Pot production could edge out vegetables on local agricultural land, Delta mayor says
Greenhouses operated by Village Farms in Delta, B.C. that may be, if allowed by various levels of government, to be turned into marijuana growing greenhouses. (Jason Payne/Postmedia Network)
A large-scale multinational Delta vegetable producer is swapping out its tomato plants for pot plants in a 1.1-million-square-foot greenhouse because it says it can make more than 10 times the money.
Village Farms International also has plans to expand to five times that scale, resulting in a warning from Delta Mayor Lois Jackson about the future of farms in the Agricultural Land Reserve (ALR).
"If you're a big corporation, you're going to do whatever you can to make money," Jackson said. "But if we lose all our greenhouses to growing pot, what are the incentives for the farmers to be growing tomatoes, turnips and pumpkins?"
The Agricultural Land Reserve was created to protect five per cent of B.C.'s land for growing food and other agricultural practices, said Jackson.
And Delta, with its 22,000 acres of farmland with rich soil, offers the "lowest tax rate" to encourage farmers and local production, she added.
Farms operating on the ALR also receive substantial tax breaks, which are available to medical marijuana growers.
"(Village Farms International) is doing it strictly for the money, and if the provincial and federal governments are good with that, with them wanting to make lots of money and to take it out of this province, I don't agree with that," Jackson said.
She also worries that Canadians will eventually have to rely solely on the United States for food supply.
Village Farms has entered into a joint venture with a Victoria-based licensed producer of marijuana to grow pot in the greenhouse beginning as early as next year, when recreational marijuana is expected to be legalized.
"The reason is that you look back at the vegetable industry, we used to have (profit) margins of 20 to 25 per cent, and now it's down to six per cent," Village Farms CEO Michael DeGiglio said from his Texas office.
Because NAFTA allows Mexican vegetables to be imported into Canada, Canadian growers can't compete with the $8 a day workers get there, he said. With benefits and other expenses like the carbon tax, workers here cost the company $16 to $20 an hour.
"Revenues will be 10 to 15 times higher than with vegetables."
And the company's website says its earnings before interest, taxes, depreciation and amortization — a common business measurement — are expected to be 50 per cent.
"If the margins are that much better (with pot production), we have a fiduciary responsibility to our shareholders," said DeGiglio.
He said profits for vegetable growing have been on a "10-year slide," and "if we're going to continue with NAFTA, we're not going to be a viable company soon," throwing 800 employees out of work.
He said there's no worry of a shortage of vegetables because there's a "huge oversupply of vegetables and 60 per cent of them are exported to the United States."
The deal included an option for the joint venture to eventually expand to Village Farms' second and third greenhouses, for a total of 4.8 million square feet and output of 300,000 kilograms a year, "which would supply a considerable portion of the expected future cannabis demand in Canada or for export abroad," said the company.
The first greenhouse now grows close to six million kilograms of tomatoes, said DeGiglio.
The new joint company expects to eventually grow 75,000 kg of marijuana a year in the first greenhouse, he said.
Jackson said her municipality is going to make recommendations in a wide-ranging report to the province and the Agricultural Land Commission on how legalized marijuana is going to affect Delta.
Martin Collins, director of policy and planning for the commission, said it's not known what regulatory changes are coming after legalization, but he said the commission is not concerned about pot production exhausting arable farmland because the product would likely be subject to supply management that would limit its production.
B.C. Agriculture Minister Lana Popham was not available for comment.