gate value, which saw an increase of about $15 per ton compared to last year, says Al Krueger, executive assistant with the Ontario Processing Vegetable Growers. In addition, the tomato negotiations aren’t finished yet.

The one crop with the steep price cut is peas. The pea agreement reached with Bonduelle Ontario Inc. calls for a 10 per cent decrease in all prices on the tenderometer scale this year compared to 2013 levels.

Krueger described this year’s vegetable negotiations as difficult. Tomatoes prices went up and “that’s a function of the California Tomato Growers Association price going up and our exchange rate going down.” Peas and corn would have had deeper price cuts if it weren’t for the impact of the exchange rate.

Jim Poel, processing vegetable board chairman, says they’re disappointed the prices are down.

Krueger says in the U.S. Midwest, the main areas for pea and corn production in North America, prices are down significantly “and that’s as a result of commodity prices being down. Our prices basically track what happens in those areas buffered somewhat this year by the exchange rate.”

There are some crop agreements that still have to be negotiated, including green and wax beans, lima beans and squash.

On the tomato side, Weil’s just recently agreed to the prices the processing vegetable growers board negotiated with Sun-Brite Foods Inc., he says. But ConAgra still has a different position on prices for paste and whole pack. If an agreement isn’t reached with that company the negotiations will go to arbitration.

A date for arbitration hasn’t been set for ConAgra and there currently aren’t any negotiations with the company either, Krueger says.

The agreement with the other two tomato processing companies outlines that for paste, farmers will be getting $110 per ton this year, while for whole pack it’s $120 per ton and for juice it’s $119.50 per ton.

As for the new company that has signed a letter of intent to buy the H.J. Heinz Company of Canada plant in Leamington, Highbury Canco Corporation, Krueger says there haven’t been any negotiations with it yet. “At this point they don’t even have a license to process from the Ontario Farm Products Marketing Commission,” he notes.

Part of the tomato agreement includes a memorandum of understanding that sets out the method that prices will be determined for the next five years. Included in the method is recognition of the factors that impact tomato prices in Ontario and an agreement on how they will be applied. Some of the factors include the California Tomato Grower Association price, field to factory freight, transcontinental freight and exchange rates.

Krueger says “the parties have agreed on how it’s going to be done.” The memorandum “formalizes a lot of what’s being going on anyway but it does put a little more structure on it and I think that was of value to the parties.”

In other processing tomato news, growers are facing an increase in crop insurance premiums this year because of the poor 2013 processing tomato crop. “Premium rates will increase due to the larger claim payments in 2013,” it says in a Jan. 31 notice about the rates on the Ontario processing vegetable growers website.

For 2013, 94 of the 104 processing tomato growers had a claim, and claims hit a total of slightly more than $8.1 million.

For this year, total premium rates are estimated at $157.72 per acre with the grower portion of that amount being $63.09 per acre. That’s up from total premium rates of $94.84 per acre in 2013 with the grower portion being $37.94 per acre, the notice says.

In addition, because of the 2013 experience, 80 per cent of growers will have a reduction in yield potential of three per cent or more, with the majority of customers in the range of three to 12 per cent.

Krueger says it’s hard to estimate how many acres of processing tomatoes will be planted this year because the situation with Highbury Canco buying Heinz hasn’t been finalized yet. He says there might be 8,000 to 10,000 acres. Last year, there was slightly more than 12,000 acres.

For carrots, agreement was reached with Bonduelle Ontario Inc. and the Campbell Company of Canada. The price for dicers is $96.50 per ton and for slicers it’s $125.50 per ton, both the same as last year. The only difference in the agreement is the storage charge, which will increase by $3 per ton for each period for growers who store the carrots. There are eight periods.

For sweet corn, the price per ton of $96 is down from last year’s price of $111.25 per ton in the agreement reached with Bonduelle Ontario Inc. This year there is an addition in the agreement of a $10 per ton premium for shoepeg varieties (Early Cogent, Code 93). Shoepeg is a type of white sweet corn. BF