Written by: Tory Schwope - 2nd Generation Grower
Schwope Brother's Tree Farms, Atherton, MO
Forty years from now I hope to be able to sit down with my grandchildren and tell the story of how our nursery survived the “Great Collapse.” I think the “Great Collapse” is a fair name for what my friends and I are experiencing, and not at all overdramatic. All of the long-time nurserymen I know say that the market conditions we have faced for the last three years have been indescribably worse than they’ve ever seen, and not one had ever dreamed that it could ever be this bad for this long. There are many reasons why “it is what it is” as they say, and I think it is important that the story be told. It’s not a story with a happy ending, a hero, or a villain; it’s about chance, and the damage that can be done when all the worst things happen at the most in-opportune time. The net effect is the destruction of an industry: an industry filled with small, family-owned businesses with nowhere to sell the plants they’ve grown. Many industry analysts predict that we will lose between forty and fifty percent of growers though the “Great Collapse.” Many have already quit or been forced to, and there will be many more to come.
Why and how we got into this situation is a complicated and ill-fated tale of booming times followed by multiple unforeseen blows. The result is an environment of oversupply and a drive to meet the lowest price, or be forced to destroy the crop you’ve poured the heart of your company into. This type of environment creates many difficult decisions for nurserymen. With sales down, and a present over-supply, what the grower faces is a mandate to cut cost. Cutting cost in this industry is very difficult to do, as you have to provide proper maintenance for the plants or they will become unsellable. The only way to significantly cut cost is to cut into your future and stop putting new plants into production -- the plants that you should be marketing two to four years from now. Not having enough plants to sell in the future will probably cause more farms to close than today’s low prices. Ultimately, at some point, the current crops will work their way through and prices will recover, and then skyrocket. In the aftermath, with only around half of the businesses surviving, coupled with their reduced production numbers, supply will become very low. The net affect of the “Great Collapse” is a very unstable supply and pricing structure: vast oversupply and prices below the cost of production now, and incredible shortages and inflated prices in the near future.
The “Great Collapse” has been caused by four natural business cycles all driving price down for no less than five consecutive years. Growing nursery stock through the 90’s and early 2000’s was a dream. Prices were consistently rising, and selling the crops took only a few phone calls. It was a 15 year run of good times. So good, that the success of nursery stock producers was envied by many, and many jumped right in with investment dollars, anxious to make big money. Hundreds of millions of dollars from one end of the country to the other plowed into the construction of new nurseries. Around the turn of the century over 80,000 acres of “new” nursery were built or planted every year. This massive expansion of the industry created a natural over-supply a few years later. The law of supply and demand worked perfectly. Pricing fell, some competitors began to fail, the market had almost corrected itself, and then the unthinkable happened. The housing market crashed, and demand for nursery stock did as well. Prices for nursery stock, rather than rise because of falling supply, fell even further because the demand was falling faster. As supply continued to fall, equilibrium continued to become harder to achieve because of the banking system scare, and the subsequent recession and commercial real estate fall out. Now, here at what must be rock bottom, it is clear that an enormous amount of irreversible damage has been done to almost every grower in the country, and still no end in sight.
What the Grower Faces
Things happen slowly in the nursery industry. Most woody shrubs take at least 3 years from the time they are propagated to be ready for sale, and many trees take ten years or more. A 10’ spruce tree can be 15 years old! Lots of money, patience, and dedication have been invested, but it’s all for not if there is no buyer for the plants when they are ready for market. All plants have a marketable life span. It’s not how long the plant lives; it’s how long it stays at a size that can be economically transported and installed, or healthy and viable in its container. Generally, in times of over-supply or economic hardship, a grower will take a reduced price for some crops that mature during that down period and even throw some away. But with many of the plants they grow they can simply wait to market the plants under better market conditions. During this collapse though, the better times haven’t come, and panic ensues. Many growers want to get what ever they can for their plants before they have to be destroyed, while other growers go out of business and their creditors force the plants out into the market, (a market that is fifty or sixty percent smaller than it was 4 or 5 years ago). In 2010 there may be as many plants destroyed as sold. A lot of my friends’ sales are down 70% or better over the last three to four years, and with no way to cut cost other than not planting any new crops the pressure builds to liquidate whatever you can just to keep the lights on.
Even the Economics 101 drop-out knows the answer to this question, but the big story is what the effect on the related industries will be. Landscaping will cost much more in the future, which will drive demand down. This is the biggest travesty. Over a twenty year period fueled by a once in a generation housing boom, efficiency and economies of scale were naturally developed in our industry. This made landscaping cheaper. In reality the consumer has received more for their money year after year since the industry’s boom in the mid 80’s. I think the opposite will be true in the future. The problem is the length of time it takes to build up the growing inventories and capital (both human and monetary) to reach both the levels of efficiency and competition we have experienced for the last 5 years. The amount of industry expertise lost due to career change out of our collapsing industry and the natural retirement cycle will take a long time to replace.
As a grower I can honestly say that I have no ill will, nor pity for what has happened to the industry I love. My friends and I understand that the storm we faced was a natural economic phenomenon, and the hard decisions we’ve faced will make us better and stronger in the future. I think what we would all like to see, though, is the consumer taking advantage of the situation. Destroying the crops you’ve labored over for years and years is heart breaking, and destruction is the only alternative if plants aren’t moving out in a timely manner. This is my motivation for writing this piece: the general public needs to know that now is the time to buy plants and get the landscaping you’ve wanted done. Not because you feel empathy for the grower, but because it is in your best interest . Plants will not be any cheaper in our life time, and will most likely be inflated for ten years following this down turn. Buy plants. Buy a plant from my customer, from their competitor, or from the big box retailer down the street. Not just because it’s good for our industry, but because the plant that adds beauty, color, and warmth to your life is never going to have a better value than it does right now.