Login | Register

RUNNING ON EMPTY
Tuesday August 5 2008 By Richard Vivian, Staff Writer The effects of high fuel prices are evident everywhere. People are curbing their driving habits and paying more for most everything they buy.
Local farmers are feeling the pinch particularly hard, as their output costs jump and revenue prospects remain relatively unchanged.
“The cost of fuel, just fuel, can be anywhere from 25 to 40 per cent of your cost of production. If you have that increase by 50 per cent in six months, you can imagine what happens,” says Ron Munro, who runs Munro’s Country Garden in East Garafraxa and serves as president of the Greater Dufferin Area Chamber of Commerce.
“In our own operation, our cost of fuel is now exceeding what we pay our employees. You can [only] do that one year in a row and something’s got to give.”
Fuel is an essential component of agriculture. Without it things would move a lot slower and be more labour intensive. Think of the process involved with horse-drawn plows or harvesting by hand, and the accompanying store prices.
In addition to the equipment needed to operate a farm, fuel is a major expense in getting the end product to store shelves.
“It goes straight to the bottom line,” Leo Blydorp, a farmer for the past 14 years, says of fuel costs. “What I pay for fuel, it’s got to come out of whatever I get.
“We’re not price-setters, we’re price-takers.”
Blydorp primarily grows corn, soybeans and wheat on 575 acres of land, split between a property north of Shelburne and another near Lucknow in Bruce County.
“Hopefully we’ll be able to cover our costs,” he says.
Farmers wrack up expenses throughout the season but don’t really know what kind of return they’ll see on their investment until sales have been completed.
“We have some idea, but crops can vary a lot,” Blydorp says, citing his soybeans as an example. “This year it’s very wet, so I have some soybeans that went in later than I’ve ever planted soybeans, and this area is sort of a short season area. Whether the crop is going to mature before we get a killing fall frost is a bit of a question mark.”
Exactly how much of an impact rising fuel prices have varies farm to farm. It changes based on individual practices and the make-up of each operation. But there’s no question it’s affecting every sector of the industry, says Mark Ostrowski, vice-president of the Dufferin Federation of Agriculture.
“If you’re a livestock producer, fuel hits you probably not as hard as it would if you were a cash cropper,” he says.
Most livestock producers grow at least some of their own feed, he says, noting they also experience significant transportation costs.
“I’m sure glad I’m not in those commodities,” he adds of cash cropping and the required fuel costs.
Ostrowski, a trained food scientist and partner in an agriculture/environmental management consulting firm, has a field nursery for landscape trees in Amaranth.
He says fuel prices don’t affect him “as much” at his field nursery, but in the greenhouse business “it’s costing these guys a fortune (for heat) ... in the winter and spring seasons. They’re costs have gone up, probably 30 to 50 per cent.”
It’s not just the price of fuel that’s gone up, Blydorp points out. Pretty much everything needed around the farm is more costly — “These products have to be moved around, so they’re dependent on transport, which uses fuel.”
And the price of fertilizer is “going up faster than fuel,” he adds, as one of the key ingredients in fertilizer is nitrogen, which is a derivative of natural gas.
The impact of high fuel prices are abundant and wide-ranging, Larry Martin, chief executive officer of the George Morris Centre, a Guelph-based agricultural think tank, says.
Even agri-tourism — touted in recent years as a saviour of family farms — is taking a hit, not necessarily because of skyrocketing expenses, but dwindling revenues.
“They’re just not driving as much,” Morris says of society as a whole. As a result, fewer people are leaving the cities to visit country markets and other rural attractions.
“It may change the way local food gets distributed. It’s probably going to be cheaper to take the food to the city than take the city to the food.
“We may see, still, some success [with farmers’ markets], but maybe less success from the tourism side and more success marketing it to the folks in the city.”
People in Prince Edward County have been having “a fair amount of success” with a satellite farmers’ market operation in Toronto, he notes.
“Some people aren’t coming to the county, but they want the brand.”
Despite widespread concerns about the demise of family farms, there is potential for a silver lining in the cloud of rising fuel costs.
Importing produce from far-away countries consumes greater quantities of fuel than purchasing local supply and, as a result, that expense may help level out the playing field.
“This could be, maybe, somewhat of a blessing in disguise. Canadians are dealing with these absurd price increases in fuel over a very short period in time, but it’s not restricted to Canada — this is a global thing,” says Munro.
“You go into the grocery store in December, January, they’re air-freighting tomatoes from Israel. Now I don’t know what it costs to fly a person from Israel to Toronto, and then get them to Orangeville, but I would imagine that it’s going to cost a hell of a lot more to buy tomatoes in the winter.”
However, Ostrowski is less optimistic. The ability of foreign farmers to provide produce in the winter will prevent parity between local and import foods, because imports contracts can be for larger quantities over a longer-term, he says.
Foreign producers often, aren’t encumbered with the same level of government regulations, he adds.
“It’s a great concept.... I think with smaller local retailers, that might be true, but with the large chains that have a significant amount of leverage, I just don’t think it’s going to register on their radar. That’s my gut reaction,” he says of fuel costs inspiring more local produce on shelves.
Four major chains control 92 per cent of food sales in Canada, he adds.
“They have quite a bit of clout in the marketplace and when farmers come to the table to sell wares, it’s one guy or it’s a small co-op ... that’s negotiating,” Ostrowski continues. “It’s difficult because these large chain buyers have access, first of all, to way better information by virtue of deep pockets and international contacts ... and secondly, they can access, probably, the same products offshore at much lower prices all year around.
“You can’t blame them. Their job is to get return on investment for shareholders.”
There is “some evidence” stores are starting to turn more attention to local produce, Martin says.
“That kind of thing is slow in taking place because people have purchasing policies and things like that.
“If (the price of fuel) stays high, and I expect it to stay high, I don’t think there’s any question that it will do that in the longer term. It’s going to give advantage to local product,” he says. “It’s causing people to re-examine that whole thing about bringing in ... imported produce.”
Whether it’s the result of high fuel prices or something else, Martin believes higher food prices are inevitable.
“To me that is absolutely a no-brainer,” he says, citing increased demand from Asia, which impacts the global market, as a major factor.
“We’ll increase our productivity, but we’ve got a fixed amount of land in the world and it’s got to translate through into higher food prices,” Martin continues.
“Retailers are resisting like hell, but it’s going to happen. It’s just bound to happen.... At some point, it’s just going to be a reality and you’ll have no choice.”

North Peel Media Group Newspapers: The Brampton Guardian Caledon Enterprise Independent & Free Press Orangeville Banner