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Tuesday, January 20, 2015

Why Ontario greenhouse operations are expanding into Ohio.

This is the time to form partnerships with grocery stores, restaurants, and food service industries, in order to persuade key players to support American agriculture products. In our communities, we need to exercise the power of the dollar. Make a conscious decision to buy American grown products.”
-- Aaron Preston - Future Farmers of America
Saturday I read an article claiming greenhouse operations in Essex County are leaving the Leamington/Kingsville/Lakeshore area because of a lack of electrical power. The article laid the blame on the governing Ontario Liberals.

"No Juice For Veggies" the headline read in a big, bold font. "Power problems push growers elsewhere," the reader on the Web was told and the writer should know. He's from the Leamington area and may have relatives working in the greenhouse industry. Yet, like so many other Free Press articles, I was left with more questions than answers.

Leaving Essex County for Ohio simply to reap the benefits of being on  the American electrical grid seems a reach. As the International Business Times reports: "The United States endures more blackouts than any other developed nation. . . . " The American grid suffers from an increasing number of blackouts because of an aging infrastructure, a lack of investment and no clear plans guiding modernization. The Ontario Liberals are not alone at mismanaging the power grid and they have mismanaged the grid. There is no argument there.

It's true that the little Southern Ontario town of Leamington and the surrounding area has lost jobs to the United States. At a city Economic Development Committee meeting a year ago, Chair Louis Saad raised the issue of incentives to encourage businesses to remain in town. It seems a local business owner was considering moving his company south of the border to benefit from the lower cost of living, the more favourable tax rate and the generally less expensive business environment in the United States.

Chair Saad was told it was illegal for the Municipality to give incentives to businesses. This was not news to Saad. He has complained in the past that "(The U.S.) has a lot of tax incentives that aren’t legal in Ontario." Saad argued Southern Ontario communities must be able to offer incentives in order to attract the companies that otherwise would take the jobs to Michigan and Ohio.

Mark Balkwill, president of the Essex County Federation of Agriculture, agreed. Balkwill has been quoted as saying that a major player in the greenhouse industry was opening an operation in Ohio after the state offered to match dollar for dollar any investment in production facilities. In addition, the state promised no property taxes during the first five years of operation.

Balkwill may have been referring to Nature Fresh Farms which stated in a press release that their move into Ohio was "contingent upon acceptable levels of incentives from the State of Ohio and other government authorities as well as utility rates agreeable to Nature Fresh." The Leamington grower may have received the incentives as there are no signs that the expansion is not going through.

And there is one other reason Canadian greenhouse operations are expanding into the States: Money. The United States is where the money is. And it is not just Canadians looking to expand into the States. Greenhouse growers in the Netherlands are actively looking for opportunities in the States.

A report released by Dutch greenhouse sector points out: "It is remarkable that the total area of greenhouse production in the US only amounts to 9.100 hectares, while in the Netherlands greenhouse production takes place under 10.400 hectares, (even though) the US is 244 times larger than the Netherlands and has almost 20 times the number of consumers. . . . the US greenhouse sector has some room to grow."

Historically the U.S. has imported most of their greenhouse grown food but in the past few years the domestic production has increased significantly. Why? A small part of the reason is a growing trend to buy foods grown locally whenever possible. This puts foods from both Mexico and Canada at a disadvantage and even Florida and California when one is considering the Midwestern and Northeastern markets.

But there is a bigger movement afoot. It is one that touches the entire American market for consumer goods and more: The "Buy America" movement. In 2008, Barack Obama promised rural Ohio voters he would "enforce Buy American requirements to protect specialty crops." Fruits and vegetables are counted among  specialty crops.

The Obama campaign literature claimed demand for locally grown foods was growing quickly. For this reason Obama supported the immediate implementation of the Country of Origin Labeling law. COOL would enable American consumers to distinguish imported foods from those grown within the States. Obama argued consumers "deserve the right to know where their food comes from."

EMD workers locked out without a hope of being called back.
When London, Ontario, lost Electro Motive Diesel a London Free Press columnist tweeted, "Electro- motive workers should give their assent to a team of shuttle diplomats." Maybe but I put more faith in the words of John Hamilton, CEO of Electro-Motive Diesel. He told a House subcommittee: "In accordance with Buy America, we announced last week a search for a facility in which to perform final assembly." To sell locomotives in the States, in any quantity, EMD was going to have to build those engines in the States. The closing of the London assembly plant should have come as a no surprise to anyone.

The other reasons given for closing the EMD plant were real but they were not the whole story. For instance, the problems with the electrical grid in Ontario are very real and electricity in the province is among the most expensive on the continent. But, when it comes to losing the expanding greenhouse industry to the States, our electrical problems are not the whole story.



Reportedly, up to 25 percent of the power generating capacity in the state of Ohio is reaching the end of its lifespan. Replacing those power plants will be expensive and will take years. Cold weather pushes the present grid in Ohio to its limits.

When I did a search of electrical blackouts in Ohio, I discovered one outage about two and a half years ago left 450,000 folk across the state without power. A little more than two years ago 240,000 Cleveland residents lost power in a severe autumn storm. Some four years ago, 80,000 residents living near Lake Erie were without power because of an equipment failure caused by too many people overwhelming the grid by turning on their space heaters. Space heaters overtaxed the Ohio grid!

80,000 people left without power in Ohio by the use of too many space heaters
A similar search of Southwestern Ontario turned up one recent blackout affecting a mere 2,440 people. This is not to say The Free Press is wrong when it reports the Southern Ontario grid needs upgrading; It does. The power problems in Essex County have been big news this year. But if Canadian companies are moving to Ohio simply for the electricity, they may be making a mistake -- and they better think twice before turning on a space heater or anything else to heat a greenhouse.

Compared to Ohio, it appears Essex County offers far more reliable power.
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After writing this I happened upon this information released by the USDA more than two years ago. "Imports from Canada's hothouse tomato industry peaked in 2005, but have weakened with rising competition from Mexico." I'm sure the rising price of electricity in Essex County played a role in this but it is clear that much more is going on here. It is interesting to note that some of the Mexican competition is from companies owned by Leamington growers. Today I went to the neighbourhood Metro grocery store and two long sides of an island in the produce department were lined with Mexican tomatoes carrying the names of Leamington/Kingsville based growers.

The USDA article goes on to report, "Mexico now accounts for 71 percent of the U.S. import market for greenhouse tomatoes, while Canada's share has been reduced by half to 27 percent." By half!

And here is the kicker, "Greenhouse tomatoes, in fact, have taken a greater share of the U.S. fresh-market tomato industry. About three-fourths of U.S. fresh tomato exports are shipped to Canada . . . (furthermore) During the early 1990s, the United States became a net exporter of processed tomato products and has remained so."

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