Cheap Trees Prices Won’t Last!

A tree nursery using gutters to decrease growi...

Image via Wikipedia

Why Tree Prices Will Increase –

This was posted by Bold Spring Nursery.  Very interesting information.

    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.

Advertisements

5 responses to “Cheap Trees Prices Won’t Last!

  1. It looks as though you have your work cut out, Gilson. We need trees! I wish you the best of luck and I hope that the market works in your favour.

  2. Pingback: $99 for a Shade Tree or Flowering Tree at Amherst Nurseries in Amherst (Up to $330 Value) - Daily Couponds

  3. Thank You for such a well written, concise piece that we all know is true, think about all the time but have a hard time getting people (buyers) to believe. This article is a great help to those of us selling trees based on actual quality and not just price.

  4. Pingback: $25 for $50 Worth of Plants at Narrow Tree Nursery » Get your daily Groupon deals

  5. Pingback: $25 for $50 Worth of Plants at Narrow Tree Nursery - Koream Deals

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s