Cucumber buyer slashes commitments for Ontario's 2015 crop

Wednesday, April 1, 2015

by SUSAN MANN

Ontario’s major buyer of processing cucumbers is cutting the amount it buys this year from provincial farmers because it says it can source cheaper product from U.S. producers.

The cut will mean revenue losses in the millions, says one industry insider.

Dan Hartung, president of Hartung Brothers Inc. of Madison, Wisconsin, a licensed greenshipper in Ontario, says his company is not buying as many Ontario cucumbers this year “because (in terms of pricing) Ontario is no longer competitive with the United States.” Hartung Brothers buys the majority of Ontario’s crop and sells the cucumbers to processors.

Depending on the size of the cucumber, prices in Ontario are 30 to 80 cents per bushel higher than what Hartung Brothers can buy cucumbers for in the United States, he says. Hartung says they will be buying about 1.1 million bushels (26,190 tons) in Ontario this year. That’s down by 500,000 bushels (11,905 tons) of cucumbers compared to last year.

Hartung says the Ontario Processing Vegetable Growers board “wants to go up when the rest of the world’s going down and that just doesn’t work.”

The company also owns all the equipment at all four Ontario grading stations, an investment of close to US $9 million. “We’ve invested a pile of money in our Ontario operations and I think that worked against us,” Hartung says. With the cut in cucumber volume “there’s less bushels going through the same assets and that doesn’t bode well either,” he says.

Al Krueger, executive assistant with the Ontario Processing Vegetable Growers, says the cucumber price this year was determined by arbitration, with the arbitrator deciding in favour of the grower position. The price for hard-harvested cucumbers went up by 13.5 per cent, while for machine-harvested cucumbers the price rose 17 per cent.

The machine-harvested cucumber price reflects the major increase in harvest costs that growers have to pay, he says, noting harvest costs went up by $85 per acre to $370 per acre. “That was the reason for a big part of the increase.”

But Hartung says the grower-requested price increase “is way more than the cost of operations.”

Krueger says the lower volume contracted by Hartung Brothers this year is due to a pickle processor it had been supplying, Gedney Foods Company in Minnesota, losing Smucker’s as a client. “Smucker’s is now using Bay Valley to pack the Bick’s label,” Krueger says.

“As a result Hartung’s requirements, because his customer no longer has the business, have gone down,” Krueger says, adding the processing vegetable grower’s organization has heard Hartung’s requirements for hand-harvested cucumbers are down by 30 per cent, while machine-harvested is down by about 50 per cent.

One industry insider who didn’t want his name used because of concern it could affect future industry negotiations, says the volume cuts will cost the industry $4 million in revenue this year compared to last year.

Langton-area grower Frank Peters says his hand-harvested acreage will drop to about 18 acres this year from the 25 acres he grew last year. He is also growing 40 acres of peppers and 60 acres of rye this year on his 127-acre farm. He only grows hand-harvested cucumbers.

The price increase won’t offset the contracted volume decline, he notes. For hand-harvested cucumbers “we’ve had a 13.5 per cent price increase and a 30 per cent volume cut, so we’re still out like 16.5 per cent.”

Growers weren’t expecting a volume cut, he notes. “With the dollar difference, if anything we expected an increase (in volume contracted). Even with the increase in price that we got, he (Dan Hartung) is still getting them cheaper here than last year.”

Peters questions whether Ontario prices are uncompetitive with U.S. prices because there aren’t any hand-harvested cucumbers in the United States. “We feel as farmers, a lot of times the comparisons he (Dan Hartung) makes are not fair to us.”

Peters notes that hand-harvested and machine-harvested cucumbers are two different products and “you can’t compare them.”

Krueger says in 2014, 40,000 tons of cucumbers were contracted with 29,000 tons of it being hand-harvested and 11,000 tons being machine harvested.  In 2013, 31,085 tons were harvested with a gross farm value of $11.4 million, according to the Ontario Processing Vegetable Growers’ website. Farm value numbers and tonnage harvested for 2014 haven’t yet been posted on the website.

Cucumber grower and grading station operator Jeff VanRoboys of Chatham says he’s disappointed the volume being contracted is down. “It’s a very huge hit to the industry, especially after a year that was very good.”

VanRoboys says only the hand-harvested volume cut was due to Smucker’s switch in supplier. The machine-harvested volume cut in Ontario was due “to the fact that Hartung Brothers can source cheaper cucumbers in other growing regions in the (American) Midwest right now.”

He says for machine-harvested cucumbers “our price was obviously too high if our volume got cut that much.” BF