By Glen Korstrom
The plan by struggling Langley plant and vegetable grower Bevo Agro to build five new acres of greenhouse space has raised eyebrows among fellow growers who fear for the future of the $600 million B.C. greenhouse sector.
Greenhouse growers have been rattled in recent years by:
- B.C.’s high agricultural land prices;
- a strong Canadian dollar; and
- the cost of upgrading facilities to battle a growing number of U.S. competitors.
“You can see that [Bevo Agro’s] financials are never showing a lot of profit,” said Darvonda Nurseries Ltd. principal Byron Jansen. “It definitely does seem a little odd to me.”
Bevo Agro (TSX-V:BVO) lost $476,000 in the quarter that ended September 30, but generated a $1.06 million profit in its 2010 fiscal year, which ended June 30. Last year’s profit came partly from a $871,000 federal AgriStability payment, which is a subsidy that Ottawa grants to stressed agricultural operations.
Bevo Agro president Jack Benne told Business in Vancouver that he plans to spend $4.2 million using debt and internal resources to build five acres of greenhouse and add it to his 34 acres of greenhouse on 100 acres of land.
“It’s a matter of making the best use of the land,” he said. “Before it was just empty land. There are many properties here in the Fraser Valley that are not used for anything. We’re building a five-acre greenhouse on it to keep up with demand.”
Benne said his customers increasingly want more good-quality, disease-free, propagated vegetable and flower seedlings.
“We’re doing fair,” he said. “My outlook is positive.”
A Canadian dollar near par with the U.S. greenback means Benne’s 150-employee operation generates less revenue from U.S. customers than he did five years ago, when the Canadian dollar was worth about US$0.85.
He sells most of his propagated seedling flowers to American customers and most of his vegetable seedlings to Lower Mainland growers.
Across the Lower Mainland in Ladner, Houweling Hot House principal Casey Houweling fears for the future of B.C.’s greenhouse industry and is investing $20 million to ensure that his 50 acres of Canadian land under glass is energy efficient to avoid becoming a casualty of rising energy costs.
Houweling recently expanded in California, where he first ventured in 1996. He added 40 acres under glass in California last year and now operates 124 acres of greenhouse land in the Golden State.
His recent $50 million investment on that Oxnard, California, land was similarly aimed at reducing his energy use.
Solar panels generate electricity on his Oxnard property, and he has invested in a system to strip energy out of irrigation water and recirculate it.
Houweling has not expanded his B.C. greenhouse footprint in 17 years, and he has no intention of increasing the size of his Canadian operations.
American land, he said, is much cheaper.
Houweling estimated that Washington state has up to 1,000 times the amount of available flat arable land that B.C. does – at a fraction of the cost of this province’s farmland.
He started renovating Canadian operations last year, and the project is set to be complete within a year. It includes buying a new grading and packing line along with other modern equipment to reduce labour costs. He has also built a new shipping cooler facility.
“We’ve asked ourselves, ‘What’s it going to take for us to make it through the next 20 years?’” Houweling said.
“We’re going to be putting in new wood-burning facilities. We have all these challenges. We have a choice. We either wind down this organization or we reinvest and make sure that it stays competitive.”
Houweling, along with many Lower Mainland greenhouse owners, is shifting to generating energy from burning wood – to the chagrin of environmentalists who believe that it produces more air pollution than burning natural gas does.
But it’s cheaper, so greenhouse operators are unlikely to return to burning natural gas unless government forces them to.
One B.C. advantage is that many of the bugs that infest greenhouses in California can’t survive a B.C. winter and therefore are more easily eradicated.
That is a small saving grace.
“Greenhouse growth in B.C. in the 1990s was vibrant and growing quickly,” Houweling said. “In the last five years, you’ve seen very little greenhouse growth. You’re probably even going to see some contraction –because of the competitive pressures – particularly with the older facilities that aren’t as efficient.”
Milner, B.C.
CEO: Jack Benne
Employees: N/A
Market cap: $4.85m
P/E ratio: 9.50
EPS: $0.07
Sources: Stockwatch, TSX, globe investor