Balancing supply with demand

Talk to any greenhouse cucumber grower and prices, in 2012 and 2015, were in the gutter.

Talk to any greenhouse cucumber grower and prices, in 2012 and 2015, were in the gutter. Prices as low as $5 for a case of a dozen medium-sized cucumbers at the Ontario Food Terminal don’t cover costs. As the industry seeks to balance supply with demand, this winter’s prices of 33 per cent higher than the six-year average are signaling modest recovery.   

In Ontario alone, 754 acres of cucumbers are under hydroponic cultivation.

“I think this reflects growers making decisions based on macro factors such as interest rates, exchange rates and other options for investments as well as growing demand for Ontario greenhouse products,” says Rick Seguin, general manager, Ontario Greenhouse Vegetable Growers (OGVG). 

The U.S. market is still ripe for development. Food safety is a strong card for the Canadian industry to play, especially because an outbreak of Salmonella-contaminated, field cucumbers from Mexico has made headlines for months stateside. Nancy Hewitt, foodservice market specialist, OGVG, observes that inconsistent supplies of field cucumbers have hampered the image of cucumbers for some U.S. retail chains. The issue also plagues foodservice companies which depend on consistency of experience as part of their brand.

“We have noticed considerable diversity at retail in how greenhouse product is merchandised or presented in the U.S.,” says Seguin. “There is also a wide range in knowledge of the advantages of Ontario greenhouse vegetables by retailers, foodservice and consumers in general. This varies considerably within and by region, according to our research.”

As the entire food chain buys into sustainability initiatives, preventing food waste will become part of that equation. Greenhouse cucumbers fit that new narrative because they result in zero waste.

Lakeside Produce is one Leamington, Ontario company which plans to keep greenhouse cucumbers in its mix. The Cervini family announced a 10-acre expansion last month that will include cucumbers along with tomatoes. Supported by a $1 million grant from the Ontario government, these growers see opportunity beyond the U.S. 

“Over the last two years, we have explored the opportunity to expand into the Asian market,” says Tariq Malik, marketing director. “I have personally visited Shanghai and Hong Kong to introduce our brand to this area. There is a huge demand for healthy, good-for-you products in this area due to the ongoing water concerns.”

“We are continuously working on new and innovative packaging that will increase both shelf life of the product to account for long distance travel and, more importantly, allow product to remain fresher on our customers’ tables,” says Malik.

“We’re taking a cautious approach to China. It’s not just about the distributors at the other end but about the packaging and transport to get our produce there.” 

At present, only greenhouse cucumbers are allowed into the Middle Kingdom but as trade barriers are expected to fall in coming years, more lucrative trade beckons. However, some major questions remain.

“I would say the sheer size and complexity of China is the major hurdle for us,” explains Seguin. “We are investigating this market and will work closely with our marketers to share any information and insight that we garner. The logistics of getting fresh greenhouse vegetables to specific sub-markets within China and the distribution channels once there are other aspects we need to better understand.” 

Jan VanderHout and brother Dale, Beverly Greenhouses, near Dundas, Ontario are keeping their sights closer to home on the domestic market.  With 20 acres solely devoted to cucumbers, they are putting 2016 expansion plans of seven acres on hold and keeping a laser focus on costs.  For one thing, they use no supplemental lighting.

“In my opinion, it does not compute to pay $1,000 per acre per day to light a cuke crop in the winter months,” says Jan VanderHout. 

“We still need more from the marketplace,”says VanderHout. “With labour and electricity costs increasing, we can have no significant gaps in efficiencies.”

The VanderHouts have increased their efficiency with an automated packing line installed two years ago. However other costs gnaw away at the bottom line. While the Canadian dollar vis-à-vis American dollar appears favourable from a marketing standpoint, there is still an uptick in costs for materials priced in U.S. dollars. VanderHout says corrugated cardboard costs are rising 8.5 per cent this month on top of a 6.0 per cent increase last fall. Costs of plastic wrapping are also increasing.

The agronomic challenge is to grow greenhouse cucumbers year-round so that there are no interruptions in supply. If yields can be boosted, then the opportunities are with multinational chains such as Subway. Clients such as those can handle consistent large supplies.

The cucumber segment represents almost 30 per cent of Ontario greenhouse production with tomatoes and peppers each comprising 35 per cent share. Recently, profits in tomatoes and peppers have carried cucumbers. This spring, indicators from the U.S. and Mexico are more promising for the cucumber category.

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Tuesday, March 1, 2016

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