High grain prices may pull veggies up too

High production costs and the lure of easier returns from other crops may cause some vegetable growers in Manitoba to rethink their operations — but the extensive infrastructure involved in vegetable production should limit quick acreage shifts in the province.

Strong grain and oilseed prices are expected to eventually pull vegetable prices higher as well.

In recent years U.S. corn and soybean farmers have been stealing acres away from every crop that’s not as profitable, "which is most everything," said Tim Hannagan, a Chicago-based grains analyst with Alpari LLC (US).

Soybeans and corn were now even being grown in fields that used to be used for vegetables, he said. As a result, he expected "food inflation" to become a larger topic as vegetable companies will soon be forced to pay premiums to keep farmers growing the crops instead of the less-risky grains and oilseeds.

In Manitoba, just over 4,000 acres were seeded to commercial vegetable crops (excluding potatoes) in 2011, according to the latest provincial data available. That’s down from about 5,000 acres in 2006. The major vegetable crops in the province include carrots, onions, sweet corn, cabbage, cauliflower, and broccoli.

An estimated 80 per cent or more of the vegetables grown in the province are typically exported out of province, according to market participants.

The cost of production has gone up a fair bit and profit margins are eroding, said Todd Giffin of Mayfair Farms in Portage la Prairie and president of the Vegetable Growers Association of Manitoba.

The declining profit margins are causing some growers to reduce their number of employees and off-shore labour as they try and streamline and remain profitable. "When it comes down to it, it has to be profitable, and it’s been tough for some producers," he said.

"Everybody is looking at cutting back to try and be profitable… making decisions of what crops to reduce or drop to be sustainable," said Giffin. While vegetable crops do make a larger gross return per acre than other field crops, there is also a considerably higher risk involved, he said.

"It doesn’t make sense for all of these other commodities to go up, and vegetables not to go up," he said. Vegetable prices will eventually need to move higher as well, he said, or producers will turn to other crops with less risk.

However, he added, the vegetable industry is not as easy to get out of as switching between soybeans and canola, given the heavy investment in coolers, irrigation, warehouses, equipment et cetera.

"Any producer, no matter what their main crop is, are always checking out other options to see if there’s a way to make more money with less risk," said Tom Gonsalves, vegetable specialist with Manitoba Agriculture, Food and Rural Initiatives at Carman.

Gonsalves had not heard of any major adjustments in the provincial vegetable industry just yet, but noted that any shift in acres away from vegetable crops would be taking place in larger farms, as the intensive market garden producers farming only a few acres are not likely to be switching to other rotational crops.

A vegetable farm is not as mechanized as a grain farm, and labour costs are significant. Of the larger vegetable growers in the province, Gonsalves estimated about half grew other rotational crops themselves, while the remainder grew only vegetables.

From a pricing standpoint, he said, the reality of the Manitoba industry was that values need to stay competitive with crops grown elsewhere.

"In the vegetable world, like it or not, prices are set by (asking) ‘What would it cost to bring onions in from somewhere else into this marketplace?’" he said, noting that Manitoba needs to remain competitive with that price.

— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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