Inflation and other cost factors are creating some significant challenges for Ontario field vegetable growers.
Jim Veri, co-owner of Exeter Produce, Exeter, Ontario, said besides inflation, factors like skyrocketing labor costs, strict food safety requirements and shrinking margins are driving some growers out of the ag industry or prompting them to switch to grain crops, which are less costly to produce than vegetables.
Agriculture and Agri-Food Canada listed 1,709 vegetable farms in Ontario in 2016. That number now has dropped to about 1,430.
Veri said he expects volume at Exeter Produce to be up this season as a result of a “contraction of the grower base” as other farmers flee the vegetable industry.
“In many cases, guys are saying the rewards don’t outweigh the risks,” he said.
Growers across the board are struggling with rising costs.
“Everything has gone up,” said Rob Reesor, president, CEO and part owner of Rouge River Farms, Gormley, Ontario.
Labor, packaging materials and agricultural inputs like fertilizer have all undergone “substantial cost increases,” he said.
While labor and packaging costs continue to skyrocket, fuel costs have stabilized for the time being, and the inflation rate for freight has not been excessive, he said. Fertilizer costs actually have come done from a few years ago.
“During COVID, there was a year when fertilizer prices were really high, probably related to the war in Ukraine,” he said. “There’s has been a bit of relief from that.”
The company has stabilized its labor situation by transitioning from 100% local labor to 50% foreign H-2A workers, he said.
Inflation has affected all aspects of agriculture, from land prices and carbon tax increases to the cost of transporting product to supermarkets, said Melissa Toste, operations manager for Alliston, Ontario-based Ontario Potato Distributors Inc.
The positive note for the company is that potatoes aren’t like some specialty commodities that consumers are cutting out of their budgets.
“Potatoes tend to be one of those household staples that are on the cheaper side per pound,” she said. “They’re not a specialty item that people only buy at a certain time of year.”
Major wage increases have occurred throughout Canada, said Scott Biddle, president and CEO of Vittoria, Ontario-based Scotlynn Group.
“That’s a significant cost because the crops we grow are very labor intensive to harvest and package,” he said.
He said workers’ pay has to increase so employees can deal with the higher cost of living.
Costs of packaging and transportation also have undergone steep increases.
“We’ve had to pass those costs to the retail market, which then passes it on to the consumers,” Biddle said. “[But] there’s only so much that can be passed down.”
Costs in some categories — transportation, for example — have eased up a bit, but prices still are significantly higher than they were a few years ago.
Biddle said he thinks the higher costs have affected his business.
“We feel the markets are a little softer this year than previous years,” he said.
Veri of Exeter Produce said, to be successful, growers today must look at the overall costs involved when they decide which crops they want to grow.
“If there’s not enough economies of scale with certain items, we’re getting out of them,” he said.
Some costs have come down, but increases in other areas have offset any potential savings.
“We’ve seen some easing in packaging costs, but they’ve never come back to pre-COVID prices,” Veri said.
The price of fertilizer doubled during the COVID-19 pandemic, he said, but even though they now have “somewhat normalized,” increased wages have more than offset any savings on fertilizer.
Taking all related costs into account, minimum wage for workers is now more than $20 per hour, Veri said. “There’s no such thing as cheap labor.”
Exeter Produce automated its sorting lines with photo optics and lasers a few years ago, but labor remains a significant budget item.
“We still can’t get away from the fact that the bulk of these items have to be handpicked,” he said.
Careful planning must go into a grower’s choice of products, Veri said.
“You don’t want to deploy resources for something that doesn’t make sense,” he said.
Companies don’t grow a commodity on speculation anymore.
“You have people who want it and will commit to it, or we’re not planting it,” he said. “Everything’s way too high a price to gamble on.”
