Ontario greenhouse growers wrestle with high gas prices

Tuesday, April 1, 2014

by JIM ALGIE

The cold “that just went on and on and in fact it's still going on” has scorched potential profits for greenhouse vegetable business this season, Ontario Greenhouse Vegetable Growers chair Don Taylor said in an interview, Monday.

Heavy heating fuel demand and wild price increases for the sector's main fuel, natural gas, means “this year is going to be a challenge,” Taylor said.

Unlike most residential gas users in Ontario hit with price increases that come into effect April 1, greenhouse growers and other large gas users have been paying higher prices for most of the winter. Fresh from a recent round of producer meetings where gas prices were the main topic, Taylor estimates gas use rose about 35 per cent for the first three months of 2014 because of the season's extreme cold.

Most of his association's 220 operators buy gas by the gigajoule on wholesale contracts based usually on historical use patterns. But gas use that exceeds contracted volumes comes at market prices, which rose sharply this year and have fluctuated wildly.

A heating season that began with gas prices in the $4 to $6 range rose by mid-February to between $8 and $10 per gigajoule, Taylor said. Those who hesitated to pay those prices expecting the usual late season decline eventually faced outrageous spikes as high as $72 a gigajoule, the vegetable board chair said.

Much of the cost increase reflects TransCanada Pipelines delivery costs which “spiked considerably” during February, Taylor said. His association expects to raise questions with federal gas regulatory officials about transportation policy changes last year that seemed to exacerbate price fluctuations.

“It's hard to point a finger of blame at anybody,” Taylor said. “It was . . . a perfect storm but unfortunately we are on the wrong end of the storm.”

As much as 80 per cent of Ontario's commercial greenhouse vegetable producers are in areas of southwestern Ontario in Essex, Kent and Lambton counties, where climate and access to rural natural gas have spurred “significant” expansion in recent years.

Growers have added 500 acres and invested roughly $350 million over the past five years to bring total greenhouse production to about 2,400 acres. As much as 70 per cent of production is exported to U.S. buyers.

“In most years we are very competitive,” Taylor said. With this year's winter costs, however, and the availability of Mexican and U.S. cucumbers, tomatoes and peppers, Ontario growers are taking a hit.

“Just because your costs are up doesn't mean you get to demand more from the grocery stores,” Taylor said.

“Prices aren't what we need to recover our costs this year,” he said. “This year is not going to be a good year for greenhouse producers.” BF