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Crop Harvesting
Crop Harvesting
April 01, 2022

For the 327 Ontario processing vegetable growers who earned $98 million in farmgate revenues in 2021, there was no surprise in the current economic trends laid out by JP Gervais, chief agricultural economist, Farm Credit Canada at their March 30 annual general meeting.  

 

Tight supplies and very strong demand for all commodities, as Gervais outlined, have already been acknowledged in the 2022 negotiations with processors. All contracts are up by double digits. Sweet corn leads the way with a 36 per cent increase, with peas following with 34 per cent increase. Other crops:  green and yellow wax beans (+27%); lima beans (+32%); cucumbers (+22); squash (+22%).

 

2022 contract prices for tomatoes and carrots are negotiated directly between growers and processors, and are kept confidential. 

 

“These large increases are the result of unprecedented challenges from rising input costs and the costs of competing crops in all growing regions,” reported Ron Van Damme, vice-chair, Ontario Processing Vegetable Growers (OPVG).

 

Gervais explains that the Russian invasion of Ukraine amplifies the volatility, uncertainty, complexity and ambiguity (VUCA) of global markets citing not only cash crops such as wheat but vegetable oils. In some business circles, the acronym VUCA now explains that overwhelming sense of seismic change. 

 

Supply chains are still not moving efficiently, Gervais says, pointing out that the Vancouver port is still congested. The war in Ukraine will further disrupt global patterns of trade, with three ports out of commission in the Black Sea.

 

Supply chain disruptions also affect inputs such as plastic packaging, wood containers and pallets, diesel fuel and fertilizer.  The steep climb in prices for these basic inputs is detailed in the accompanying charts. 

 

Statistical tables

 

All of this to say that inflation is not a short-term problem. To tame Canadian inflation now pegged at 5.7 per cent, the Bank of Canada has signalled another 0.25 basis point increase on April 13. And some financial markets are pricing in at least six more increases before the end of 2022. 

 

“I find these forecasts quite aggressive,” Gervais commented. “But I do feel compelled to say never fight the market.” 

 

For Ontario farmers, there is both comfort and anxiety in rapidly rising farmland prices. Depending on whether you are a seller or a buyer, the increase of 22 per cent in Ontario farmland in 2021 is “quite unique in the magnitude of increase,” says Gervais. “These increased values were seen right across the board in all regions. The diversity of buyers, including urban interest in farmland, has driven up prices.” 

 

For more in-depth analysis, go to www.fcc.ca/knowledge

 

Source:  Ontario Processing Vegetable Growers’ March 30, 2022 annual general meeting

 

 

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Submitted by Karen Davidson on 1 April 2022