Tomato growers, Leamington processor at odds over price class proposal

Tuesday, March 24, 2015

by SUSAN MANN

Leamington-area tomato processor, Highbury Canco Corporation, has devised a way it says can help Ontario’s industry replace a large chunk of tomato-growing acreage lost when H.J. Heinz Company of Canada closed its business last year.

But some tomato growers and the Ontario Farm Products Marketing Commission are skeptical about the proposal.

Highbury Canco is suggesting a fourth end-use class for industrial tomato paste be added to the existing three tomato price classes – juice, paste and whole pack – and processors should get a discount for tomatoes in the industrial paste class.

The company that took over the Leamington tomato plant last year from Heinz and is co-packing for Heinz has, so far, been unable to convince the Ontario Processing Vegetable Growers that adding the fourth class for processing tomatoes is the right way to go to grow the industry.

Sam Diab, president and co-owner of Highbury Canco, said by phone Friday the fourth class would be “industrial paste for sale in industrial containers, such as drums and bins.” The industrial paste would compete with “other sources of supply that are generally imported into the Canadian market and sold domestically and to the United States.”

Diab said the three current end-use classes for processing tomatoes have been in place for “quite some time.” Processors use the current paste class to make products for sale “as finished goods to the marketplace.” For example, when Heinz operated the Leamington plant it used the paste class to buy tomatoes for manufacturing paste for its ketchup and other products.

The Ontario Processing Vegetable Growers has responded that arbitration in the matter isn’t needed because there is no matter to be arbitrated; the Ontario Farm Products Marketing Commission, which has regulatory authority over the industry’s negotiations, agrees, according to a recent Processing Vegetable Growers’ notice.

The commission also agrees with the submission of the processing vegetable growers’ legal counsel that there’s already a class for paste, the notice said.

The notice was posted earlier this week on the organization’s website but has since been removed.

Jim Poel, the organization’s chairman, said Friday he didn’t know why the notice was taken down. He declined comment on the issue, noting, “it’s a bit controversial.” He said, “it’s in discussions. I better leave it at that for now.”

Phil Richards, chair of the tomato negotiating committee, said "there's going to be another appeal on it so I think it's just as well I don't comment."

Diab said Highbury Canco hasn’t given up on establishing an industrial paste class and is still looking for a way “to move forward to allow for the industry to grow. We haven’t been able to do so yet.” He did not mention whether Highbury planned to appeal Farm Products’ decision.

“We feel there should be a discussion on this fourth class,” he said.

Commission chair Geri Kamenz couldn’t be reached for comment.

The company has been pushing for the addition of the class since its inception last year, Diab said.

Adding the fourth end use class would help the entire industry recover some of the lost tomato volume “associated with the Heinz closure,” Diab said. He notes there is the potential for an additional 250,000 tons of tomatoes, which would translate into an added 6,000 to 6,500 acres of tomatoes and an estimated 25 to 30 more growers compared to 2014 levels.

For the entire industry, there were 85 contract growers in 2014 and 384,452 tons were contracted. That’s down significantly from 2013, the last full year of operations for Heinz, when there were 119 contract growers and 508,923 tons were contracted.

In 2013, Heinz alone had 43 contract farmers growing tomatoes and its contracted tonnage was 200,000 tons. Highbury Canco has significantly fewer farmers, just 10 contract growers in 2014, its first year of operations, and it will likely contract with 10 growers again this year.

Adding the 250,000 tons to the 384,452 tons contracted last year “is significant,” Diab said. It would put the contracted tonnage back up to some of the larger amounts contracted in Ontario when Heinz still operated the Leamington plant, he explained.

But there is a catch. Diab said they were asking for a discount for the industrial paste class. The discount would allow the industrial paste to be competitive in the marketplace and “to allow growth,” he explained.

Diab says he couldn’t give an exact number for the discount. “It's predicated on the current pricing on the existing classes,” he explained.

Nevertheless, he anticipated even with the discount “the price (paid for the tomatoes) would still be significantly higher than (the paste price) was in 2013 at $95 a ton. It would still be at least 10 per cent higher than that.”

In 2014, tomato growers received $120 per ton for whole pack tomatoes, $119.50 per ton for juice tomatoes and $110 per ton for paste tomatoes. BF