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Nurseries slow to recover

If the economy was at “the edge of the cliff” by third-quarter 2008, recent trends indicate that we’ve already stopped the downward economic spiral. Today, economic conditions are more stable.

Nurseries slow to recover

If the economy was at “the edge of the cliff” by third-quarter 2008, recent trends indicate that we’ve already stopped the downward economic spiral. Today, economic conditions are more stable.

But it’s unlikely that we’ll experience sustained growth in the near future. Instead, the economy may experience a slow recovery. Relevant indicators for nurseries and landscapers suggest a mixed bag of good and not-so-good news for 2010.

First, reasons for optimism

Private investment on new residential structures stopped falling. It has shown modest increases in recent reports.

Private investment on existing residences is stabilizing. New and current homeowners may increase spending in property beautification as pent-up demand from last year occurs

Local and state governments, for their part, may increase their demand for the industry’s products and services, used as sources of carbon sequestration and environmental benefits. This may become a market opportunity in future years, as public interest for a better environment consolidates.

Recent devaluation of the U.S. dollar may help the industry because imported substitute products (e.g. cut flowers) become more expensive. If so, consumers will search for substitutes.

The not-so-good news arises from declining private investment in commercial structures, which lags investment in residential structures by about 18 months. That’s because commercial projects tend to be larger and require longer planning periods

Thus, investment in commercial structures will continue falling through 2010. This may hit the industry hard.

Market adjustments to make

Marketing-oriented nurseries and landscapers understand the broader scope of their businesses. That is, they should be in the business of selling enjoyment, beauty and environmental services, not merely trees and plants.

To anticipate market changes, marketing-oriented executives should always consider what market segment(s) to target, and the most effective strategies to meet this changing target market’s needs

Given the 2010 outlook, consider adjusting marketing strategies to take advantage of increasing public environmental concerns, particularly greenhouse gas emissions. Make concerted efforts to communicate your value as a “green industry” to local, state and federal governments.

Second, pay close attention to retail operation performance, in terms of customer satisfaction as a vehicle to build customer loyalty. Remember, when customers visit, they aren’t merely shopping for products — they’re paying for their whole shopping experience.

Highly satisfied customers are more likely to come back. They develop strong preferences. They also deliver effective word-of-mouth advertising – the most effective promotion strategy.

Third, targeting your marketing strategies to increase sales to younger generations is a key challenge. The industry needs to innovate at various levels (product, distribution, pricing), and understand better the behavior and drivers of younger generations.

Gómez and Rickard are marketing specialists for Cornell’s Horticultural Business Management and Marketing Program.

Meat down, but set to return

We all know the world is an ever-shrinking place where nothing happens in a vacuum. It’s easy to forget that when looking at “the farm economy.”

We look at the weather and harvest conditions and how well the cattle are gaining, and often tend to forget about the outside world.

Yet how we prosper is heavily dependent on how our city cousins are doing. If they don’t have the disposable income to buy beef, we’re going to feel it!

This has never been truer than in the last few years.

We continue to shrink the national beef herd, yet prices lag behind even with smaller available supplies. But the worldwide recession has put the squeeze on everyone — pork and poultry, too.

Obviously, beef demand has been in the dumper lately. And the big question is, when will things turn around and margins improve?

CattleFax economists analyze myriad worldwide factors affecting the future of the business. Here’s a summary of the data and predictions they pulled together for a recent seminar.

Key Points

• Low consumer confidence and lack of jobs are “eating up” meat demand.

• With U.S. meat demand peaked out, exports become crucial.

• Substantial demand improvements are likely to occur by 2011.

Business indicators:
Major stock markets — the obvious barometer of overall business health — all bottomed out during late summer and early fall of 2008, then began a steady recovery.

From early 2008 to midfall of 2009, the eight major stock markets increased an average of 66%. The Dow Jones average gained 52%. While these are promising signs, we’re not out of the woods yet.

Unemployment still hovers around a high 10%. The consumer confidence index, an indicator often related to beef sales, stood at 49.5 last November. That’s far below 90, the value generally acknowledged as a solid economy.

United Nation predictions for global food needs are promising — for those who can weather the economic storm.

The growing global human population means that food production will need to increase by 40% by 2030, with beef and dairy production needing to double by 2050.

But near-term domestic meat demand isn’t nearly so rosy. Total U.S. per-capita.

Beef numbers: We can’t blame price weakness on excessive cow numbers. The 2010 beef cow inventory is approximately 31.5 million head, the lowest since 1963!

Our Canadian neighbors are cutting cows even faster at 4.4 million head, down from 5.2 million in 2005.

The Jan. 1 calf and feeder supply stands at about 27 million head, down 700,000 from last year, compared to a peak head count of over 40 million in 1982. Per-capita net beef supplies of 62 pounds hit a 20-year low in 2009 — versus 78 pounds at the 1985 peak.

You have to wonder how long the feedlot sector can continue to operate in the red.

Cow-calf margins have been slipping the last couple years, but have at least stayed positive since 1997. Cattle feeding margins for the past five years, on the other hand, have remained negative.

Exports critical: The importance of foreign markets is clear when you look at beef, pork and broiler consumption trends. Compared to 20 years ago, U.S. per-capita consumption is up about 5%.

Yet per-capita consumption in the rest of the world is up about 30%. Clearly, the U.S. must be active in world markets to remain healthy and vibrant.

Growing list of intangibles: The days of the market being impacted only by supply and demand are over. Government and/or customer demands regulating feedlot emissions, animal care, use of public lands, grain-use mandates for ethanol, and probably issues we haven’t even thought of yet will loom larger in the future.

And what’ll be the real impact of the negative press focused on beef production? The public is constantly bombarded with health issues, environmental issues and animal welfare issues — all designed to put beef production and consumption in the worst possible light.

We can only hope that real science, reason, and common sense win out in the end.

The bottom line is ...

Total U.S. meat consumption appears to have peaked for the foreseeable future. The return of consumer confidence will be key to boosting domestic beef demand. Even so, it’s essential that America be an active and reliable player in world markets.

If near-term demand increases, beef supplies will be tight and prices will respond. Look for this year to be one of slow improvement, hopefully followed by substantial improvement in 2011.

Harpster is a Penn State animal scientist and a beef cow-calf producer.

Berry markets stay strong

Demand for berries in the Northeast continues to be strong. Despite the poor economy, sales didn’t suffer at the local level in 2009. So, decreased demand isn’t likely to occur in 2010 either.

Consumers are becoming more health-conscious, and look for ways to eat more healthfully. Berries will continue to be popular as a healthy treat, substituting for various high-calorie alternatives.

Strong markets for local berries appear to be driven by several factors.

One is growing awareness of the advantages of eating locally grown foods. Growers are also improving postharvest handling.

Then there’s the negative publicity about foodborne illness outbreaks attributed to farms in the West.

Growers should be ready to explain their protocols for keeping berries free of pathogens and to assure consumers that the fruit is safe to eat.

Key Points

• Berry demand continues to grow with consumer health trends.

• Strawberries and raspberries strong, while “blue” competition grows .

• High tunnels and more labor availability may boost sales.

Strawberry demand stays strong

After several years of increases, planted strawberry acreage in California decreased by about 6% for 2010.

That suggests the market for nonlocal fruit is near saturation, and that supermarket prices are likely to stay about the same.

Cold weather in Florida may temporarily cause a price increase. But this shouldn’t affect Northeast growers, who begin harvest in May and June.

Supermarket prices don’t have a major effect on local strawberry prices. The two are often marketed differently, and can be easily differentiated.

Good snowfall throughout the Northeast should ensure that strawberries emerge from winter with significant fruiting potential. Local demand and prices received for strawberries should remain strong.

Blueberry competition grows

Planted acreage is increasing rapidly around the world, including the United States. Breeders have developed varieties tolerant to a wider range of soil and climatic conditions.

Large plantings are nearing maturity in California and China. Blueberry growers are worried that 2010 might be the year when the wholesale market price drops below the cost of production.

Under these conditions, Northeast growers will need to differentiate their product from others to leverage the interest in buying local.

Blueberries are much more difficult to differentiate in the market. Varietal appearances are similar, and those from different growing regions are often the same.

Raspberries vulnerable to root rot

Last fall’s weather was good for flower bud initiation and hardening off of raspberry plants. But high rainfall throughout the second half of the year may predispose raspberries to root rots in 2010.

Cold weather and high winter winds can cause winter injury in many varieties. Growers should pay particular attention to signs of root rot in spring. Be vigilant about pruning.

More growers are using protected culture, especially high tunnels, for raspberry production.

A high tunnel can provide protection again winter winds and excessive rainfall. Their use also greatly increases quality and shelf life, while simultaneously extending the season and bringing a higher price.

Other positive market factors

Berry growers are finding good outlets for lower-quality fruit, as demand for fruit wines and other processed products is increasing. Black-currant production also is increasing, since several Northeast states now allow them to be grown.

Available labor, always a major limitation for expanding berry production, may be easing. Labor supply may be loosening this year as unemployment rates continue to stay high.

In New York, controversy surrounds recent efforts to implement overtime pay rules for agricultural workers. If it escapes the Senate ag committee, this could significantly affect wholesale berry growers.

In summary, 2010 looks to be a good year for Northeast berry growers, especially for those who market directly to consumers.

Since many people don’t take advantage of local farm products, there are still opportunities for growth.

Demchak and Pritts are horticulture and small fruit specialists at Penn State and Cornell, respectively.

This article published in the March, 2010 edition of AMERICAN AGRICULTURIST.

All rights reserved. Copyright Farm Progress Cos. 2010.

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