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2018 looks strong for nursery/greenhouse growers |
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January 14, 2018 |
Northwest Farm Credit Services’ 12-month
profitability outlook remains strong for the
nursery/greenhouse sector. Pricing is favorable;
early bookings for 2018 are strong as buyers
secure plants, although inventory shortages
continue for certain plant varieties. Strong
economic indicators will support continued
growth for the industry.
Consumer preferences are shifting to lower
maintenance plants and landscaping. Hiring
landscapers is a growing trend and the landscape
industry is growing 3.9 percent annually,
according to the IBIS World market report.
According to the National Association of
Landscape Professionals (NALP), 40-percent of
Americans with a yard hired professionals for
landscape care last year,
compared to 35-percent in 2013.
Census Bureau data indicates the median lot size
of new, single-family detached homes is
declining. In 2016, the median lot size dropped
below 8,500 square feet, the smallest on record
and 26 percent smaller than 30 years ago.
Regional
differences in lot sizes are driven by density
of developed land and land availability.
Reduced consumption is a global trend. In the
U.S., this includes a movement toward smaller
living spaces, which is raising demand for
compact shrubs and container gardens. Homeowners
have become more interested in holistic
landscapes that promote well-being, opting for
raised gardens and portable containers.
U.S. job growth remains positive. November
unemployment was a decade-low 4.1-percent with
228,000 new jobs. Still, the labor-force
participation rate is stagnant at 62.7-percent.
Access to labor remains a key concern for most
nursery/greenhouse producers as competition for
quality labor grows. The H2-A visa program is
critical to the industry’s labor force, which is
one of the top agricultural sectors using the
H2-A program, according to the Department of
Labor. Also, higher wages to attract workers,
minimum-wage hikes and healthcare costs are
increasing overhead.
Producers may have a difficult time passing
increasing costs of labor onto consumers.
Understanding cost of production is critical as
increased labor costs will impact inputs and
compress margins. Producers are focused on
production efficiency and labor productivity,
with many implementing more mechanization.
Tight supplies and high demand drove up
Christmas tree prices, which have steadily gone
up.
The National Christmas Tree Association reports
the 2008 average cost of a tree was $36.50.
Prices stabilized somewhat until 2015 and 2016
when the average price spiked to $50.82 and
$74.70, respectively. 2017 prices were expected
to increase by more than 10- percent.
Drier summers and exceptionally wet springs for
the last few years have led to seedling supply
shortages. Additionally, many nurseries reduced
seedling inventory during the economic downturn,
decreasing the number of uncontracted trees
currently on the open market. The tight tree
market is compounded by increased disposable
income, which has increased demand for live
trees. Growers who maintained inventory levels
through the downturn are poised for strong
profits.
U.S. housing starts surged in October and
November to a seasonally adjusted annual rate of
1.256 and 1.297 million units respectively. The
increase was driven by rebuilding activity in
the South due to hurricanes and flooding.
Strong longer-term demand for both new home and
repair segments is likely. Robust gains were
also noted in the Northeast and Midwest regions.
Residential building permits jumped 12.4 percent
in October compared to September to an annual
pace of 1.297 million, signaling strong
construction in the pipeline.
For more information or to share your thoughts
and opinions, contact the Northwest Farm Credit
Service Business Management Center at
866-552-9193 or
bmc@northwestfcs.com. |
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