From the Editor: June 2018
The costs of playing with numbers
Rarely do costs ever go down, but greenhouse operating expenses seem to be rising at an alarming rate.
Total operating costs rose from $2.16 billion in 2013 to $2.56 billion in 2017 (Statistics Canada) – a $400 million difference, which translates into a 19% increase over four years. The Consumer Price Index rose by 6.2% (Statistics Canada, 2013-2017), so the rise in costs seems out of step with inflation.
In emailed communications with greenhouse horticultural advisor Gary Hickman, he drew attention to greenhouse vegetable operational costs which rose by 28%. Some of the highest increases were from payroll (+40%) and electricity/fuel (+22%). The remaining costs rose by 24%.
Inspired, I dove into the rabbit hole that is Statistics Canada online. Lo and behold, the total number of employees in greenhouse vegetable operations rose by 15.5%. Combined with an average pay increase of 21% per employee, no wonder wages made up a third of total operational costs in 2017.
As for fuel, it made up a sixth of the total 2017 operating costs, while electricity was less than one-twenty-fifth. By itself, fuel costs rose by 19% from 2013. Could this simply be due to greenhouse expansion? Total greenhouse area had increased by 16.3% over the same period (perhaps driving the rise in #employees), but the total operating costs per m2 also rose by 10%. A separate category known as “other crop expenses” (including fertilizer, pesticides, irrigation, containers, packaging, growing media and bioprograms) rose by 49.1% per m2, making up 18 per cent of total costs.
Greenhouse “flowers and plants”
The numbers tell a different story for “greenhouse flowers and plants”, as 10% of greenhouse area was lost.
Payroll (a third of the 2017 expenses) dropped by 11.2%. Number of employees was reduced by 19%. And with an average 10% wage raise per employee, this seems to add up.
Fuel costs were reduced by 13.8%. Though on a per m2 basis, that’s -4.2%. And unlike greenhouse vegetables, this sector’s fuel costs only make up five per cent of the total operating expenses. Electricity only accounts for another 2.5 per cent.
“Other crop expenses” rose by 73.1% per m2, making up 15 per cent of total operating costs. In contrast, “plant material purchases for resale” have declined by 10.2%, as have “other operating expenses” by 6.8% (includes interest, taxes, insurance, repairs and machinery) both per m2.
The big question
Have sales increased? Sales rose by 15.5% for greenhouse vegetables (likely driven by expansion) and 7% for greenhouse flowers and plants. But do these numbers make sense for the latter? Because if we look at sales per m2, fruit and vegetables didn’t change by much (-0.62%), whereas flowers and plants jumped by 18.8%.
Both sectors seem to be growing their profits in different ways. But the next time high-level, industry statistics are presented, I’ll be sure to ask “do they make sense?”
Note: Calculations are based on 2013-2017 data from Statistics Canada.