The tribunal is pondering what to do about an application to
establish the first integrated tomato growing and processing business, a joint
venture of Art Brouwer and his Eau Farms Ltd. and Highbury-Canco Corp.
The Ontario Processing Vegetable Growers Marketing Board has
turned down an application from their joint venture, called Integrated Farming
Ltd., to grow about eight tonnes of tomatoes next summer.
It sees the joint venture as a ploy to reduce the cost of
tomatoes for Highbury-Canco.
But Highbury-Canco president Sam Diab testified Monday that
the reason is to explore new marketing ventures that will increase sales,
mainly by exploiting survey findings that consumers prefer made in Canada
tomato products with the tomatoes coming direct from local farms to their store
shelves.
He said this is separate from another Highbury-Canco goal of
pursuing large-volume sales of tomato paste, both in Canada for export. As part
of that goal, Highbury-Canco has been asking the marketing board and the
Ontario Farm Products Marketing Commission to approve creation of a fourth
pricing category for processing tomatoes at $12 to $15 per tonne below the
prevailing contract prices.
But the board thinks the joint venture proposal is simply
another Highbury-Casco attempt to get a lower price for tomatoes and it’s for
that reason alone that it rejected the application for a licence to grow next
summer.
The tomato paste proposal is still under discussion among the Ontario Farm Products Marketing Commission, Highbury-Canco and the marketing board. Their next meeting is Friday.
The tomato paste proposal is still under discussion among the Ontario Farm Products Marketing Commission, Highbury-Canco and the marketing board. Their next meeting is Friday.
Under close questioning from two members of the panel for
the Ontario Agriculture, Food and Rural Affairs Appeals Tribunal – Marthanne
Robson and Arnold Strub - the marketing board’s general manager John Mumford
said the board assumes that Highbury would use its share of profits from the
joint venture company to lower its cost of procuring tomatoes.
Strub noted that Integrated Farming Limited could use its
profits any way it chooses, and not just to lower tomato prices.
Robson learned from Mumford that the board has no objection
to a joint processor-producer venture if it’s a sole owner, not a partnership.
Thus Lakeview Vegetable Processing grows and processes carrots, but the profits
are all stay with the sole owner.
DeBrouwer testified that the joint venture is “a deal made
in heaven” and that he was immediately enthused when he was approached by Diab
in January.
His benefits are reduced risks, lower costs for
bulk-purchased inputs such as trucking, fertilizers and pesticides and a
greater likelihood that he will be able to expand production.
Diab said Highbury benefits by learning much more about the
details involved in growing tomatoes and by providing services such as currency
hedging. He said it also gives Highbury a legitimate reason to advertise that
its tomato products come directly from its fields to customers.
Mumford said under questioning by Strub that he believes
many other vegetable processing companies are watching this venture closely,
especially if they think it presents a way to lower crop input costs.
That could, he said, undermine the entire structure of
orderly marketing for the processing-vegetable industry.
Highbury-Canco was formed in 2014 to take over the Heinz
tomato ketchup facilities in Leamington. It was one of five plants Heinz closed
and Mumford said it was a closure the board anticipated, yet was surprised by
the timing.
Heinz helped Highbury establish itself, including provision
of a letter of credit so it could qualify for a processor licence from the
marketing board.
Highbury contracted with 10 growers, each with an equal
share, for the 2015 crop.
When the board refused to licence Integrated Farming Limited
to grow tomatoes this year, it was left with 2.5 million plants and so
contracted with Bert DeBrouwer, an uncle of Art DeBrouwer, and three other
extended-family members and companies to plant the seedlings.
Diab said he did not contract with Art DeBrouwer’s Eau Farms
Ltd., the joint-venture partner in Integrated Farming Limited, because the
board was suggesting that Highbury-Casco could contract for its needs with Eau Farms
and didn’t need to establish Integrated Farming Ltd.
Diab said he objected to the board telling him with whom he
should contract. DeBrouwer said he had hoped that he would get the contract,
but didn’t know the reason for Highbury’s choice of his uncle, nor did he ask.
The tribunal is likely to issue a decision before the end of
the year.
