Nurseries, contractors to feel brunt.

Provincial funding slashed

Tree growers and planting contractors are upset over a reduction in the number of tree seedlings the province will fund this year.

The Ministry of Natural Resources (MNR) has announced that it will reduce the number of seedlings from 165 million to 122 million, with part of the balance being sold to private groups at a loss. The reduction will be experienced by all companies involved in the reforestation effort.

"We're expecting to see a 50-per-cent cut in the contracts the ministry tenders," says Grant Brodeur, president of the Ontario Silviculture Contractors Association (OSCA). "Last year we planted 50 million trees. This year it will probably be closer to 22 million."

The OSCA represents 40 tree planting contractors which do approximately 80 per cent of the planting funded by provincial reforestation programs.

Forestry companies pay the costs of replanting on approximately 70 per cent of all Crown forest areas. The companies are then reimbursed by the province.

The size of the decrease will be determined by the ministry after provincial Treasurer Floyd Laughren presents the province's budget.

With fewer trees to plant, Brodeur estimates that half of the contractors in his membership could be out of business within a year.

Joe Bird, president of the Ontario Forest Industries Association, says the group's membership is dismayed.

"In the 10 years since the government and industry established the FMA (Forest Management Agreement) the number of trees planted has doubled and the area planted has quadrupled," Bird explains. "The FMA is the backbone of the province's silviculture effort, and the government is not living up to its end of the agreement, while the industry is being held to its part."

Bird says it is unlikely that the forestry companies will make up the funding difference, "but there are a number of elements that could possibly be worked out."

However, any reduction in funding will result in workforce reductions, say planting contractors and nursery operators.

"These cuts will mean I'll probably have to cut my staff by between 60 and 70 per cent," says Pat Ross, the owner of New North Greenhouses and the president of the Ontario Tree Seedling Growers Association.

Last year 30 privately owned Ontario nurseries produced almost 100 million trees, compared to between 50 million and 60 million produced by 10 government-owned nurseries.

Bob Thomas, an information officer with the ministry's Sault Ste. Marie office, says the expected reduction is due primarily to the government's fiscal bind.

"The recession is certainly the motivating factor for the reduction, but many of the forestry program managers were looking for more flexibility in the programs, and the reduction allows that," Thomas says.

He claims that some forest managers wanted to emphasize tending the trees rather than simply planting the seedlings.

"You have to plant the trees before you can tend them," responds Joy Neill, co-owner of the Jellien Nurseries Armstrong Ltd. "There needs to be a balance."

Neill admits that some reforested areas do need to be thinned out, especially areas which have been aerial seeded or have been allowed to regenerate naturally, but she notes that the procedure is "very expensive."

"Because the province has gone to a competitive market, a good base industry has developed, but it won't go anywhere until a mechanism for funding at a consistent level is in place," Neill adds.

"The problem is that you're not going to see trees grow in four years. So it is hard to show voters where the money went when it's election time."

Brodeur bristles at the thought that there is not sufficient money for reforestation.

"The government has already collected stumpage fees from the industry," he says, "but the money goes into general revenue, so it's used for welfare and social services."

Last year the province collected approximately $80 million in stumpage fees, while spending $130 million on silvicultural programs.

This year, rather than plow the excess seedlings under as was done in Thunder Bay in 1988, the ministry has opted to sell 23 million seedlings to individuals, organizations or companies, at a loss.

Provided the buyer meets certain criteria, the seedings can be purchased from the government for 15.3 cents each for the first 300. It costs the province about 24 cents each to grow the seedlings. Any seedlings over the 300 mark will be offered free to the purchaser.

Ministry officials say the token payment will allow the government to circumvent the rule prohibiting free distribution of the seedlings.

3-YEAR CYCLE

However, the problem extends beyond handling this year's surplus. Because the seedling industry operates on a three-year cycle, from seed to site planting, the reduction will have far-reaching effects.

In addition, with less funding to work with, forestry companies will reduce the amount of site preparation work conducted at cutting sites.

Craig Boddy, a forest management supervisor with E.B. Eddy in Espanola, says the reduction will have a minimal impact on this year's reforestation efforts, but site preparation work will be curtailed in anticipation of less planting next year.

"There will be less area ready for planting, so there will be less need for trees in '93," he says.

The reduction in funding could not come at a worse time for some segments of the reforestation industry.

Nurseries are presently coping with changing technologies and methods, and forestry companies are not in any financial shape to cover the funding shortfall.

Neill, who is also the past president of the Ontario Tree Seedling Growers Association, says the province's nursery industry is already over capacity by 45 per cent.

"Either the government requirements increase or nurseries have to close," she says. "The reduction just makes the market situation worse."

Over-capacity also means it is a buyers' market for the ministry and forestry companies.

"There's an incredible difference in costs and quality between the nurseries," according to Gerry Liddle, owner of Aqua North Forest Industries, a private nursery in Wawa. "Forestry companies are going to be looking for the best quality seedlings at the lowest price."

Liddle's $3.5-million facility began operating last April. The greenhouse utilizes what is known as the Panth System, a Swedish method which includes plastic containers and robotic harvesting technology.

Liddle says the nursery can produce 1,000 seedlings at a cost of almost half the provincial average of $250.

Aqua North has contracts to supply seven forestry companies, such as Kimberly-Clark and Abitibi-Price. It is negotiating with an eighth company as well as the government of Alberta. In addition, through an associated company, Liddle plans to market the technology throughout Canada and in the United States.

Liddle is critical of the nursery industry's reaction to the expected reduction in government funding.

"They had a five-year agreement with the province to sell seedlings on a cost-plus basis, so there was no incentive to invest in new technology," he says. "They wanted to have a competitive, but protected market.

"A lot of companies want to avoid making major capital investments. They want short-term solutions."

Neill admits that some of the private nurseries have failed to reinvest in their operations, but she does not agree that the failure is due to the security of government contracts.

"When prices are down, there is no room left in budgets for research and development or new technology," she says.

Two nurseries which have reinvested in response to changing market conditions are Lafleur Gardens Limited of Timmins and A & R Greenhouses Limited of Hurkett. Both operations have received term loans from the Northern Ontario Development Corporation to purchase equipment and expand.

A & R Greenhouses received a $150,000 loan to help fund the construction of cold storage facilities which will allow the north-western Ontario company to store and ship up to seven million seedlings annually. The expansion will enable the company to ship seedlings to U.S. markets.

Lafleur Gardens received a $245,000 loan to construct a potting and freezing facility which will also allow the firm to freeze and ship seedlings. The expansion is a move to compete with out-of-province seedling producers, especially growers from British Columbia, who are also battling for a piece of a diminishing pie.