Aug 10, 2016Ontario processing vegetable growers might lose bargaining power
In February, Ontario’s Regulatory Registry listed proposed amendments by the Ontario Farm Products Marketing Commission to Regulation 440 (Vegetables for Processing-Marketing) under the Farm Products Marketing Act to remove the provisions establishing negotiating agencies and to add provisions establishing an industry advisory committee.
In plain language, the commission is proposing to take some of the negotiating authority away from Ontario Processing Vegetable Growers (OPVG).
“What we know is that the commission is proposing to remove marketing authority from the OPVG for 14 commodities that it currently has negotiating authority over,” said Al Mussell, research lead for Agri-Food Economic Systems, who authored a policy note on the subject. “The idea is that it will become more of an advisory group, which would be a very different role for them.”
The commission is also debating a number of options to enable the processing vegetable sector to remain viable and grow, such as modernizing how prices between growers and processors are established or negotiated and the role of the industry and board moving to a free-market system.
Mussell said he wrote the policy note in part because there was a lot of uncertainty about what’s going on.
“There was no public discussion that particularly prepared us for this possibility,” he said. “There was a discussion back in the winter where the commission had raised an issue of accreditation from the standpoint of which growers would be covered under the negotiating authority, and they conducted a survey regarding that. I don’t think the information from the exercise has ever been made available.”
Sylvain Charlebois, an economist at the University of Guelph, called the initiative an interesting move.
“Producers have been reliant on marketing boards for decades, and many aren’t even questioning how things can improve,” he said. “Many farmers are able to negotiate and compete on their own. It’s important to have this debate. With marketing boards, in 2016, it is difficult to see how Ontario can vastly capitalize on opportunities abroad.”
John Lugtigheid, past chair and board member of OPVG and former operator (now run by his son David) of Lugtigheid Farms in Kent Bridge, said the news came as quite a shock, and the idea that Ontario’s processing vegetable growers will lose their power to bargain collectively is not one he is happy about.
“From what we’ve been told, we’re doing a strategic plan for the commission, and we don’t know what they’re going to do in the end,” he said. “Are they going to completely take all our authority away, or is it just a few minor changes? At this time, we don’t know.”
According to the commission, there were 18,000 vegetable growers in Ontario in 1940, and about 450 now, which shows the demise of the industry. Lugtigheid, however, said that’s the same all over North America, whether you’re talking about corn, cattle or any other ag commodity. In his opinion, more discussion is needed between processors and growers, and everyone needs to be working together.
A big grower fear is that if they have to negotiate individually or face increased uncertainty about a contract, they will have trouble getting bank loans. Another concern, Mussell said, is that processors will dictate terms that are less favorable.
He added that without a marketing board intermediary, many of the market conditions characterizing Ontario processing vegetables will lean toward vertical integration, which is not an industry structure most producers prefer.
“The reason we have regulations has to do with particular types of conditions that if they prevail can lead to unstable prices and unstable production and perhaps this vertical integration,” he said. “If you have a highly perishable product where you don’t have a recognized reference for pricing, and where you have relatively few processors, you’re in a position where processors can exert influence on price that’s negative for the growers, and the result can be a pattern of unstable supply.”
That could lead to growers dropping out and prices rising, making it difficult for uniformity and consistency. Mussell said the risk exists that some growers would decide processing vegetables are too difficult, and would just grow corn, soybeans and wheat – which would hurt Ontario’s entire supply base.
According to Charlebois, the move is about growing the rural economy differently, not trying to hurt growers.
“Our regions need oxygen, and to put our strategy into question is appropriate,” he said. “The industry should engage in the debate, and not stay on the sideline and protest. It’s just silly.”
Although no one really knows what’s going to happen, it does appear that decisions will be made soon.
“They suggested that they want things done before 2017 negotiations start, and with cucumbers that deadline is Dec. 15 this year,” Lugtigheid said. “There are certain things we can maybe modify. We only have a one-year contract, and everything is open to discussion every year. We always strive for competitive prices and look at everything to see how we can keep our processes competitive.”
The comment period for the proposal runs through August, after which more information will probably come to light. According to Mussell, the commission intends to have the amendments finalized by fall, ready for implementation for the 2017 processing crop year.
He said that if there’s going to be such a big change to the marketing board’s authority, there should be some analysis to back it up – but that just hasn’t happened.
“You would expect to see a pretty thorough marketing analysis that demonstrates where it is the market is failing, and analysis of what the marketing board has been doing and how it’s been going in a different direction and missing opportunities,” he said. “In the case of processing vegetables, you should have that analysis for each commodity and we haven’t seen that. If there is to be a transition to a freer market, there should be some kind of blueprint for how this is going to work.”
– Keith Loria, VGN Correspondent