In This Section |
A Profile -
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| Author: | Wayne Brown - Greenhouse Floriculture Specialist/OMAFRA; Graeme Murphy - Greenhouse Floriculture IPM Specialist/OMAFRA |
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| Creation Date: | 01 June 2003 |
| Last Reviewed: | 08 August 2007 |
The Ontario greenhouse flower industry has had significant growth over the past 20 years. Based on farm gate receipts it is now the third largest agricultural sector behind dairy and swine. Since the early 1980's, until recently (2004), expansion by more than 10% occurred each year even through times of recession in the rest of the Canadian economy. Most large wholesale growers are a very dynamic, aggressive and technologically advanced sector of the industry and are key to its success within the North American market. Conservatively, it is estimated that the industry directly employs approximately 10,000 people with a gross yearly payroll of more than $150 million. Floriculture production includes flowering potted plants, annual spring/bedding plants, container-grown perennials, spring flowering containers and cut flowers.
The 2006 farm gate value of the Ontario greenhouse floriculture industry as reported by Statistics Canada in Publication 22-202 was $828 million, an increase of 6.5% over 2005. Until 2003 an average growth rate of over 10% had been recorded since the early 1990's. Export sales peaked in 2003 with record export sales of $317 million. In 2006, export sales dropped to $192 million representing a 40% decline with the sharpest decline occuring in 2005. Exports are now less than 27% of total sales but are critical to the viability of the large wholesale growers located in the Niagara area and surrounding regions. However, the sector still maintained a positive trade surplus of $17 million.
In 2006, the Ontario industry represented 55% of the total Canadian farm gate receipts of $1,515 million). The British Columbia industry (21%) and Quebec (11%) are the two regions with a significant greenhouse floriculture sector. These two regions, like Ontario have experienced considerable growth during the past decade. However BC farm gate value dropped in the past couple of years as growers switched to greenhouse vegetable production. Overall growth of the Ontario industry, until recently, has been because of population, climate and proximity to large US markets and the concentration of larger technologically advanced operations within a small area that has allowed crop specialization to occur.
Among North American jurisdictions, Ontario is the third largest producer of greenhouse floricultural products behind California ($1.1 billion US) and Florida ($976 million US). From a global perspective, the value of Ontario production is about 25% of the US industry and 10% of that of the Netherlands.
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In 2006, 460 ha of greenhouse floriculture production were reported by 1274 Ontario producers (Agricultural Census), only a 13% increase from the 406 ha reported in 2001. A discrepancy of over 50 Ha is apparent when comparing with the results of the 2006 Annual Greenhouse Industry survey (Stats Canada Pub 22-202) which reported approximately 515 Ha. In comparison, the production area for greenhouse vegetables totalled 650 Ha, nearly 200 Ha larger than floriculture. In 2005 and 2006 limited new production area was built for flower production.
The number of commercial growers, totally 1,274, has declined marginally (7%) since the last census. There are still many smaller retail-oriented growers operating successful operations, 6-7 months per year, in non-traditional greenhouse production to service a vibrant local spring garden market. Statistics Canada survey results show that on average greenhouse production facilities are being operated about 8.5 months of the year, reflecting a steady decline since the late 1990's. Energy cost is a key reason.
The majority of the Ontario production (75%) is situated in southern Ontario in the counties located around the western end of Lake Ontario (Niagara and Hamilton) and the counties along the north shore of Lake Erie (Essex, Haldimand and Norfolk in particular). ). In southern Ontario, 50% of the growers and 60% of the production area are located in the regions of Niagara and Hamilton. A significant percentage of the production from these regions is destined for the export market. Since 2001 the production area in Niagara has grown by 31.5 Ha. Essex was the second largest area but the sector has only expanded by 5 Ha primarily because a higher percentage of the area was dedicated to cut flowers.
The average operation in Ontario is just over 3600 m2 (39,000 ft2)
according to the 2006
Agricultural census. However, the operations in the major production
areas are much larger. In 2006, the average operation in southern
Ontario was about 8,660 m2 (93,200 ft2) compared with 1550 m2 (16,500
ft2) or less in non-traditional production areas of the province.
These small family operations service their local market primarily
with bedding plants, perennials and garden mums in the late summer.
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The strong growth in the wholesale production sector in both the domestic and export market has been because of the involvement of the mass market chains in the sales of plants and flowers. Florist shops have maintained the wedding and funeral sector of the retail market but have lost considerable market share in the potted plant market.
Beginning in the mid-1980's, until 2004, growers particularly in Niagara, were successful in the development of the export market throughout the United States eastern seaboard, with destinations as far south as Florida and Texas and as far west as Chicago. The Ontario industry was initially successful in penetrating the US mass market because of their investment in technology, product quality, product diversity and volume. The concentration of growers and wholesale distributors within a relatively small area has been beneficial in being able to supply all the stores of a mass market chain within a specific region with a full line of floral product. It has allowed individual growers to specialise in the crops grown.
According to Statistics Canada, International Trade Division, exports increased rapidly during the past decade; from $63.3 million in 1991 to a high of $317 million in 2002. Export sales in 2006 dropped for the fourth consecutive year to $192 million for a variety of reasons including the rapidly rising value of the Canadian dollar and dramatic increases in fuel costs for heating and transportation.
The export market has declined sharply for a variety of reasons. The rapid rise in the Canadian dollar has reduced a key competitive advantage. Expansion and modernisation of both the US and Ontario industries has meant an oversupply in the market place. The competitive and price point pricing by the large chains has resulted in unit plant prices being flat lined for the past decade. Escalation of transportation including fuel surcharges, heating, growing containers and packaging costs (essentially all inputs that use energy to manufacture) have resulted in razor-thin production margins.
Both Home Improvement and Supermarket chains in the US and Canada are changing their purchasing patterns with most now focused on key holiday and spring market sales or direct, small shipment delivery to individual stores because of the high level of product loss experienced (poor sell through) during the remainder of the year. This change in focus has created problems for growers from both a production and labour perspective. The US consumer purchasing habits for floral product is much different from European consumers who purchase flowers weekly and over the year spend 5 - 10 times more per person than North Americans. Canadian consumers purchase habits fall somewhere in the middle.
The introduction of Pay-by-Scan sales by large mass market chains is forcing many growers and wholesale distributors to re-evaluate their business plans and product lines because growers are being paid only on what is sold. Many Home Improvement chains are insisting that the 'lead vendor" take on much of the responsibility of maintaining plant material in the individual garden centres in an attempt to increase the profitability and the sell through of bedding plants and other flowering potted plant material by reducing their losses. Some view this as an opportunity given skyrocketing input costs, no increases in wholesale pricing and the perishable nature of the product.
The cut flower sector is currently in crisis. It has become extremely
difficult to compete with cheaper imported "bread and butter"
cut flowers from South America and Africa for use in mass market commercial
mixed flower bouquets. Since January 2005, one leading domestic retail
chain has been accessing pre-made supermarket mixed bouquets directly
from South America, eliminating Ontario rose and chrysanthemum growers
and wholesale bouquet makers from the marketplace. As a result the
market price for domestic product has dropped dramatically. Domestic
cut hybrid tea rose production has declined sharply and has been replaced
by alternate crops like gerbera and snaps. As a consequence, cut gerbera
and snapdragon prices in 2006 fell because of the increased production
as growers switched to these crops. Currently surviving on their equity,
it is likely that a number of growers will be forced to close within
the next few years. A few rose growers are attempting to compete by
growing only the latest novelty roses that the key producing regions
generally don't produce until the demand becomes sufficiently large.
The inability to access the latest cultivars of cut chrysanthemum
developed in Europe that they must compete against is another challenge
for chrysanthemum growers.
The availability of similar pest control products to their US counter parts continues to be a major issue. The industry has supported the minor use programme but demands by PMRA for greenhouse-based dislodgeable foliar and occupational exposure studies not generally required by the US or other OECD countries, has been a key stumbling block to achieving new registrations. The lack of new, effective, reduced risk products that are IPM friendly continues to frustrate the industry. The adoption of bio-control programmes where feasible, has been a positive outcome to this dilemma. Flowers Canada Ontario, for the past several years, has funded a technical specialist to assist in the development of User Requested Minor Use Label Expansions applications.
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Growers and wholesale distributors have experienced 'serious turbulence" because of the sky rocketing rise in value of the Canadian $ that began in 2005.
Delays at the US border due to increased security since 9/11 and numerous shipments being delayed for 6 - 12 hours or being turned back due to what the industry perceives as non-tariff pest issues has been costly because of reduced shelf life, lower quality of the product upon reaching its destination and most importantly disgruntled retail customers who rely on "just-on-time" delivery of product to their distribution centres or individual stores.
"Country of Origin Labelling" is also an issue challenging
the export of mass market cut flower bouquets and floral arrangements
that contain both imported (typically South America) and Ontario-produced
cut flowers in part because Canada does not inspect cut flowers entering
the country.. Industry has been working with both the Canadian Food
Inspection Agency and US government Plant Health officials to resolve
this issue.
Quarantinable pests and diseases including Japanese Beetle, Swede Midge, Ralstonia, Sudden Oak Death and Chrysanthemum White Rust have caused many problems and cost the industry hundreds of thousands of dollars in lost sales during the past couple of years because of the restricted international movement of both finished and propagative material. In spring 2005, a new insect pest, Duponchelia fovealis, not previously known to exist in North America, but widely distributed in greenhouse operations in Europe, was identified as being present in 3 Ontario cut flower greenhouses. Considerable concern about this pest exists within the whole greenhouse industry because of the reliance on the US market as a destination for both flowers and vegetables produced in Ontario. By the end of 2005 all 3 operations were declared pest free by CFIA. In 2007, CFIA has begun consulting with the industry concerning pests of quarantinable interest and the impact on the industry. Currently, individual growers financially bear the cost of destruction and loss of sales whenever a quarantinable pest or disease has been identified. Flowers Canada has been promoting changes be considered to the current policy.
CITES, the international agreement to protect species of wild plants occasionally creates difficulty when exporting flowering plants such as cyclamen, many cacti and orchids because the native genera are protected under the International Convention.
The industry where the crop and investment allows, has been pro-active since the early 1990's, installing recirculation systems to better manage water and nutrient usage when building new production areas or retrofitting older facilities. However, it is very crop specific. Growers producing cut flowers such as snapdragons or chrysanthemums, crops traditionally grown in soil or containerised crops such as bedding plants will continue to be produced in open systems.
Until recently much of the newer production area has utilised an
inflated double layer of 6 mil polyethylene as the greenhouse roof
covering in part because of initial investment costs. Disposal of
the poly, which must be replaced every 3-4 years, has become increasingly
difficult as many municipal landfills no longer will accept it as
a waste. Recycling initiatives are being investigated by the greenhouse
sector. Renewed interest in glass has occurred for two reasons; a
lifespan of 30+ years and the 30% higher light levels critical to
crop quality and production.
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Prices have remained relatively steady over the past few years, but input costs continue to rapidly increase, with some like fuel and transportation (surcharges often an issue) increasing by more than 30%. To remain profitable, growers have become more efficient in production and management through a variety of means including focusing on one crop, economy of scale and technology.
The price of natural gas has risen rapidly since 2001, but prices during the past year have levelled somewhat. Heating is a major input cost representing 25-40% of the total cost of production depending on the crop being grown. The months of December - February represent 58% of the total annual heating requirements. Long term natural gas contracts (Ag Energy Co-Operative) have cushioned some of the cost increase but for most, fuel costs have increased by 30% while wholesale prices have increased by less than 3%. In 2006 total fuel costs for the greenhouse industry increased 10% over 2005 (Statistics Canada Pub 22-202).
The industry is divided on the approach to alternate energy sources. Some are utilising anthracite coal while others are using alternate fuel sources such as waste wood products, oat hull pellets and corn. Often growers have not appreciated the many issues and the increased level of management required to operate boilers when utilising alternate fuels. Others are installing new boiler and computer technology that allows for greater energy efficiency. Others with older structures are shutting down parts of their operation during the coldest time of the year because of low product pricing and demand. Many larger operations will consider installation of co-gen units once policy and pricing decisions are made by the province.
Electricity costs in general, account for 10% of the total energy bill and the rapid increase in prices in 2002 following the deregulation of the Ontario market was a major concern for many growers. Government moves to cap the electricity prices have removed the immediate concerns but a sense of uncertainty remains. A $0.01/kWh increase in electricity represents an increase of $2.25 million cost of production increase. Use of high pressure sodium lighting has dropped significantly because of rising electricity costs and lower wholesale flower prices.
The industry has recently participated in a comprehensive audit of
energy consumption (heating and electricity) with preliminary reporting
already completed. Increasing the price of many floral products to
reflect the rising cost of production has been difficult when negotiating
with mass merchandisers.
Finding and retaining qualified labour to manage crop production continues to be an issue because of the increasing seasonality of the work, especially production of bedding and spring plants. Nationally, Statistics Canada reports that the yearly payroll increased by 6.5% in 2006 over 2005. Labour costs typically represent 20 -30% of the cost of production. Many operations with peak seasonal work, are increasingly relying on the off shore labour programme to supplement their labour force. In potted plant production, technology including robotics, is being incorporated that eliminates repetitive activities such as pot filling, seeding, transplanting and spacing while with cut flowers, automated grading and bunching machines are becoming more common.
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Conflicts with neighbours are more common. The issues include fan noise, tractor-trailer traffic, stray supplemental lighting and environmental concerns related to burning of alternate fuels, nutrients and pesticides. Municipal bylaws currently address most of these concerns.
As higher percentages of crops are marketed through the mass market outlets, supermarkets and large box stores such as Wal-Mart and Home Depot, medium and even large wholesale growers are relying more on the large wholesale distributors to market the product because of their sales force and contacts. Medium growers can then rely on what they do best, grow quality product. Increasingly, the chains want to consolidate the number of growers or suppliers from whom they purchase in a particular region of the country. Bankruptcy and consolidation of several US chains always puts a "chill in the air" for growers. The mass market chains expect growers to "grow with them" as they open more stores. In response to these kinds of demands, there has been a spate of corporate buyouts and amalgamations of numerous large growing operations by investment bankers during the past decade. Many in the industry view this activity with considerable scepticism and within the past year, a couple of large corporate interests in the US have divested of their production facilities.
Flowers Canada Ontario Inc. is pursuing a check-off initiative through
Section 12 of the Ontario Farm Products Marketing Act to fund marketing/branding
of locally grown product and to fund research initiatives aimed at
maintaining the competitiveness of the industry.
Modern, state-of-the-art greenhouses are costly to construct; $200
or more per square metre depending on the technology incorporated
inside the greenhouse. This is a barrier to many potential growers
entering the industry. As a result, many of the existing family operations
continue to expand as the next generation enters the family business.
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Flowers Canada (Ontario) Inc. currently is a voluntary organisation that represents the interests of commercial greenhouse flower growers in Ontario. Flowers Canada (Growers), the grower division of Flowers Canada (national) is also managed by the Flowers Canada Ontario office located in Guelph because of the commonality of issues. As an organisation, it represents growers on national issues such as pesticide minor use issues, border issues, quarantinable pests and diseases and Ontario growers on provincial issues. Dr. Irwin Smith is Executive Director of both organisations.
The Ag Energy Co-Operative, founded by greenhouse growers and also
located in Guelph, purchases gas and electricity contracts on behalf
of its grower members. It now represents 2/3 of all greenhouse natural
gas consumption in the province. Mr. Mike Bouk is Executive Director.
The Ontario Greenhouse Alliance (TOGA) is a strategic partnership
of the Ontario Greenhouse Vegetable Growers and Flowers Canada (Ontario)
Inc. with its major focus being on issues common to the members of
both organisations. Mr. James Farrar is the managing Executive Director.
The industry sells life style……"beauty, enjoyment
and a pleasurable experience". Gardening must be fun! The typical
North American family leads a hectic life style with little free time
and also because of technological advances (cell phones, e-mail, microwaves)
expect instant gratification. Hence, growers must grow and market
flower and plant products tailor-made to meet that expectation.
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