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Cross-Border Croppers

Sometimes you just don’t know where a thing is going to end up. When Richard and Robert Reesor started their sweet-corn business over 20 years ago, it wasn’t really a business at all. It was just a few acres

along the road out front, plus a roadside stand and two brothers putting themselves through school.

Today, Rouge River Farms is producing much more than just a couple of acres. In fact, it’s producing 3,000. And instead of sticking to the home farm, the Reesors now are growing crops spread out over half a continent.

In fact, in geographic breadth, their farm has got to rank among the biggest anywhere. While others might own different farms in places that are more miles apart, that isn’t the Reesor strategy. Instead, all their fiels are part of one very integrated operation.

Pick a day on the calendar, in fact, and you’re as likely to find the Reesors walking a crop in Georgia or Ohio as on the home farm at Markham northwest of Toronto. And instead of selling to their neighbours, you’re likely to find them negotiating deals with major Canadian chain stores that have rarely if ever formed such tight connections with a Canadian farm.

When they graduated, Richard and Robert discovered they had learned enough to make sweet corn into a real business, with commercial scale production and sales.

Those lessons included: Always maintain quality. Be price competitive. And… the more season you’ve got, the more corn you can sell.

Turning those lessons into a business model has taken innovative thinking, thousands and thousands of miles of travel, and learning how to size up potential business partners in places where farming looks a lot different than it does here. Along the way, the business has grown beyond anything the brothers could have imagined when they started.

According to Statistics Canada, farmers north of the border plant 50,000 acres of sweet corn a year and gross over $70 million, mostly in Ontario and Quebec. It’s a growing market, although still small compared to the U.S. fresh market which notched a record $835.8 million in 2009.

Sweet corn is grown for three distinct markets — fresh, frozen and canned. Like other fresh and processed vegetables, the fresh market accounts for most of total sweet corn crop value, and also accounts for all of River Rouge Farm’s sales.

It’s a premium market and it’s a shifting market. Fresh sweet-corn consumption in the U.S. now exceeds frozen-and canned-corn consumption, a trend that holds in Canada too.

Canada continues to be the top export market for U.S. fresh corn but now some of that corn is being produced by a couple of Canadian farmers.

In the Reesors’ part of Ontario, the local sweet-corn season is only 10 to 12 weeks. So about 15 years ago, the brothers began thinking about expanding geographically to stretch the season for potential customers. The grocery stores ate it up. They wanted a source of high quality, fresh corn-on-the-cob… if it could be delivered longer.

“The large three retailers plus Walmart are looking for someone to provide vast supplies,” says Art Smith, CEO of the Ontario Fruit and Vegetable Growers Association. “Continuity of supply is important.”

The Reesors were ahead of the seasonal extension trend in the fresh fruit and vegetables sector. Today more Canadian producers use cold storage, shorter-season or ever-bearing varieties, new production methods and north-south business models. Delayed ripening chemistry is common on many fresh imports but it’s not registered for use on Canadian-grown produce.

The Reesors first expansion was into the traditional tobacco-growing region of Ontario, about 150 miles southwest of their home farm. “At first we attempted it in southwestern Ontario and we gained about 10 days,” says Reesor.

Today they move their operation down there for the first two weeks of the Ontario season and then move back east for the season at home.

Next, the Reesors decided to try it south of the border. It helps that Richard and Robert are dual citizens of the two countries. They had some family connections in the states and flexibility of movement over the border.

First, they researched and selected areas with the right climate and conditions for growing sweet corn in staggered seasons so sales in Ontario could be year round. This meant finding a way to farm in Florida, Georgia and Ohio in addition to Ontario.

“Every locality has it’s own growing-season sweet spot,” says Reesor. “We’re always planting somewhere and always harvesting somewhere.”

For example, in Florida they plant in January, February and March and harvest in April, May and June.

Instead of buying or renting land and managing it all themselves, the Reesors work with local farmers who own irrigated land. The farmer/landowners are paid as custom operators to do the field management and the Reesors do the harvest and marketing. In the U.S., the Reesors hire their own harvesting crew that moves with them.

“We own the crops and hire them to manage them on our behalf,” says Reesor. “They’re interested in working with us because we give them a secure market.”

Fresh sweet corn prices can traditionally vary extremely with season and weather, including the winter premium for fresh fruit and vegetables in Canada. Globalization of the supply and consolidation of the grocery industry has changed the marketing landscape for Canadian fresh produce growers.

“When quality and quantity are at their best, price is at its worst,” says Smith. “However, retail price for fresh produce (in Ontario) doesn’t swing as much as it used to.”

It isn’t a business for the faint of heart. From the moment it’s ripe enough to harvest, you only get five to seven days to get the crop out of the field and into the store.

“The fresh market is like the Wild West of farming,” says Reesor.

Then the pressure keeps building. With a bad season, you have to wait 12 months to try again.

Still, their strategy spreads the risk of poor crops over more more locations, Reesor says. “This way, we are able to self-insure our business.”

The U.S. farmers know the local area and know how to grow vegetables under irrigation. That’s critical because Richard spends only about one week a month at each location. When the Reesors aren’t there, they rely on their farmer partners, together with outside consultants hired to manage this sensitive crop.

“We want a lasting relationship,” Reesor says. “It takes a lot of trust.”

To find good condidates, the Reesors talked to extension services and seed sales people. It hasn’t always worked out perfectly. It usually take three years to test the competency level of the manager and to confirm if the region has the right combination of weather and soil to deliver sweet corn in a particular time slot.

“In our situation, it’s the right business decision with respect to the needs of the customer,” says Reesor. “But the learning-curve time slot is financially more risky.”

Dare to compare

While cost savings aren’t the reasons the Reesors are farming south of the border (it’s all about meeting customer demands) they are in an interesting position to compare farming on both sides of the border.

The Reesors have created an American corporation and a Canadian corporation so the farming activity is taxed in each country separately. Richard says although the personal income tax rate is lower in the U.S., the corporate rate is higher. Some states don’t have any personal income tax but all the other taxes are higher.

Canadians need to consider the benefits they get out of their tax dollars, specifically health care, Reesor says. “The relative competitiveness of tax rates and health insurance premiums for U.S.-based operations should be added into personal tax rates to make a proper comparison.”

The nominal labour rate is about $2 more per hour in Ontario than the U.S. “When the Canadian dollar was worth $0.90 U.S. or less, it was similar total cost for us,” says Reesor. “With the Canadian dollar at par, there’s a larger labour-cost spread.”

Over the years, the Reesors have bought equipment on both sides of the border and overall have seen very little difference in cost. Occasionally, the U.S. government has accelerated the depreciation on new equipment to stimulate the economy, which caused more used equipment to be on the market and some better deals.

“In my experience, it’s cheaper to grow sweet corn here,” says Reesor. “The main reason is we have such a favourable climate and soil base.”

The clay loam and moderate climate in Markham takes less fertilizer and it doesn’t require as much irrigation to grow vegetables. In the U.S. most intensive vegetable production is on sandier lighter soil, requiring more irrigation and fertilizer. In Georgia during harvest it’s routinely in the 100 F and that takes a lot of water, says Reesor.

Generally their herbicide and pesticide costs are similar, even though the options and needs are different on different locations. However, rent is much higher than at at home, often hitting $200 to $250 per acre for irrigated vegetable land.

On the more southern farms, multiple crops are harvested per year and in each area the rotation and farming methods differ. In Ohio, they no-till plant a fall crop of sweet corn, after winter wheat is summer harvested. In Georgia, they use a zone-tillage planter into a burned down cover crop. After harvest, they plant beans or cover crops into the standing sweet corn. In Florida’s muck soil, the standard is full conventional tillage. In Ontario, they plant following a field cultivator to prepare a seedbed after a burn-down of an over-wintered cover crop.

Understanding the relative competitiveness of each agricultural area is key to their operation. “The economics of agriculture are sort of self-levelling through the price of land,” says Reesor.

Moving the product north to Canada supermarket chain stores has become easier over the years. Pre-NAFTA, there was a seasonal tariff of 15 per cent on sweet corn but by the time the Reesors started importing, those trade barriers were gone. Now most loads are pre-cleared and are only stopped and inspected on a random basis.

Reesor says in the last five years Canadian retailers have begun expecting a food safety program. River Rouge Farms and custom managers track all aspects of production and leave a paper trail so a potential recall can be logically instituted.

Since sweet corn is protected in a husk, it’s easier to manage from a food safety perspective than a crop such as lettuce. “The main point of the program is to identify potential risks and then try to minimize the risks through monitoring and modification of procedures to make the product safer,” says Reesor.

Trimming and packing the cobs in cellophane so the customer can see what they are buying is another way they’re adding value to their product. Perception pays. The Reesors have set up a facility in the Stouffville area to do this before the corn heads to grocery stores in Ontario. For River Rouge Farms it’s another customer demand they’ve heard, understood and taken action on.CG

———

“ We’re always planting somewhere and always harvesting somewhere.”

— Richard Reesor

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Senior Business Editor

Maggie Van Camp

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