Contract dispute | Manitoba producers offered five percent less while Alberta growers get raise
Manitoba’s potato growers usually know in a normal April how much they will be paid for a hundred pounds of potatoes.
However, this year they still don’t have a price because McCain Foods has offered a contract price five percent lower than 2012.
“We normally have our contracts in place and producers know the acreage and we’re not in that position right now,” said Garry Sloik, manager of the Keystone Potato Producers Association.
“It’s been a long time since we’ve gone this late (without a contract).”
The proposed price for process potatoes represents a decline of 50 cents per hundredweight, which is a reduction of $140 per acre based on the average potato yield in Manitoba of 280 cwt. per acre.
Manitoba growers are refusing to sign the deal because production costs are rising.
“The margins just aren’t there (for prices) to go down,” Sloik said in an interview during a Keystone Agricultural Producers meeting in Portage la Prairie.
“Not many costs go down. Labour, environment costs … workman’s compensation, all of those things have increased the cost (to produce potatoes in Manitoba).”
Manitoba growers are also displeased with the contract offer because McCain Foods, which operates processing plants in Carberry, Man., and Portage la Prairie, has already cut deals with potato growers in Washington state, Idaho and Alberta. Sloik said those producers will get a price increase of 1.5 to two percent.
It isn’t much consolation, but growers in Wisconsin, New Brunswick, Prince Edward Island and Maine are also dealing with contract offers that lower prices by five percent.
Producer associations in New Brunswick and P.E.I. have rejected McCain’s offer, terming it too severe.
Matt Hemphill, executive director of Potatoes New Brunswick, said costs have risen an estimated 20 cents per cwt. from last year, meaning a 50 cent per cwt. price decline represents a 70 cent per cwt. reduction for growers. A yield of 300 cwt. per acre pencils out to a revenue decline of $210 per acre.
The contract dispute between McCain’s and growers in New Brunswick entered arbitration last week. Sloik said it’s the first time in decades that a potato contract has gone to arbitration there.
Despite the difficulties, Hemphill said New Brunswick growers have an excellent relationship with McCain Foods.
Sloik said potato growers in P.E.I. have also entered arbitration to settle their contract with McCain. The outcome of arbitration in the Maritimes will likely determine the terms of the Manitoba potato contract, he added.
Potato contract arbitration doesn’t exist in Manitoba.
Sloik said the Keystone Potato Producers Association and McCain Foods haven’t discussed the contract for weeks.
“There’s been no progress, no movement since Feb. 27,” he said.
“And there won’t be for the next two weeks while these other areas go to arbitration.”
Sloik said the Manitoba producers association has an offer from Simplot, which operates a french fry plant in Portage la Prairie.
“Whether we can get that matched by McCain’s, it’s going to be very interesting to see what happens in these other areas (N.B., P.E.I. and Maine).”
Kevin MacIsaac, United Potato Growers of Canada general manager, said Cavendish Farms, the other major potato processor in P.E.I., didn’t ask for a five percent price decrease.
However, potato growers couldn’t reach an agreement with Cavendish, so that contract is also before an arbitrator.
MacIsaac said a couple of factors might explain why McCain is willing to pay more for potatoes in Washington, Idaho and Alberta but less in other regions.
One is proximity to the Pacific Ocean.
“The western areas are closer to the coast for export to Asia, where the big export market is today. That’s the only part of the industry that’s really been expanding,” he said. “The potatoes, plants and french fries are closer to the export terminals.”
The other factor is the firmness of the American dollar relative to Asian currencies, which exerts financial pressure on exports of potato products, MacIsaac said.
“I think the biggest issue has been a major change in currency rates from the time that the first contracts were negotiated,” he said. “Especially in the Japanese yen and the strength of the U.S. dollar.”