[Image: azaleas]National Situation and Outlook
A recession for the U.S. economy is no longer a forecast, it’s a fact. Economic activity declined in consecutive quarters, and continuing declines are expected at least through midyear 2009. Recession resulted from significant problems that were revealed in 2008, particularly in the financial system. The spike in fuel prices worsened the situation. Linkages to other sectors of the economy spread the impacts from financial and fuel. News of layoffs has appeared regularly. Individuals and businesses have incentive to be conservative. In combination with the lack of willingness to lend, many sectors have retrenched by reducing inventories, sales efforts and other business activities. Consumer confidence has been hammered down, with impacts on general consumer purchase patterns. Home and auto sales are particularly hard-hit. The rates of new home construction and sales of existing homes are down significantly. Home prices have taken substantial blows, mostly in areas where there had been rapid appreciation in recent years. A significant portion of Louisiana’s out-of-state nursery sales are to Texas, which has been beset by the factors above. All these factors are important because they have direct and indirect impacts on the ornamental plants industry -- from wholesale growers to retailers.
As noted in Floriculture and Nursery Crops Situation and Outlook last year, USDA/ERS no longer covers this industry on an on-going basis, so the magnitude of the declines in production in Louisiana and regionally are not known. Indications from those who follow the industry are that production and sales are down, and plant inventories are up. Sales are not expected to increase in 2009 and more generally not until consumers regain confidence in stability of income and home values stabilize at some level.
In the meantime, nurserymen and garden center retailers should be conservative by taking actions to conserve cash and should redouble emphasis on understanding their customers’ needs and serving those needs in the context of the kinds of products and services they are best at. Charles Hall (Ellison Professor of International Horticulture at TAMU) echoes the advice of marketing experts of "relentlessly focusing on and emphasizing their value proposition to their key customer base." This means retailers must understand and respond to needs of targeted consumers and that Louisiana’s growers should consider how they can be supportive of the retailers' sales efforts.
Louisiana Situation and Outlook
Production and sales of nursery-grown ornamentals have significantly increased over the past five years. 2008, however, saw a significant farm-gate value production decline of 10-20% compared to 2007 figures. This was only the second or third time in the last 40 years that sales decreased from one year to the next. Wholesale production in Louisiana the last few years has been in the $120-$125 million range with an additional $75-$100 million in plant inventory. Some growers feel these values are under-reported. Nursery crop sales in 2008 suffered due to less residential and commercial landscape installation projects. The nursery industry in Louisiana was also economically impacted by crop and structural losses from hurricanes Gustav ($5 million) and Ike ($3 million) and unexpected snowfall in south and central Louisiana in December ($5 million).
Woody ornamentals account for the vast majority of the wholesale farm-gate value of commercial nursery crops in Louisiana. The LSU AgCenter estimates wholesale sales of woody ornamental in Louisiana of $70-$80 million annually. The prediction is for a recovery from the 2008 decline by fall 2009-spring 2010. Container-production acreage has increased significantly in the last five years, while acreage in-field production has been stagnant or decreased slightly. The major container crops are azaleas, hollies, crape myrtles, Indian hawthorns, groundcovers and shade/flowering tree species. The number of acres in bigger container sizes is up significantly. Excess inventory of 1-gallon and 3-gallon woody ornamental material is currently available.
Floriculture/bedding plants typically represent about 30 percent of Louisiana’s nursery crop production. At the wholesale level, about 40 percent of bedding plant/floriculture crop sales occur in late winter and early spring. Floricultural crop and bedding plant production (including poinsettias, hibiscus, garden mums, lantana, impatiens, petunias and periwinkles) has experienced little growth in Louisiana in the past three to five years. Profit margins in floriculture-crop production are shrinking because of energy price increases, transportation cost, fertilizer expenses and other factors.
Foliage plant production in Louisiana has slowed. Most foliage sold at the retail level now is imported from Florida or brought in from Florida by wholesale growers and brokers. In some cases, these imports are grown in Louisiana for several months prior to wholesale sale. Interest in wholesale production of tropical plants, however, has increased recently in Louisiana. Although this category could fall into the floriculture/bedding-plant category, outdoor tropical plants such as gingers, cannas, etc. have increased sales potential. Many greenhouse growers have profitable markets for these products.
Fruit/nut tree production is stable in Louisiana at the wholesale level. A slight increase has occurred in the last several years. Container citrus production has rebounded from 2005 when damages occurred via hurricanes Katrina and Rita, but the discovery of the asian citrus psyllid and citrus greening in Louisiana has caused economic loss in the container citrus industry. Availability of container-grown, improved pecan cultivars is significantly below market demand, and opportunities to grow these cultivars for wholesale or retail sales are considerable. Also, many new fruit cultivars could be grown to increase market potential. Citrus, figs, pecans, peaches, muscadines, blueberries, apples and pears represented the vast majority of wholesale production of container grown fruit and nut trees. LSU AgCenter fruit tree releases are popular with consumers and are under-produced in the state.