Wednesday, August 8, 2012

Evaluation of the Current Nursery Marketplace: 8-8-2012

Nursery Market Evaluation
Gene Redlin
Expert Horticultural Evaluations

You received an update on the wholesale nursery marketplace this spring.  After in depth visits with nurseries around the nation I am reporting the following as of this date:
  • Spring Season Better
  • Dry Weather hurt sales, helped construction
  • Short Dig Season spot shortage
  • Cities struggle to buy
  • Dead Tree Landscapes
  • Gator Bags Everywhere...helping/?
  • Future death loss from the drought
  • Low growth liners from 2012
  • Doughnut Hole Availability
  • Shortages spotted
  • Specific Spot Market Analysis
  • Good Fall Sales Coming
  • The Election and Spring 2013 implications
  • Liner Purchases Delay
  • Weather Pattern affects
  • Housing and Commercial Construction Starts
  • Change Change Change

Full comments on all these issues follow:

Spring turned out better than expected.. Sales were up…somewhat, not extraordinary, but better.

Extreme dry weather in many parts of the country slowed summer sales, but the offset is that a great deal of construction that drives sales has been completed in the dry weather creating new demand. 

The short dig season from the early spring has created spot shortages in certain categories.  The perennial "longages" continue.  Red Maple (other than Autumn Blaze) has continued to be weak.

Cities are trying hard to plant within a shorter palate which now excludes ash trees of all kinds.  YET, there seems to be a hesitancy to use up the maple surpluses.  I have been reviewing bid lists and see over and over again the specification of trees that just aren't there.  Tree form Japanese Lilac is a continuing battle.  

There are a large number of dead trees
in landscapes and streetscapes.  They are everywhere you look.  It's a sad sight.  YET…they are not  being replaced at a reasonable pace.  Even the cost of removal has become prohibitive.  At some point wind will do the job.  It's unsightly, but It belies a difficult economic climate.  I am told by foresters that they would plant, but the money available isn't there. Ten years ago they would all be replaced by now.

Gator watering bags are everywhere.  I see water trucks nursing them. It is questionable that this is doing as much good as people hope.  I know it has done great things for the Tree Gator company. 

The death loss from the drought and heat this summer will be greater than we believe.  We are beyond permanent wilting with a large portion of recently planted landscape.  Even with a good wet fall it won't be enough to save many of the trees planted in the last few years and that have languished in the drought.

Spring planted liners are slow. Unless they were on a drip irrigation system, in nurseries, they didn't put on much growth. 

We can expect the doughnut hole of availability to continue and even grow to 1"-1 ½" and 3" Plus.   Not many middle ground sizes.
The continued reduction in nursery acres and reduced lining out is beginning to create shortages.  This won't be the bonanza some hope, this will be spotty.  I don't expect the nursery industry to respond quickly to this situation.   Many have been fooled once too often to go overboard.  Money has been short and sales uncertain.  We are in very conservative times.

The market buzz for fall looks like the fewer survivors will see better sales then they thought.  Buyers will have to become more flexible in their demands.  Much of what is being specified by architects is vapor stock.  Plants pulled from a plant guide book and placed on a job by an architect without knowledge of the industry availabilities.  Substitution will be the word of the day. However, those nurseries who insist in growing fewer and fewer varieties are finding themselves unable to respond to even basic quote requests.  This will reduce sales.

As a result of all of the above, Some nursery stock values are firming…slowly.  Some species more quickly than others.  A demand and price evaluation on evergreens shows the following:

  • Spruce Firmer
  • Pine Neutral
  • Douglas Fir Weaker
  • Concolor Fir Firmer
  • Hemlock Firm and holding
  • Arborvitae continues weak, no hope in sight
  • Yews Steady in a quiet market
  • Boxwood…steady to a bit weaker
  • Rhododendron steady to firmer
  • Upright Junipers steady to firmer
  • Spreading junipers weaker

There are niche markets that continue to hold up

  • Hydrangeas
  • Some of the sculptured and shaped evergreens
  • Japanese Maples, particularly the Red Leafed

I forecast a pretty good fall season, driven however by availabilities.  If you don't have them to sell, no matter how good your demand flow is, you won't sell as much.  There is enough economic activity to keep things going into winter.  It will be equal to fall 2011 (or a bit better).  You must have something to sell to be part of this.

Spring 2013's market will have a linkage to the fall elections.  If conservatives capture the senate or senate and presidency, there will be knee jerk reaction  optimism driven solely by hope and change.  It's not about politics, people are hungry for better in governance.

If the current administration survives and the house and senate remain as they are, there will be a greater headwind to any recovery so needed to build back.  The tax increases and implementation of difficult policies already online to come into being will take a hard toll on the marketplace.  Optimism is low now.  This will drive it lower.  That will be a demand driver.

This fall's election is a harbinger for 2013.   

I suspect that many people will hold off buying liners and expanding further without some assurance that the government is not going to become even more intrusive and oppressive.   Nurseries are by nature conservative;  No matter your politics.

Weather patterns nationally are not driven by global warming (when it's hot it's global warming, when it's a cold winter it's just weather according to the experts), but by a shifting el NiƱo - la Nina pattern in the ocean.  It has been difficult but we have seen this before.  Actually we have seen worse.  This too shall pass.  Climates change.  Shift.  It all has an effect. An economic impact.  Evaluating and apprising the net effect of  the change is what I do.

Housing starts, construction starts and other indications point to a decent fall coupled with less supply from fewer acres then a year ago and could point to a decent 2013 but there are many uncertainties.  It is best to have all the tools at your disposal as you consider actions to be taken in your business over the next year or two.

This much is certain, there is nothing as certain as change right now.  Not all change is considered improvement. Psychology tells us that most change is perceived as LOSS.  Yet there can be no improvement without change.  Knowing which is which is critical in the years to come.

The  next evaluation of the state of the Nursery Economy will be end of year, after the election which will inform our 2013.

To contact me for assistance in the appraisal, evaluation and  economics surrounding your exposure in this marketplace-- 

Gene Redlin CAGA (Conducting Certified Appraisals)
Expert Horticultural Evaluations
St Charles IL
Phone 630-513-5105 (Byron Nursery Phone)
Fax 630-513-5127

You are receiving this because at one time I have conducted an appraisal for you or your company, been consulted for or are a known part of the wholesale nursery marketplace.  These observations result from daily involvement in the nursery trade on a national level as a broker and evaluation expert.  They are my own observations informed by not only experience, education (BS Horticulture/ BA Botany) but by the Sr Executive level positions I held before I came into the business in 1991. This background has helped me understand long range supply / demand cycles which trained my eye to spot business trends and place proper values on inventories. 

No comments: