‘A double-edged sword:’ horticultural industry faces pricing challenges
Farmers unable to pass the increased cost of production onto their customers
By Kaitlynn Anderson
Ken Forth, a broccoli grower near Hamilton, Ont., is one of many producers worried about the potential consequences of the recent minimum wage increase.
On Jan. 1, the Ontario government increased the minimum wage to $14 per hour from $11.60 per hour. This wage is scheduled to further rise to $15 on Jan. 1, 2019.
“We are somewhat concerned about (the higher wage) because we have no ability to pass on the extra cost into the marketplace,” Forth told Farms.com on Tuesday.
Horticultural producers are price-takers in the marketplace, as large multinational companies are the price-setters.
These companies also import products from developing countries with lower wages.
“Our main competition is Mexico, where workers earn 50 cents per hour,” said Forth.
In addition to higher labour costs, farmers like Forth could face higher input costs, raising their cost of production even more. Businesses that supply inputs to Forth are raising their prices, as they are subject to the wage increase too, Forth explained.
And “the multinationals have (also) told us that they want to recoup their increased wage costs from the price of product,” he added.
At the same time, these companies want to lower the prices on some of these products.
“It’s kind of a double-edged sword,” he said. “We either match the price from Mexico or we don’t sell our crops.”
Growers such as Forth employ and support many foreign workers. With the hourly wage increase, these workers will earn $17 per hour, as they also receive a $3 per coefficient to account for housing and transportation.
“We’ve always wanted to pay our people as much as we could,” said Forth. But this wage increase “is going to tighten things up.”
Photo: Stanislav Derevianko/iStock/Getty Images Plus