Risk Management Plan to mitigate farm labour cost increases?

Saturday, February 23, 2008

By SUSAN MANN

In its prebudget submission, delivered to the provincial government early January, the Ontario Federation of Agriculture (OFA) called for a plan to tackle the issue. The provincial budget comes down in early spring.

On Jan. 1 the hourly minimum wage rose by 75 cents to $8.75 from $8. It’s set to go up again on Jan. 1, 2009 to $9.50 and then to $10.25 a year later.

Ontario will have the highest hourly minimum wage in North America when the rate reaches $9.50, says OFA executive committee member Mark Wales.

Wales noted the farming industry had just finished swallowing a graduated increase in the minimum wage prior to this year. Then in last spring’s budget the provincial government announced this latest round of increases.

“It came out in the budget as a total surprise,” Wales explains, adding there weren’t any consultations.

Farmers’ returns are often based on international commodity prices or grocery chains dictate what prices they will pay farmers. “They base them on the lowest cost importer, which may be Peru, Chile, China – countries which have no minimum wage regulations and no labour legislation,” Wales said.

All farmers are facing increased minimum wage costs, but horticulture will feel it the most. On a typical Ontario fruit, vegetable or flower operation 40 to 50 per cent of the cost to grow the crop is labour.

“Your single biggest cost is now going up by 28.5 per cent over three years and there’s no way to recover one cent of it from the marketplace,” Wales notes.

The OFA wants to see in place a program similar to the three-year pilot risk management program introduced for grains and oilseeds farmers last year. That program was developed by the Ontario Ministry of Agriculture, Food and Rural Affairs (OMAFRA), commodity groups and the OFA. It's designed to provide funding to help mitigate cost of production increases.

The program works this way – the cost of growing the crop is compared to what the crop needs to sell for. A target price is set. If the crop in Ontario sells for more than the target price that year there isn’t a payment. But if the crop sells for less than the target price there’s a payment for the farmers who signed up and paid a premium.

Wales, who grows corn and soybeans along with 12 different vegetables in Elgin County, says the Ontario Fruit and Vegetable Growers’ Association and the Labour Issues Coordinating Committee are working with OMAFRA to design a similar program for horticulture. It’s hoped this program will help offset unforeseen cost increases both in labour and energy.

In developing the program, officials still need to compile cost of production and sales data. “We also need to get a funding commitment from the province,” Wales says.

The federation’s pre-budget submission has been submitted to the government. Agriculture Minister Leona Dombrowsky received a copy and it has been submitted for Finance Minister Dwight Duncan for consideration. No decisions have been made yet, says Kelly Synnott, her communications adviser. BF