Tuesday, October 25, 2016

What I have seen in the last few weeks on the Farms of America

I have been traveling a great deal on assignment.  That means that I get to tour nurseries everywhere.  I also get an inside look at production.

Here's a truth some may not want to hear.

There are a LOT of young trees in the ground right now.  I saw whips to 1 1/2" everywhere.  The crop looks good.  There is land being put into production that has been out for the last 5 years.  Old overgrown trees are being removed by bulldozer.  The land is being reclaimed and new stock is going in.

In Tennessee's McMinnville area which had been pronounced dead, is very much alive.  And expanding.

And the quality is up a great deal.  All this means that pressure on supply that kept product in shortage is about to change.  We are about to see that old bugaboo surplus hit the fan again.  Not for a year or two but that train is already on the track and moving.

So, do your best, keep up the narrative but be ready to move with the market as it moves.  It will.

Bob Dylan just won the Nobel Price for Literature.  Well deserved.  I"m a fan.  But he has a comment on the nursery stock shortage... "The times they are a changin"
 
 

Saturday, October 1, 2016

It's been a Year like we haven't had for a while

 Lots of product being moved.  But the pipeline is filling up.  I see a train a-coming, coming round the bend.  There are going to be more sales and consolidations. 

Recently I was involved in the Marketing and Sale of the Former Anna Nursery to Schowpe
Brothers Tree Farms.  It was a 6 month project.  From time to time I am hired as a nursery marketing arm.


I think the next several months will see a shift.  The election in a bit more than a month will tell a tale.  I won't tell you who to vote for, but I want to see America Great.... again.

So..

Keep your eyes open and your ears clear.  We are about to go thru a transition.

 

Monday, April 18, 2016

Race to the TOP always leaves people at the BOTTOM

It's amusing and sad at the same time to watch the circus and have to take part in the center ring when things are like they are. 

Product is short, mostly, people are planting too much too fast, Prices are goofy. 

What makes it worse is the tendency to think this will go on forever.  Or the occasional sale to an entity that has no common sense in buying indicates the market.

Just because one guy bought 100 trees 2" at $250 doesn't mean everyone will.  So the insanity ensues.

Waiting right now is the best strategy.  Wait until things get normalized.  Yes the day of the $95 2" Red Maple is gone.. but so is the fantasy of the $250 2".

I have people ask me how long before we enter into the next inevitable cycle down in price up in supply.  I have been saying 3-5 years with emphasis on the 3.

So enjoy but don't extrapolate this to be a permanent condition.  Save some money and in 5 years at the bottom, buy a bunch of smaller liners and plant like crazy.  You'll be ready next time.

OH, and how do I know all this?  First we do this all the time in the nursery trade.  Second the economy isn't that robust. IF we elect a conservative to the White House and keep the House and Senate there will be a restart and it will be painful.  That will put a clamp on the economy for a little while.. THEN if we are smart.. it will be katie bar the door for the next move.

Cue the clown theme

 
 

Tuesday, October 13, 2015

Why Raising Prices too much in the Nursery Business in GOOD TIMES will create BAD TIMES later

Drunken sailor alert.

When business is poor in the nursery trade, many nurseries get too aggressive reducing prices and therefore leave money on the table.  I warn of that.  This other than a full liquidation.  Pricing lower doesn't increase demand, much.  People buy what they need and if they need it they will pay a fair price.  You do not create significant incremental demand with a lower price. 

On the other hand, pricing too HIGH in good times has an effect that many don't grasp.  Nurseries have good customers, people who have bought from them for years and who use them as core suppliers.  When a nursery gets too far out of the center of the price spectrum as many do in these good days the net result is they become to existing customers an unreliable supplier.  I am not talking about brand new customers, yes you can gouge them a few times but at some point they will walk away.

What happens too often in these markets is long time customers drift away, cease to call, find other suppliers.  Not always cheaper either.  Sometimes these suppliers are just more consistent.  Predictable.  Quality the same, but without the drama.

Sure you are selling everything you can dig or grow, the question is, when the market turns as it always will, can you get those burned over customers back?  Will your desire to capture an additional ten or twenty dollars per tree from your existing customer base require you to spend much more money you won't have then to try to woo them back later? 

It's a false economy (unless you are intent at going out of business) to raise prices too quickly or too radically.  There is a perception that the marketplace has when a radical increase in price is made, it signals desperation or incompetence.  We see that too much and it's causing upheaval.

So where is the right price point, if you were doing your job well up till now you will be slightly below the averaged up price of your high priced competitors and slightly above the low priced ones.  And you will have a "Deal" for the volume buyer.  A too high price Can cause you to MISS business and burn customers you cultivated for a long time.  Right pricing is an art.. learn it.  It starts with throwing out the high price outliers and the bargain basement sellers.  Then start analyzing the middles.  Find the price that will work.

The longest operating nurseries profitable in the USA are that way because they have been consistent and at the right price for a long time. They didn't have to liquidate when things got tough, they didn't have to fire sale, they simply kept their price structure within the range of sanity for decades.  Always just on one margin or the other.  Never a price leader up or down.  I won't name them here, but they are the ones who survived and prospered in the hard times and cultivate new business in the good times that will stay with them in the days to come.




 
 

Wednesday, October 7, 2015

Overrunning Headlights

The cyclical nature of the nursery business has many people convinced good times are here to stay, nothing to worry about, welcome to the Cabaret.

There is a lot of overhang right now. A lot of people who are still trying to come out of it all.

There are a lot of people in the nursery business who have raised prices so high that in the end it is going to become hard to back down.

AND PRODUCTION....

Already I can see more trees in the ground than anyone knows.  This means that in a few years with any kind of economic slowdown, there will be another crunch, oversupply, and prices plummeting.

BUT LAUGH DANCE and don't think about tomorrow.

You would think we would learn.. but we don't.

Thursday, March 12, 2015

A TURN AROUND

Its been a while since I last posted.  In fact a year. 

Things are really different today.  It's a new time. A new cycle.

Product is very short..  because while business was poor, no one planted anything.  They just harvested.  There are still some large trees in the market.. but not as many. 

Containers are short but since the cycle is so fast, not that short.

Now we enter this phase and as always happens new planting will blossom everywhere until in a few years we will go back into surplus.  The booming times right now have less to do with a robust market but that thing are so short.

There are still nurseries just squeaking by.  I am contacted by banks who are asking what the collateral is worth on the nursery they are financing.  I go and make an appraisal of the stock. 

The optimum size in the bell shaped curve of demand is from 2-3"  That's where sales take place, that's where money is made.  When product is too small, or when it is way overgrown (large) there is a much weaker demand.  It is a bell shaped curve the top of which is 2 1/2" caliper.

Below 1" B&B there is almost no market and above 5" also almost no market. The mythology that I'll leave it in the ground an it will become more valuable simply doesn't work. 

The market now takes better marketing... they won't just COME to you.  So do well. Sell well.  Turn the product when it's ready..
 
 

Friday, February 14, 2014

SPRING 2014 NEW LIFE

What a difference a couple years make.  Two years ago I was being BEGGED to sell trees that were in huge surplus for any amount possible.  Those days are now gone.

The problem is now there are no trees available from 2-3".  Still lots and lots of 5-8" trees no body wants and a smattering of 1" Trees.  You would have to be a fool to dig a 1 1/2" tree right now.  If you just grow it on a little bit you will sell that tree for nearly double what you did.

So what are nursery people doing.  What we always do.  Like lemmings to the cliff you can't buy a budded liner.  The sources are all dried up. I suspect a serious arm wrestle will take place.

What this means is in a few years huge quantities of trees will come available and surplus in about 5 years.

There are surpluses in evergreens.  Not huge, but they are there.

Arborvitae are still in huge supply.

What is not are the shrubs of fancy cultivars.  The luxury landscape architects have had in picky choosy is going away.  We are getting down to fewer.  It's about time, with over 200 flowering crab cultivars, 250 spirea cultivars, and a burgeoning hydrangea palate, the idea that you will find in any quantity the plants you need to fit is becoming a myth.

Of course I am glad to see the growing use of native plants.  More all the time.

So, here we go, fire up the roller coaster.  UP DOWN UP DOWN WHEEE