Profile of the Canadian Greenhouse Tomato Industry

Industry Highlights

• Canadian greenhouse vegetable production has evolved into a rapidly growing business with a farm gate value of $494 million in 2000.
• Production of greenhouse vegetables occurs in every province but is concentrated in Ontario, British Columbia (B.C.) and Quebec due to climatic and energy advantages as well as the proximity to large domestic and U.S. markets.
• British Columbia, Ontario and Quebec have also been able to develop niche markets in nearby U.S. states with the decrease of tariffs since 1989.
• In 2000, Canada grew 182,736tonnes of greenhouse tomatoes valued at $288 million for the fresh market. Also in 2000, Canada produced approximately519,166 tonnes of field tomatoes with an estimated farm gate value of $52 million. Nearly all the field tomato production went to processing. Greenhouse grown tomatoes account for an increasing proportion of Canadian fresh tomato production.
• In 2000, Canada imported 172,696 tonnes of fresh tomatoes from all destinations. During the same period, Canada exported 101,472 tonnes to all destinations from which 101,390 tonnes went to the U.S.
• In 1999, Canada utilization of fresh tomatoes was 229,530 tonnes. U.S. exports to Canada represented approximately 58 percent of Canadian utilization.
• In contrast, the United States (U.S.) produced 1.7 million tonnes of tomatoes for the fresh market, valued at US$1,161 million in 2000 and U.S. global imports valued at  Cdn $270.9  million. Canada imported 141,041 tonnes of fresh tomatoes from U.S. valued at Cdn$163,254 which represent 82% of all fresh tomatoes imported.

Introduction to the Greenhouse Industry

Canadian and European growers have been at the forefront of greenhouse production technology primarily due to climatic conditions. Canada has a short summer which limits the quantity of field vegetables grown. Through greenhouse production Canadians can grow vegetables all year. As a result, they have developed close ties with research institutions which has helped to provide a competitive advantage. Recently, several new U.S. producers have entered the greenhouse business using new technologies and increasing their greenhouse acreage, thereby diminishing Canada's technological competitive advantage.

Almost all greenhouse vegetable production uses various forms of hydroponics. The most common systems use rock-wool slabs as the growing medium. Computerized production facilities and new varieties have increased the diversity of products, improved quality and improved efficiencies. Lower per unit costs in spite of relatively cool climates have increased the competitiveness of the industry significantly. Most greenhouses in Ontario and B.C., the two leading provinces are heated with natural gas, usually purchased through producer-owned cooperatives. In warmer climates cooling becomes a significant cost. Greenhouse crops, because of the controlled and enclosed environment, are much less susceptible to outbreaks of diseases and insects. Biological control of insects using predator insects has become a very common management practice in recent years. The use of bumble bees has improved the efficiency of pollination and can also be used to distribute biological controls for certain diseases.

Greenhouse Tomato Production

Canadian Greenhouse Tomato Production

Canada produced 182,736 tonnes of greenhouse-grown tomatoes in 2000, valued at $288 million. The Canadian greenhouse tomato industry has experienced tremendous growth over the last decade. Since 1996, greenhouse tomato production and value have more than double. The industry now represents 58 percent of greenhouse vegetables grown in Canada.

Greenhouse tomatoes are considered to be higher quality than field grown tomatoes and do not compete directly on price. Some key greenhouse tomato cultivars are Trust, Dombito, Belmondo, Perfecto and Capello. These cultivars present desirable characteristics including: consistent quality; higher yields; large fruit (200 grams and greater); low tendency for growth cracks and fruit softening; and, good flavour.

In contrast to field tomatoes, Canadian greenhouse tomatoes are allowed to ripen naturally on the vine and are harvested as "breakers" when they start to turn colour. The green calyx is left on to emphasize freshness and to differentiate the product from field grown. Tomatoes are placed in a cell package in 15 lb (6.8 kg), single layer flats. Another recent trend is the production of vine-ripe clusters on the stem of smaller sized tomatoes. Harvesting at the early vine ripe stage makes tomatoes much more susceptible to damage from shipping but provides a considerable improvement in taste and texture.

Canadian greenhouse tomatoes are available from March to December with a peak in production in May. There is a move toward trying to provide a year round supply, however, the economics of producing a crop when light levels and temperatures are at their lowest willincrease costs and limit supplies from December to February.

Expansion of the Greenhouse Industry in the U.S. and Mexico

The North American greenhouse industry continues to expand. As outlined in Table 1, Canadian production has increased by 48 percent between 1997 and 1998, 36 percent between 1998 and 1999, and 16 percent between 1999 and 2000. The rate of growth has decreased over the last 3 years from 48 percent to 16 percent. Further, there are several new and growing U.S. competitors that are also expanding rapidly.

In 2000, a Colorado company is presently the largest greenhouse tomato producer in the U.S. with 178 acres of greenhouse vegetable production. Total U.S. production is estimated by industry sources at 167,668 tonnes, or 10 percent of U.S. production of fresh tomatoes and 768 acres planted in tomatoes.

Vegetable production from new greenhouses in Mexico is also coming on-line to supply the North American market. Some of these greenhouses have been financed with Canadian and U.S. investment. The total Mexican greenhouse vegetable area was estimated at 450 acres in 1999.

Comparison of the Canadian and U.S. Greenhouse Tomato Industries:

• In United States, the three largest producers account for 402 acres, more than 50% of the estimate acres planted in tomatoes;
• The largest company produced 34,292 tonnes representing 91% of British Columbia tomato production in 2000. This company exports to Canada on a regular basis;
• That company's yield (193 tonnes/acre) is higher than Canadian average yields (175 tonnes/acre). This is largely due to the greater amount of sunshine in Colorado and that the latest technology is being used in new facilities. Overall, Canadian yields will improve over time as older facilities and technologies are replaced but it will be difficult to attain Colorado's yield potential. As illustrated in graph 1, the number of greenhouses is decreasing and the greenhouse area is increasing in Canada.

Comparison of Canadian and U.S. Production and Marketing of Tomatoes

Canadian field-grown tomatoes are generally produced between July and October. Production peaks in August and September, at which time exports include field and greenhouse products. As mentioned earlier, greenhouse tomatoes are available from March to December, with peak production in May. In 2000, Canada produced 519,166 tonnes of field tomatoes for a farm value of $51,8 million. Of these, about 95 percent were sold to processors.

In 2000, Canadian exports of both field-grown and greenhouse tomatoes were 101,472 tonnes valued at $244.3 million. Export data do not distinguish between field-grown and greenhouse tomatoes. However, it is estimated that field-grown tomatoes constitute the majority of exports to the U.S. during August and September while greenhouse-grown tomatoes are exported during the other months. In 2000, Canada imported 172,696 tonnes of fresh tomatoes worth $209 million, with the U.S. share of the Canadian import market being 141,041 tonnes (82%) valued at $163 million. Other major suppliers to Canada included: Mexico, 24,119 tonnes; Spain, 3,450 tonnes; and Netherlands, 2,189 tonnes.

In contrast, the U.S. produced 1.7 million tonnes of fresh market tomatoes in 2000. During the same period, the U.S. imported fresh tomatoes for $951 million. The Canadian share of the U.S. import market was $244 million or 26% percent.

Marketing of Greenhouse Tomatoes

Both the Canadian and U.S. greenhouse vegetable industries have made it a priority to educate consumers on the difference in quality between field grown and greenhouse tomatoes to be able to obtain higher prices. In-store product tasting, to demonstrate superior flavour characteristics, is a key marketing tool.

Most field tomatoes from southern U.S. areas are harvested before they ripen, at the hard, green stage, then jumble packed in 25 to 30 lb (11-13.5 kg) lugs (containers). They are treated with ethylene gas to ripen at the destination market. Many growers are beginning to ship "vine-ripe" tomatoes which do not require artificial ripening, but these require more expensive packaging to withstand long haul transportation to the northern U.S. and Canada.

Under NAFTA, duties on tomato traded between Canada and the United States have been eliminated.

On March 28, 2001, U.S. greenhouse tomato growers filed an anti-dumping petition with the United States International Trade Commission (USITC) and the United States Department of Commerce (DOC). The USITC initiated an injury investigation on March 30, 2001 while the US DOC initiated an anti-dumping investigation on April 17, 2001.

On June 28, 2001, Canadian greenhouse tomato growers announced that they have filed an anti-dumping complaint against U.S. tomato imports. The Canada Customs and Revenue Agency (CCRA) has until mid-August, 2001 to decide whether to initiate a full investigation.

Under these actions, anti-dumping duties could be applied in either country.

Cost of Production and Market Pricing

Greenhouse tomatoes are generally priced higher than field-grown tomatoes due to higher production costs but yields are much higher as well (in Canada, yield for greenhouse tomatoes is approximately 187 metric tonnes/acre compared to 26 metric tonnes/acre for field tomatoes). Higher costs are attributed to higher usage of fuel, labour, sophisticated technology and computers. Moreover, fuel cost increased by 44 percent between 1999 and 2000.

Prices vary from market to market for similar products. The price of Canada Number (No.) 1 Grade  Large greenhouse tomatoes was almost always priced higher than field tomatoes 2001. For instance, the price of No.1 Large greenhouse tomatoes of 11 lb was $12-18 and the price of No.1 Large field tomatoes of 15 lb was $8.50-18 during the week of July 16, 2001 (source: InfoHort , Agriculture and Agri-Food Canada).

Greenhouse tomatoes are well differentiated in the market and are usually priced at a premium to field grown tomatoes. However, market prices between greenhouse and field grown tomatoes are interrelated. Depressed market conditions caused by an oversupply of field tomatoes will also depress the market for greenhouse tomatoes.

The reverse seldom happens because of the much larger volume of field tomatoes on the market at all times. However, individual marketing plans and/or larger than expected volumes at certain times may force marketers to offer features to major buyers from time to time.

PROVINCIAL MARKETING SYSTEMS FOR GREENHOUSE VEGETABLES

British Columbia (B.C.)

In British Columbia, all production of greenhouse grown tomatoes, butterhead lettuce and long English cucumbers is regulated under the B.C. Natural Products Marketing Act. The B.C. Vegetable Marketing Commission, which administers the Act for the B.C. grown greenhouse vegetables mentioned above, requires a production area quota. The quota is allocated among growers based on the industry's market projections and recommendations.

Most B.C. greenhouse vegetables are marketed through two grower organizations. B.C. Hothouse Foods Inc., a grower controlled private company, is the major marketer representing 58 growers under the B.C. Hothouse label, with one greenhouse located in California to produce during the winter. The other organization, Interior Vegetable Marketing Agency Co-op, markets produce grown in the interior of the province.

B.C. greenhouse tomato production is estimated to have reached $78 million in 2000. Domestic sales are made from B.C. to as far as Québec, and account for 25 percent of total sales while 75 percent of sales are made in export markets. Approximately one-half of exports are to west coast States while the remaining exports are distributed across other regions of the U.S. Tomatoes are all labelled with brand name stickers and "price look up" (PLU) number code labels, and packed in 15 pound single layer tray packs. Most sales are direct to retail distributors.

B.C. Hothouse Foods Inc. is the dominant company in the B.C. greenhouse industry. It is estimated that B.C. Hothouse's total B.C. grown greenhouse vegetable sales reached $215 million in 2000. The increase in sales is attributed to new investments in machinery and technology that have increased production and productivity. Also, the company has limited sales of tomatoes to Japan, Singapore and Hong Kong. B.C. Hothouse market under the "Harvest Hot House" brand name to compliment the "B.C. Hothouse" name. The B.C. Hothouse gold label is reserved for highest quality produce while Harvest House is used for produce such as smaller-sized beefsteak tomatoes.

Ontario

The Ontario Greenhouse Vegetable Producer's Marketing Board has authority for the marketing of Ontario greenhouse tomatoes and cucumbers produced in Ontario. Unlike B.C., there is no quota involved. The Board collects a check-off from growers of $.035/sq. ft ($0.43/sq. m) used mainly for promotion and research. The Board also sets prices weekly, taking into account competitive factors in the marketplace (e.g., supply of greenhouse tomatoes and field tomatoes). Domestic sales are mainly within Ontario but extend to Québec and the East coast.

The value of Ontario greenhouse tomato production in 2000 was estimated at $177 million. The 15-lb flat with individual cells is the standard package for greenhouse tomatoes in Ontario. There are also mesh bags for cluster tomatoes. Tomatoes are individually labelled with brand names and (PLU) code to make it easier for retailers and customers to differentiate greenhouse tomatoes from field grown at the checkout.

Retailers are encouraged to sell the greenhouse tomatoes directly out of the open-top 15 pound shipping containers to prevent damage to the product and highlight the differences from field grown tomatoes.

The Ontario industry has made a start into the foodservice area - a new initiative for greenhouse that has massive growth potential. It is estimated that by 2010, consumers will spend more than 53% of every food dollar on meals purchased away from the home.

Quebec

Québec greenhouse tomato production in 2000 is estimated at 10,241 tonnes valued at $26 million. There is no formal marketing organization in Québec. Greenhouse operations generally pack and market their own product, concentrating on the domestic market. There is some coordination of pricing and promotion through weekly communications between producers/packers, including information from the Ontario Greenhouse Vegetable Producers' Marketing Board.

In 2000, industry sources indicate 430 tonnes of greenhouse tomatoes were exported to the U.S. from Québec. For the past five years, growth in greenhouse vegetable production in Québec has been due to improved yields not acreage expansion and a major growth in acreage is not anticipated. Laval University has a strong greenhouse vegetable research program which cooperates with Agriculture and Agri-Food Canada's (AAFC) Harrow Research Centre in Ontario.

Alberta

The Alberta greenhouse tomato industry is located mainly in the Red Cliff and Lacombe areas with others located in southern and central Alberta. In 2000, 9 hectares of greenhouse space were devoted to the production of tomatoes. Alberta primarily supplies the local market with two main grower/packers, Red Hat Co-op and Pik -N-Pak Produce and local direct delivery to smaller stores or consumers.

Federal Government Programs and Support

Income Support

Net Income Stabilization Account (NISA)

All Canadian producers of agricultural products are eligible to participate in the Net Income Stabilization Account (NISA) program.

NISA, established in 1991, is a voluntary program designed to help participating agricultural producers stabilize their farm income. Under this program, agricultural producers can annually deposit a percentage of their eligible net sales into a NISA account and receive a matching contribution from the Federal and Provincial Governments. In years of low income, producers are allowed to make withdrawals from their NISA accounts. Income from almost all primary agricultural commodities, except for dairy, poultry, and eggs, is eligible for this program.

Enrolled farmers currently contribute up to 3 percent of eligible net sales to an individual NISA account, with the Federal and Provincial Governments providing matching contributions of 2 and 1 percent, respectively. Farmers deposit after-tax dollars into these accounts.

Withdrawals are allowed when a participant's current year gross margin falls below their average gross margin from the previous five years or when the net income from all sources falls below the minimum income threshold of $20,000 for individuals or $35,000 for families. The Government contribution is taxable when withdrawn, but the farmer's own contribution is not taxed.

Eligible net sales under NISA are limited to $250,000 per individual, thus capping annual contributions per farmer at $7,500. NISA is not commodity specific and takes into account income from all eligible commodities, thus it is not possible to measure the assistance provided to greenhouse vegetable producers.

Crop Insurance

Although crop insurance is available for greenhouse grown crops, government sponsored crop insurance is not generally used by the greenhouse vegetable industry in most provinces because it does not meet the needs of greenhouse producers. Instead, most greenhouse operators purchase private insurance plans designed specifically for greenhouses. Nevertheless, the Province of Québec operates its own provincial crop plan that had five greenhouse tomato growers enrolled in 1999-2000, with coverage totalling $111,020.

Export Promotion and Marketing

Federal and provincial governments have supported greenhouse industry initiatives in market development and quality improvement through various generally available market development programs. These programs are outlined below.

AAFC and the Department of Foreign Affairs and International Trade (DFAIT) operate export market development programs to promote Canadian food and agricultural exports. AAFC administers the Agri-Food Trade Program (AFTP) program which assists the Canadian agri-food industry in marketing and trade-related activities. DFAIT administers the Program for Export Market Development (PEMD), an all-industry export assistance fund. The PEMD includes access to international market information and provides services to facilitate export links. If export sales result from a PEMD plan or mission, companies must reimburse a portion of the PEMD contribution.

Under AFTP, expenditures totalled $45,000 during fiscal year 1999-2000 for developing a strategic plan for the British Columbia greenhouse vegetable industry. There have been no other expenditures under PEMD or AFTP for the greenhouse vegetable industry.

Marketing and trade data dissemination to horticultural producers is provided through  InfoHort  . Greenhouse vegetable producers receive information covering Canadian production, provincial storage levels, weekly price data, and export movements. AAFC also operates the Agri-Food Trade Service , which is an electronic system for trade and marketing information and advice. The program is similar to the Trade Leads Program and other market information programs offered by USDA, FAS.

Research

The AAFC Harrow Research Centre in Ontario is the designated federal research centre for the Canadian greenhouse vegetable industry. One scientist and one technician presently operate a vegetable greenhouse program. In addition, the Ontario Greenhouse Growers Marketing Board provides financial support to a second scientist located at the Harrow Research Centre. Universities and provincial departments also carry out research and extension regarding greenhouse operations. The AAFC Matching Investment Initiative is available to the industry should it wish to participate in industry sponsored research projects with matching funds from the Research Branch.

Inspection Programs

Canadian greenhouse tomatoes must conform to the regulations for quality and food safety under the Canadian Agricultural Products (CAP) Act. Grading is performed by producers or packers and is monitored by the Canada Food Inspection Agency (CFIA). Pesticide residues are also monitored regularly. Exports of field tomatoes to the U.S. must meet U.S. minimum import requirements as specified in the U.S. Marketing Order for tomatoes. There is no mandatory inspection of greenhouse tomato exports to the U.S.   Inspections may be requested at a cost of $0.27 per hundred pounds.

Agricultural Loans

The Farm Improvement and Marketing Cooperatives Loans Act (FIMCLA) is available for greenhouse vegetable producers. FIMCLA is a federal government guaranteed loans program designed to increase the availability of loans for improving and developing farm building, processing, distribution or marketing of farm products.

Farm Credit Canada (FCC) loans are also available for greenhouse vegetable farmers. FCC is Canada's largest agricultural term lender, offering flexible financial solutions to primary producers and agribusinesses. Flexible features, including multiple interest rate and payment options as well as choice of amortization period, are available on all FCC's loans. For more information on FCC products and services, call 1-877-332-3301.