Ellison Chair in International Floriculture
Ellison Chair in International FloricultureTeaching, Research, Extension and Service

Grower water survey — responses needed!

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A team of researchers from several states across the country (see http://cleanwater3.org)is conducting a survey to better understand factors that influence nursery and greenhouse growers’ decision making processes when it comes to water conservation and treatment technologies. The goal is to aid producers of nursery and floriculture to implement sustainable, alternative sources of water to enhance long-term economic viability while decreasing dependence on potable water.  This survey is part of a larger USDA SCRI project to improve current water management technologies. All responses will remain anonymous. You can complete the survey by clicking here ==> WateR3growersurvey.

 

$5 Gas Not Likely, Says Texas A&M Expert

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Having to dig deeper to fill up the gas tank? You are not alone as gas prices have steadily risen in the past few weeks, but the possibility of gas hitting $5 a gallon by summer as many analysts are predicting is very unlikely, says a Texas A&M University economist who has studied oil prices for decades.

John Moroney, professor of economics and an oil analyst for more than 30 years, says the possibility of gas reaching $4 a gallon from its current national average of around $3.45 is possible in the next few months, but not all that likely. As for gas hitting five bucks a gallon, don’t lose sleep about it, he advises.

an oil rig in west Texas pictured against the sunsetOil prices may rise, but a Texas A&M economist says $5 gas is not likely.

“It is true prices have gone up in the last month or so,” he explains.

“Oil prices are now about $100 or so a barrel. For gas to cost $5 a gallon, prices would have to be in the $140-150 a barrel range, and I just don’t see it happening. A series of things would have to happen for that to occur, and I just don’t think it is very likely.”

Moroney has spent much of his career charting oil ups and downs. He authored Power Struggle: World Energy in the 21st Century, a book about energy demands and production several years ago.

One big reason he thinks oil prices will not rise too much over the next few months: oil production is on the rise.

New discoveries of huge oil reserves have been made in the last few years, and production of oil from shale has risen dramatically all over the U.S. and other countries. Gas prices hit a record of $4.11 a gallon in July 2008, and Moroney says he remembers “that time well because West Texas intermediate crude hit $147 a barrel.”

As for now, Moroney notes, “Shale production has been going extremely well and it is leading to more oil in the marketplace,” he says.

“For that reason alone, I don’t think you will see any dramatic shortages happen any time soon.

“The price increases over the past few weeks are fairly normal price fluctuations of oil. Could gas go to $4? It is possible, but not a certainty. Could it go to $5? I just don’t see it happening.

“You have to remember that for the oil producers in the Middle East, their very lives and economies depend on oil. They need the markets to be fairly stable. It is true demand is increasing, but then so is production of oil.

“One thing I have learned over the past 30 years is that predicting oil prices is very, very difficult to do because oil is so sensitive to world events,” he notes. “It is one of the most unpredictable commodities in the world. But I don’t see any huge gas price increases in the near future.”

Number of the week

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450,000: The likely threshold of new claims for unemployment benefits, above which the economy is likely losing jobs and below which it is adding jobs.

The unemployed are more likely to apply for government benefits than they used to be, and it’s changing how economists use reports of new jobless claims as a gauge of labor-market health.

An economic rule of thumb that generally held through the recessions of the1970s, 80s and 90s was that when new weekly claims for unemployment benefits rose above 400,000, the economy was cutting jobs and when claims were below that level, jobs were being added. Indeed, in the latest survey of economists by the Wall Street Journal, most respondents still put the threshold at the 400,000 level. But new claims spent much of 2010 and 2011 above 400,000 even as the economy steadily added jobs.

Recent research by the St. Louis Fed put the threshold since 2008 at 450,000, and noted that the level actually moves around over time. An analysis by Zach Pandlof Goldman Sachs noted similar results. Pandl showed that the relationship of claims to the change in employment fluctuates during the course of the business cycle. The threshold falls when more people are quitting and it rises when a greater share of the unemployed are applying for benefits. Pandl’s analysis of October data put the threshold at about 435,000 for that month.

That the threshold is rising isn’t necessarily as surprising as the fact that it held up for so long. After all, the population was a lot smaller in the late 1970s than it is today. In 1976, 400,000 people represented 0.42% of the labor force compared to 0.26% today. The reason the level held up even amid a rising population has to do with the take-up rate, which measures how many of the unemployed actually apply for benefits.

The take-up rate declined through much of the late 1970s and 80s, according to research from the San Francisco Fed. The authors of the Fed paper, Aisling Cleary, Joyce Kwok and Rob Valletta, cite research showing the decline was the result of falling unionization and unemployment shifts toward states with lower benefit take-up rates. “Lower rates of unionization affect UI take-up because unions provide resources that ease filing procedures for members,” they write. “The variation in take-up rates across states is less easily explained, but probably reflects cross-state differences in cultural norms regarding participation in public programs.” Since fewer of the unemployed applied for benefits, it allowed the population to rise while the threshold stayed relatively steady.

But that trend is changing. This recession has seen the take-up rate move higher than it has in recent years. In his analysis, Pandl of Goldman cites potential reasons: “(1) a more generous unemployment insurance program, (2) greater financial distress among households, and therefore more need for benefits, or (3) greater pessimism about the ability to find new work.” Though the trend has been exacerbated by the recession and slow jobs recovery, it actually began in the 1990s.

The San Francisco Fed research notes that take-up rates have been steadily increasing for some time. Part of the reason could be a shift in the pool of the unemployed. Through the 1970s and 80s when the labor force increased, a large share came from younger workers and women working for the first time. These groups were counted as unemployed when they started looking for work but weren’t eligible for unemployment benefits. Now a larger share of the newly unemployed are job losers, not people entering the work force. That means more people eligible for benefits.

If the increases in the take-up rate are here to stay, it could mean so is the higher threshold for jobless claims.

Well crap, here they go again…

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Sorry for the technical jargon in the title, but that just about sums up my feelings on USDA’s latest announcement of their intentions to no longer produce the annual floriculture crops report. After USDA-ERS dropping their situation and outlook reporting several years back and USDA-NASS cutting the nursery crops report to a overy-thrid-year cycle (but not having delivered on even that since 2005), now NASS decides to drop the only green industry report we have left?  C’mon Man! (to use the Monday Night Football slogan for dumb plays). Yes, we know funding is tight. But why not go after other row crops that represent far less economic contributions than the green industry?

Now on the surface, this may not seem like a big deal, since we have a LOT of things to worry about in terms of getting our industry back on track in terms of profitability. But this is important, not only pragmatically, but symbolically as well. To me, IMHO, this is a continuation of the blatant lack of respect that USDA has for our industry, in spite of the lip service given to specialty crops. I mean, if specialty crops are so important to USDA’s strategic plan, how will the agency decide on how to allocate resources properly if their is no data to back up their justification(s). The only system that I can think of that they could possibly fall back on is to allocate funding based on the squeaky wheel philosophy. Real nice.

Another important use of that data historically has been it provides vital benchmark data that green industry firms can use in benchmarking and planning efforts and it provides state and national associations with important data with which to combat potentially negative legislation and to help justify potentially beneficial laws and regulations.

I guess this means that the national survey and economic impact study conducted every 5 years by the Green Industry Research Consortium will become all that more valuable. At least it covers all 50 states. Ok, enough ranting, for now…

Demography is Destiny

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BNH spoke to Ken Gronbach, author of The Age Curve: How To Profit from the Coming Demographic Storm (AMACOM, 2008) and Common Census: The Counter-Intuitive Guide to Generational Marketing (Ford Odell Group, 2005). Gronbach, who ran an ad shop, KGA Advertising, in Middletown for years, sees in demographic trends reasons to espouse what most would describe as a contrarian view on America’s and China’s economic futures. Gronbach says demographics are destiny and marketers and public decision makers disregard them at their peril. BNH Publisher Mitchell Young interviewed Gronbach.

You had an agency for a long time in Connecticut. How did you transition into demographics guru?

My wife and I opened our own agency in 1979, and one of our signature clients was American Honda Motorcycle. We had all the dealers from the tip of Maine out to Pittsburgh down to Washington, D.C. — about 140 dealers. We were selling motorcycles like crazy, but [suddenly] in 1986, the bikes were shipped to the dealers. They put them on the floor, and no one came in.

Between 1986 and 1992, we tried everything, Honda put their full force behind it to solve the problem, but by 1992, business fell 80 percent and they closed all the dealers.

Was it the economy?

it wasn’t the economy; it was a demographic phenomenon. [Born] between 1965 and 1984, Generation X had nine million fewer people than the baby boomers. From a marketing standpoint, if you dropped the size of your market by over ten percent, you’ve essentially atomized it. We knew we sold motorcycles to men 16 to 24 years old and when the baby boomers exited that age, motorcycle business dropped like a stone. That’s what tipped me off to so many other issues in our marketplace. Generation X closed 30 percent of the public schools; Generation X shut down the motorcycle industry. It didn’t threaten the colleges, ironically, because they [Gen X] went to college at a much higher rate than the baby boomers.

Now Generation X age is into the car-buying age. The best customer for a Detroit automobile is a 43-year-old. That’s when the most miles are put on the car — ferrying the kids around, trips and all that jazz. The baby boomers move on, Generation X moves into the age when they’re expected to buy cars from Detroit at the level of the baby boomers, and Detroit starts firing their ad agencies and firing their presidents because sales are going down. They said, ‘We’re not getting our message out — our SUV sales are way down.’ Well, SUV sales wiped out because the buyers are wiped out. Nobody counted them.

The bottom line was that there were just fewer people to take the boomers’ place?

The most important thing was that we sent our production overseas, primarily to China. The reason for that was during the last 20 years it was an employees market: for every ten jobs being exited by the baby boomers, there were only eight [Generation X] applicants. McDonalds couldn’t even find people.

What is the birth-year range of the baby boom?

The baby boomers were born from 1945 to 1964. The next would be Generation X, and they were born between 1965 and 1984. The peak years for the boomers were between 1957 and 1961; it is a huge bell-shaped curve. Then you have Generation X, but it’s an inverted bell curve. Their lowest birth-rate years were between ’71 and ’74.

So Generation X made an employment shift from the baby boomers?

Generation X did not opt for the technical careers that the Boomers did, like factory work, electricians, plumbers. [Those occupations are] saturated with baby boomers, and boomers went into business for themselves because they couldn’t find work. That’s exactly what we’re facing right now: The kids currently between seven to 26 years old, Generation Y, are facing 50-percent unemployment. My kids can’t find summer jobs, you have to do something else — go into business for yourself. The jobs Generation Y are beginning to fill are jobs exited by Generation X. And X is a small footprint. Companies have achieved efficiencies, they’ve automated, entry-level doesn’t need as many people, a lot of things are bought online, there just aren’t as many opportunities for kids getting out of high school and college.

These demographic numbers are not secrets. So what are major companies or government agencies doing about it?

In 1998, Aetna wanted to buy US Healthcare and a friend on the board wanted me to share my opinion. I said it would be a demographic disaster. The generation that was paying into health-care insurance and using more than they were paying was the generation called the Silent Generation, born 1925 to 1944. They were tiny — their numbers are down around 50 million. The baby boomers’ numbers are up around 80 million. I told them, the Silents are going away, they’re going on Medicare. What’s next is baby boomers are moving into the age where they’re going to be paying into the system and using more [health care] than they’re paying for. You’re expecting the next generation [Gen X] that’s 11 percent smaller to pick up the slack. I couldn’t convince Aetna that this was an obvious demographic disaster. They did it anyway, and then lost $10 billion.

You said that to fix the jobs problem you have to fix the housing market. Why?

What we learned from 2008 was that the housing market is the economy. Seventy-five percent of the housing market in Arizona is foreclosures, which means there is no market. I would tell our legislators, senators and congressmen to enforce President Obama’s Home Affordable Mediation Program [HAMP]. They were supposed to sit down with the homeowners and figure out how to keep people in their homes. Take the foreclosures off the market, and you have shrunk your market in some cases by 60 percent. If you shrink the housing market in Connecticut by 60 percent, the market would come back, home values would go through the roof, it would be a signal to buy, and everybody would be back to work.

There are major assumptions about the growth of China, but you have different viewpoints of China’s future demographics.

Demographers worldwide know what’s going to happen in China. The number of people they prevented from being born through their one-child-only policy was 400 million people. To take 400 million people out of the last 32 years of the population is to literally reduce fertility by 75 percent. They went from 40 million babies per year to approaching ten million per year.

But they have a lot of people, so why would that be a bad thing?

Because you can’t cut a hole in your population. The part of the population that does the heavy lifting are the ones between 40 and 60 years old. So when it becomes the turn of this tiny group of under-30-year-olds to do the heavy lifting, they simply don’t have enough people. Economists have begun writing about their mysterious labor shortage. If you literally cut your fertility rate by 75 percent, you should expect a labor shortage.

They’ve set the stage for their country to go into economic chaos and there’s no reversing it. They simply will not have enough people to produce enough to care for their elderly. Imagine that you’re 70 years old and lost your usefulness as a laborer. You’ve worked 40 years for zip, so you don’t have much saved up, and now the country doesn’t have enough taxpayers to support you. But China never had that system anyway. Their Social Security was called ‘family’ — and they obliterated it.

Aren’t the elderly in China a more or less protected class?

They’re protected culturally by the family, but it has nothing to do with the government. They went from two grandparents with eight children and 32 grandchildren. That was the system that supported the elderly. Now it’s four grandparents, two parents and one child. They don’t even know what the word ‘cousin’ means.

To throw another wrench in the works, [demographer] Nicolas Eberstadt believes the single biggest problem China is going to have is their management model to run the companies. Their model to date has been family, because they don’t trust anyone. There’s no president, two vice presidents and a chain of command; it’s family. And without family running the businesses, the businesses won’t run.

Is there a similar problem in India? They have 1.1 billion people.

Nobody knows how many people are in India; it could well be in excess of China right now. No one knows. The CIA Factbook can guess, but there’s no way to count those people. It could be as much as 750 million in northern India alone. It’s abject poverty and no education whatsoever up there, and probably 20 to 30 years behind China. The southern part of India is where the wealthy people are and they’re doing exactly what the Chinese are doing. So their problems are very similar. Is India in better shape than China? Yeah, in the long term. One, they’re our friend, and China is not. The real problem is their proximity to China.

But aren’t more prosperous Indian families having more children?

We see that wherever the Western culture goes, when people become prosperous they have fewer kids because they enjoy their wealth. They’re more selfish. Here is the big picture: If you live in Spain, France, Portugal or Germany right now, you have come to the conclusion that you’ve made a mistake by not having kids. Because the Muslims are overwhelming you. They’re having ten kids and you’re having none. Only one in seven German couples get married, and they don’t have kids. The E.U. [European Union] is done. If you want to go experience Italy, you’ve got to go now, because in ten years you won’t be able to experience Italy. France is feeling it big time. The problem is that they forgot to have kids. Remember that people precipitate economics, not the other way around. Without people, you don’t have anything.

Ten years is a pretty short time period.

It’s going to happen in our lifetime. When things go south, they go very fast. Look at 2008 — we almost lost the world economy. Once the façade of China is realized you’re going to see [that] as fast as China advanced, it’s going to decelerate.

So the high unemployment rate among Generation Y in the U.S. is because of their large numbers.

Yes. We’re the only industrialized nation in Western culture that had kids. And Generation Y is bigger than the boomer generation. The magic number is about 2.2 — you have to have more than two

    .

    If China is going to have a labor shortage, won’t that be good for the American Generation Y?

    It’s perfect. Manufacturing will start coming back to the States, and it’s going to come back with a vengeance. Colleges are reporting that their populations are 60-40 women. So where are the men?  They don’t need to go to college. The boomers dominated the technical trades. And as they retire, the Generation Y men have picked up on it. Here’s an example: you have twins — a boy and a girl. The boy wants to be an auto mechanic, and the girl wants to be an attorney. She goes through four years of high school, then to a good four-year college. At 22 she goes through another three years of school to become an attorney. Now she’s 25, and has $300,000 in student loans. She gets her first job and makes $60,000, not a bad start.

    Her brother goes through four years at a technical school. He gets out at 18 and goes to a Mercedes dealership and is an apprentice for two years. He buys his own tools over that time, and then at 20 years old they offer him a full-time job and pay him $100,000. At this point his sister is still in her third year of college, and at 25 he’s already made half a million dollars, while she’s in debt $300,000.

    You asked about my advice for our governor: Spend some money on our technical schools, because that’s where the big dividends will be.

    In Connecticut we believe that college is where the dividends are.

    So what you’ll have is a bunch of highly educated people that have no jobs.

    Many complain about the inability of the young kids to get down and work. Why?

    You haven’t felt the effect of Generation Y yet. Their peak birth rate was around 1990, so they’re only 21 years old. You’re not going to feel them for another three to five years.

    What will they be like in the workplace?

    You’re going to hire the best people you ever hired, the smartest people you ever hired, and you’re going to have the best choice of people you ever had. You’ll run an ad and people are going to wrap around your building. They’re going to come in, and they’re going to understand that hard work is a condition of employment. They’re not going to call in ‘tired.’ Believe me, Generation Y is going to be the most productive generation in our history. A tremendous influx of people will pour into our labor system. And that’s good for insurance, because they’ll be paying in and not using it.

    But because they’re young and healthy, won’t they not buy insurance?

    They’ll buy insurance because they’re going to get married younger. And that’s because you’ll have a whole crop of young men that are going to be making a livable wage at 21 instead of 27.

    What do people need to know that they don’t know now — what do we need to fix?

    There’s a shortage of dads. Half the babies born in the U.S. today don’t have dads. According to Eberstadt, who has roots in secular demography, the strength of the U.S. is faith and family, and he’s not saying that as an evangelist. We need to make sure our kids understand that it’s important to get married and it’s important to keep your word and it’s important to be responsible, and it’s important to have children. There was a 20-year interval where we didn’t have [enough] babies. Not having them between 1965 and 1984 is what created the problem for consumption and labor.

    Well, today Americans are reacting to immigration in part because of the job market.

    Immigration is our strength. The immigrants who came in filled in the hole in Generation X. Latinos poured into the country because that’s where the opportunity was. Let’s say Latinos assimilate in 20 years; their kids won’t even speak Spanish. The stats of the number of Latinos in the military is overwhelming. If they’ll fight for the country, they want to be Americans. In 2025, we will begin a new generation called the ‘Baby Blenders.’ Our kids will intermarry because they don’t see color or race any more. We’ll look like Derek Jeter.

    Outlook: Manufacturing Strength Despite Slow Economy

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    A host of factors, ranging from the tsunami in Japan to higher oil prices, have conspired to weaken the outlook for the overall U.S. economy, yet the manufacturing sector continues to forge ahead, according to the Manufacturers Alliance/MAPI U.S. Industrial Outlook, a quarterly report that analyzes 27 major industries.

    “The positive momentum of a 2 percent reduction in payroll taxes this year and 100 percent expensing of equipment and software investments has been more than offset by higher oil prices, and Japanese automakers in the U.S. faced a parts shortage as a result of the tsunami,” said Daniel J. Meckstroth, Ph.D., chief economist for the Manufacturers Alliance/MAPI and author of the analysis. “Manufacturing, though, is currently well positioned for growth. There is pent-up demand for consumer durables, firms are profitable and need to spend more for both traditional and high-tech business equipment, and strong growth in emerging economies is driving U.S. exports.”

    By supplying major assumptions for the economy and running simulations through the IHS Global Insight Macroeconomic Model, the Alliance generates unique macroeconomic and industry forecasts.

    Manufacturing industrial production, measured on a quarter-to-quarter basis, grew at a 7 percent annual rate in the first quarter of 2011, after expanding at a 3.4 percent annual rate in the fourth quarter of 2010. MAPI forecasts that manufacturing production will increase 6 percent in 2011 and advance by 4 percent in 2012.

    Production in non-high-tech manufacturing expanded at a 5.7 percent annual rate during the first quarter of 2011. According to the MAPI report, non-high-tech manufacturing production (which accounts for 90 percent of the total) is expected to increase 5 percent in 2011 and 4 percent in 2012. High-tech industrial production rose at a 21 percent annual rate in the first quarter of 2011. MAPI anticipates this sector will post strong 15 percent growth in 2011 and 13 percent growth in 2012.

    As shown in the new report, 18 of the 27 industries MAPI monitors had inflation-adjusted new orders or production above the level of one year ago, two more than reported in the previous quarter, and four industries remained flat. Industrial machinery grew by 32 percent in the three months ending April 2011 compared to the same period one year earlier, while mining and oil and gas field machinery production improved by 29 percent in the same time frame.

    The largest drop came in housing starts, which declined 15 percent. Private nonresidential construction experienced an 11 percent decline.

    Meckstroth reports that five industries are in the accelerating growth (recovery) phase of the business cycle; 17 industries are in the decelerating growth (expansion) phase; two industries appear to be in the accelerating decline (either early recession or mid-recession) phase; and three are in the decelerating decline (late recession or very mild recession) phase of the cycle.

    The report also offers economic forecasts for 24 of the 27 industries. MAPI forecasts that 21 of the 24 industries will show gains in 2011, led by mining and oil and gas field machinery, and industrial machinery, each with expected 26 percent growth. One industry, electric lighting equipment, will remain flat. The recovery should continue in 2012 with growth likely in 23 of 24 industries, including five industries that are predicted to grow at double-digit rates, led by housing starts at 61 percent, albeit from depressed levels, and communications equipment at 16 percent. Public works construction is the only industry anticipated to decline, by 2 percent, in 2012.

    Buy Your Raffle Ticket Now to Support American in Bloom

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    As many of you are aware, America in Bloom (AIB) promotes nationwide beautification through education and community involvement by encouraging the use of flowers, plants, trees, and other environmental and lifestyle enhancements.

    One of the ways that AIB raises funds (besides sponsorships) is to hold an annual raffle. Wouldn’t it feel good to put $5,000; $1,000, or even $500 in your pocket? If you purchase an AIB raffle ticket you just might be one of the lucky cash prize winners! The 2010 raffle generated over $30,000 in funding for America in Bloom.

    The raffle will be held on Monday, July 11, 2011 during the OFA Short Course. You do not need to be present to win. It’s also easy to participate. Simply buy your raffle tickets online using the secure form.

    Now you may be asking…Why should I buy a raffle ticket? Let me answer that by summarizing what AIB participating cities say about the program:

    AIB is a quality of life improvement program
    …a great concept that can help develop both beautification and economic improvement
    … a grassroots program that believes that connecting people and plants is important to everyone’s quality of life
    … the propagation of the love of plants and their interaction with our communities
    …enhancing cities to make them better places to live
    …a program that promotes community health by using horticulture
    …a program that builds pride of place for communities and enhances awareness of different facets of the community

    AIB is a community improvement program
    …an opportunity to make a community more appealing through community involvement
    …a challenging experience, but worth the effort to see a cocoon become a butterfly
    …a nation wide program that brings a community together to beautify inside and out
    …a unique and informative creative concept to highlight your community and improve overall involvement of the neighborhoods …a wonderful shot in our community’s arm; through it we are reborn
    …a community effort to beautify and improve your town by getting the residents involved
    …an opportunity for communities to identify and build their image
    …amazing as it provide the process to get cities and towns moving and working together to improve their communities

    AIB is a civic pride and community involvement program
    …an organization to promote pride in cities
    …a beautification program for each community that nurtures volunteerism
    …a way to pull together volunteers to impact the community
    …about bringing people together to make our city better
    …a community building and enhancement program
    …a community beautification organization that promotes civic pride
    …a community effort to showcase pride in the community through plants, flowers, trees
    …community beautification …a contagious awakening of community pride
    …a method for involving the total community in planting pride in our communities
    …a community improvement and beautification contest

    AIB is an educational and community engagement program
    …a very educational program that makes our communities more aware of how beautiful we can make our communities by working together
    …a teaching experience to educate rather than criticize
    …an incredibly motivating organization that serves as a catalyst for building community pride and participation
    …an organization that promotes community pride, passion and education

    A source of inspiration
    …inspiring and encouraging
    …a facilitator of community involvement and inspiration for change and improvement

    AIB is a catalyst
    …a great resource and motivator to improve our city’s public image as well as sales revenue for downtown businesses
    …motivating and inspiring
    …rewarding
    …a municipal and volunteer self improvement program that brings the community together
    …a vehicle to coordinate community improvement
    …the contest is a catalyst for action on a continuing basis

    AIB is a friendly competition
    …disguised as a friendly competition, but serves our community as a unifier for the various non profits, corporations, private citizens for a common goal
    …a contest that can be used to generate enthusiasm and education for community wide improvement projects

    AIB is a valuable tool
    …comprehensive inexpensive survey of a city
    …a powerful community building tool
    …a program that gives us an annual list of potential problems to address from the judges’ visit

    Not convinced yet?  Then I invite you to visit the America in Bloom website to learn more! Or better yet, look for me or any other board member at the OFA Shortcourse and we’d be happy to talk more about how AIB is an important tool for ensuring the relevancy of floriculture in the future!

    The future of learning

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    Every so often I come across something that stops me dead in my tracks; something so fascinating that I simply have to stop what I am working on [regardless of how important it is] and take an excursion that, in the end, proves to be paradigm-changing. This happened today.

    A friend of mine referred me to a site that has a good video explanation of enterprise value and EBITDA. It wasn’t necessarily the content (though it was exceptional). It was the manner in which the information was being presented. I witnessed firsthand the future of learning.

    Ever wished you could take a self-paced course or simply learn more about topics such as banking and money, the credit crisis, currency, current economics, finance, the Paulson bailout, valuation and investing, venture capital and capital markets? Now you can. Or, if you just wanted to brush up on your statistics, chemistry, algebra, biology, etc.? Now you can.

    As an educator, my paradigm has been rocked. I now declare myself officially challenged to think even further outside the box. Stand back, this could be dangerous!

    Want to see what I’m talking about…go to http://www.khanacademy.org and explore. Watch the TED Conference video (BTW, you should subscribe to the weekly TED conference presentations). Choose one of the 2,100 educational videos in the library and see for yourself. See the future of learning for yourself.

    Hat tip to Rick Brown for the link (thanks buddy).

    Why tree prices will increase

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    One of the blog posts most commented on recently was by a guest blogger talking about the availability and quality of plant material in the green industry in 2011 (click here). Today, I received a heads-up from a friend (hat tip) regarding another excellent perspective regarding a related issue from one of our own in the industry. By permission, I am placing it here on Making Cents in its entirety (another hat tip to the author).

    Usually price increases are a sore topic. In our current economic climate, cost cutting has become a way of life as businesses fight to conserve cash and preserve margins. The unwelcome news of a price increase from a supplier is usually the last thing a buyer wants to hear. The ornamental tree business has been no different. Growers have suffered a crushing over-supply of trees which was, in fact, developing 6 -7 years ago, but was masked by the frenetic pace of construction through the middle part of the decade. When the bubble burst in 2007-2008 the demand for trees was reduced dramatically, beyond what few of us have ever witnessed. Since that time, growers, desperate to maintain a market share, have reacted by cutting prices for each of the last 3 years to the point where prices, on some items, have reached 30-year lows.

    Unlike many businesses, tree growers cannot simply downsize their company to a scale that matches their sales. Existing inventory requires upkeep and that costs money. Like everyone else, growers have aggressively cut costs to try to staunch the negative flow of cash. That is a tall order in a world where the costs of raw materials such as burlap, diesel, and plastic have only increased. So, in many cases, fertilizer, pesticides, pruning, and staking have gone by the board. The results of excessive cost cutting are evident in the marketplace this year and many growers are simply not capable of supplying trees of adequate quality.  For most growers, even the cost of culling bad trees is daunting when cash is tight and so the trees sit around, on display in the fields or, in the case of containers, growing increasingly pot-bound.

    The other major area of cost cutting has been a sharp decrease in tree-planting in nurseries. Many cash conscious growers have realized that if they cannot afford to maintain what they have, then there is little point in putting more trees in the ground. As a result, tree planting has declined 70-80% over this period. This reduction occurred progressively: first by about 20% in 2008-2009 and then an additional 30-40% in each of the two following years. This trend has only just begun to become evident, with many smaller-sized trees and evergreens becoming scarce this spring. Over the next two years the breadth of shortages will increase dramatically and progressively, as more gaps appear while the old inventory outgrows the market, becomes ruined from neglect, is sawed down to increase spacing, or grubbed out entirely to prepare fields for re-planting.

    Growers are watching carefully to see which items are selling out and they will raise prices whenever market conditions allow. This is not a matter of greed as much as survival. Most nurseries are just hanging on and absorbing losses, if they are even doing that. We are all watching while prominent nurseries fail, unable to continue in an economic meltdown that was nearly impossible to predict.

    The shock waves from the sub-prime melt-down will continue to be felt, but will soon be felt in different ways. The crash of demand will be followed by a crash in supply caused by a reduction in the number of nurseries that have been willing and able to continue to risk investment in the planting and maintenance of quality inventory these last three years. And just as the construction boom masked the over-supply of trees 5-6 years ago, the construction bust is masking the currently developing shortage. When we experience even a modest resumption in new construction, the shortages will be difficult to manage.

    It is important for businesses to educate their customers for what is coming. There is a special challenge for those who are bidding projects that are further out. There is a shocking gap between the desperate pricing of 2010-11, and the prices of, even, the over-supplied market of 2007. But when scarcities become prevalent, prices will return to their former levels, and eventually go higher still. That market of shortages may be much closer than you realize. Buyers should be prepared for price increases in fall 2011 and very large increases in 2012 and 2013.

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