Profitability - Transportation Costs

Transportation costs industry wide are about 11% of costs of sales and have increased 17.7% in the last decade.  There are some expectations of increases in the future with some significant structural headwinds in the transportation sector.  Here is the final video form AmericanHort with Dr. Charlie Hall looking at this cost factor and how it affects profitability.   https://youtu.be/J8kpt7HY9fI

Profitability: Energy and Fertilizer Costs

Energy and fertilizer (which is positively correlated with energy) costs are slowly rising again and will have implications to your bottom line.  Here is the third video episode of Profit Margins with Dr. Charlie Hall.  See what he has to say about the near-term outlook on energy costs.   https://youtu.be/dTdrRPRnPEI

Labor and Profit Margins

Labor is the most expensive cost of producing ornamental plants and these costs have gone up 30% in the last ten years.  If you aren't focused on how to reduce labor costs while growing plants then profits will continue to be elusive. 

Here is another video (Part 2 in a series on profit margins) from AmeriHort and Dr. Charlie Hall from Texas A&M.  This one is about labor costs, the outlook on labor and how this affects profit margins.  Here is the link to watch it. https://youtu.be/MVd95lJyIdg

Shrinking Profit Margins

One of the biggest problems we are faced with in the environmental horticulture industry is shrinking profit margins.  Our input costs have been rising and our sales prices have remained relatively flat.  Ever wonder by just how much your costs have gone up?

I highly recommend you watching this video from AmeriHort with Dr. Charlie Hall form Texas A&M.  He is a great horticultural economist and speaks our language when it comes to dollars and cents/sense.  Here is a link to the video https://www.youtube.com/watch?v=MVoR_8qnemA&feature=youtu.be

Soft Skills Drive Leadership Performance Harder

I read an interesting article about key attributes of business leaders that make them and the businesses they run perform successfully.  I was fairly surprised to find that one of the skills that was ranked at the top of the list is not usually considered a core business skill but more on the order of a "soft" skill.  Empathy was considered the most critical driver of performance. This is what rose to the top after interviews with 15,000 leaders from 300 organizations from 18 different countries.  In a world of tweets,emails and decreasing face-to-face conversations it may confound thinking that brevity in the business world for the sake of productivity might be a fallacy.  Here is a link to the article if you would like to read more about the research findings.
 http://www.inc.com/marcel-schwantes/the-science-behind-what-really-drives-performance-its-going-to-surprise-you.html

Winfield Solutions Hosts Business Seminar

Winfield Solutions is sponsoring the following business/pest update seminar. Great speakers and a free lunch; that's hard to beat!

Strategic Business Management Forum


featuring Pest Update

We know economic challenges strain your business. Sometimes deciding where to make sacrifices in your budget can be complex, risky and the desired results not immediately realized. We hope you can join us for a seminar discussing managing risk and making the most of marketing opportunities in our industry today. As an added bonus you will also hear the current status of whitefly distribution and their control tactics.

Keynote Speakers:
Dr. Charlie Hall, Texas A&M
Dr. Alan Hodges, University of Florida
Dr. Lance Osborne, University of Florida, Mid-Florida Research and Education Center

Tuesday, July 31, 2012
9:00am to 1:00pm
Gulf Coast REC・Balm
14625 CR 672 ● Wimauma, FL 33598
CEU・s Offered ● Free Registration ● Lunch Provided
SPONSORED BY: BASF ● DOW ● OHP ●Syngenta ● Winfield Solutions

How's Your Business?

We have all heard the adage, "To measure is to know."  How are you doing as a business?  How are you doing compared to your peers?  What is your return on all the hard work you are doing?  Is it worth it?  Are you losing or making money year over year?  Is this money better off in another type of  investment other than growing plants. You can't answer these questions unless you take a little bit of time to do some measurements.  Drs. Paul Fisher, Alan Hodges, Charlie Hall and Bill Swanekamp, have written a paper that was in the OFA Bulletin May/June 2012 edition that discusses the importance of benchmarking your business.  This article deals with young plant and bedding plant producers.  It also gives the stats of their operations to see what is the industry average. 
Benchmarking is a process that allows you to see how your business is doing in comparison to others in the same business.  This is a great way to find strengths and weaknesses in your operation and take management decisions to improve on the overall outcome of your balance sheet.
If you spend a little time with your annual income statement and this article you might be surprised at how you are doing.  Here is the link for the article. http://hillsborough.extension.ufl.edu/Ag/AgOrnProd/documents/MineYourIncomeMay-June2012Bulletin.pdf

For those of you who want to see how a broader perspective of the nursery industry are doing and how you compare there is the Horticulture Business Analysis System.  This is a UF/IFAS program that allows you to use your income statement and input your values into the system to see how you compare with others in the same business.   Currently the system has data for greenhouse tropical foliage, shadehouse tropical foliage (South Florida), container-grown woody ornamentals, field-grown woody ornamentals, flowering plants, bedding plants and cut foliage (ferneries). Within each commodity group, information is available for subgroups by firm size, profitability, location (state, county) and year.  Here is a link to that site. https://hortbusiness.ifas.ufl.edu/analysis/

Sharing the Love

How would you like to decrease voluntary turnover of your employees by roughly 11% and increase the return on equity of your business by 3.9% compared to similiar firms? A study released from The National Bureau of Economic Research found that firms that make use of group incentive pay with supportive employee policies achieved a reduction of employee turnover and an increase in the return of equity compared with other firms of similar size.  The co-authors Douglas L. Kruse, Joseph R. Blasi, and Richard B. Freeman analyzed 780 firms that applied to “100 best companies to work for in America" from 2005 to 2007.  They found this to be true in companies which they ranked in a "shared capitalism index" that used incentives such as Employee Stock Ownership Plans, cash profit sharing plans, gain sharing plans, Deferred Profit-Sharing Plans, and stock options.  It seems with these motivations employees are less likely to leave a firm.  These firms also had policies that allowed employees to participate in the decision-making process, valued information sharing, teamwork, and high trust supervision which also led to a higher degree of employee stability.  If you would like to read the NBER Digest of this paper follow this link. http://www.nber.org/digest/jun12/w17745.html   To order the entire paper click on this link. http://www.nber.org/papers/w17745

Nursery Cost Analysis

When growers think about "sustainability" usually they are thinking about conservation and environmental consequences. Many producers don't usually think of economic sustainability. Staying in business is a consideration within the realm of sustainability and staying in business means having more money coming out than what you put in.  What if I asked you how much does it cost to produce a finished 1 or 3 gallon of a particular plant your growing?  Would you know the answer to a series of questions such as; How much profit do you make on that plant?  What would it save you if you didn't pot up that plant?  How much profit is in producing that plant?  How much profit would you lose if you had to dump 10% of that crop?  Should you grow more of these plants than those plants?  These are all questions that can be answered by doing cost analysis. Here is an excellent video introduction on what cost analysis is in a nursery. It might surprise you that you can predict financial results on your nursery using this method. It does take some time to do the calculations but the paybacks could be substantial in terms of making real educated guesses on production factors. Just click on this link to view a Floricast video that explains the method   http://tiny.cc/zyyxo

Conduct an Energy Audit with USDA Help

This just in from USDA. This might be a good opportunity to check out your operations' energy usage and where you can save especially if you are heating greenhouses to grow plants. This program could lead to mangement and financial help implementing the audit findings.

Gainesville, FL., February 1, 2011 – Have you ever wondered about what techniques you could utilize to reduce the amount of energy used on your farm? The USDA-Natural Resources Conservation Service (NRCS) may have the answer. A USDA-NRCS initiative to help farmers and ranchers conduct energy audits and improve their overall energy efficiency has been expanded for 2011. The initiative builds on the existing energy audit initiative to also help producers implement the energy conservation and efficiency recommendations that result from an energy audit.

“Providing producers with the opportunity to assess their energy usage and make needed improvements can save money while also benefitting the environment and reducing greenhouse gas emissions,” said NRCS acting state conservationist Jeffrey Woods.

On-farm energy audits are tailored to each agricultural operation’s primary energy uses. The audits help producers determine the amount of energy used by the entire operation and also identify short- and long-term measures producers can implement to conserve energy and achieve greater energy efficiencies.
The On-Farm Energy Audit/Implementation Initiative is offered through USDA’s Natural Resources Conservation Service (NRCS), which provides technical and financial assistance for this purpose through the Environmental Quality Incentives Program (EQIP). The on-farm energy audits, which are offered as EQIP Agricultural Energy Management Plans (AgEMP), must be conducted by certified technical service providers. Producers who have had an on-farm energy audit conducted that meets or exceeds the criteria of an EQIP Agricultural Energy Management Plan may apply for technical and financial assistance to implement the audit’s recommendations.
The application deadline for FY 2011 funds is February 25, 2011. Interested producers should contact their local NRCS office immediately. To find the nearest office go to http://offices.sc.egov.usda.gov/locator/app.

Additional information on NRCS and our programs is available on our Website at www.fl.nrcs.usda.gov or at your local USDA NRCS office.

Plant Availability????

Are plants going to be in short demand? This blog post was sent to my attention from Hugh Gramling. Here is a perspective viewpoint from an anonymous broker with a guest post on Dr. Charlie Hall's blog. The perspective is that from what the broker sees around the industry is that plants might be in short supply. From his interactions with growers and the like, this broker seems to find plant availability might be wanting in the near future. This might be good as wholesale prices will rise to meet the limited supply thereby reversing the downward trend on pricing we currently see. You might have other opinions or comments from what you see at your nursery which you are welcome to leave a comment on this page for others to think about. Click on Dr. Hall's blog to read more...

http://ellisonchair.tamu.edu/2010/12/01/guest-post-viewpoint-on-avalailability-and-quality/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+MakingCents+%28Making+Cents+of+Green+Industry+Economics%29

Slower Growing Plants Help Inherent Defenses

It seems that nursery growers are in losing battle with insect pest and a rapid turn of plant crops. Here are the summaries of two articles I've come across recently.



Plants can either protect themselves or grow fast; but not both.



A recent published article in Science magazine by UC Irvine's Kailen Mooney et. al. came to the research conclusion that when plants have traits to grow fast, they are more prone to attack and need outside help from the attack of pests. The converse is true as well. A plant with slower growing traits favor more protection from insects that feed on them. It seems that faster growing plants are more tasty and preferred by plant eating insects.

Here is a link to a brief from the research from Science Daily: http://www.sciencedaily.com/releases/2010/03/100325143051.htm



Reduce fertilizer amount and reduce pest pressure.



This article was in NM Pro, March Issue. It was a summary of the researcher Andrew Chow and his colleagues work. They looked at reducing fertilizer inputs in rose crops and the pest status of introduced two spotted spider mites. They used 100, 50, and 33% of the recommended 15-5-15 Cal-Mag fertilizer and placed the same number of female mites on each plants and then grew them out. Mite egg count was 2 times higher with 100% fertilizer compared to the 50 or 33% fertilizer rate. Flowering shoots and quality was not compromised at the 50% fertility rate. This study showed that reducing fertilizer reduced the pest numbers and had positive monetary savings in sprays, labor, and fertilizer. The complete article was in Journal of Economic Entomology Vol. 102, Issue 5.

My take on these articles would be that if I had some plants that were insect magnets and I didn't need them produced for a market window, I might try to reduce the amount of fertilizer to them. Or even, spread out the production of this plant over the year and reduce the amount of fertilizer so that the slower growing plants would be reaching maturity throughout the year for sales. Then watch to see if the reduction of fertilizer reduced the pests to a non-economic damaging level. If you try this let me know how it works out!

FNGLA Financial Management Conference

Growers should check this message out from the FNGLA.

The FNGLA Tampa Chapter also will be meeting this Monday 4/5/10 at the extension office at 18:30. The FNGLA Lake Region Chapter will meet Tuesday 4/6/10 at Bok Tower at 18:30 with a tour from 16:00-18:15.

We would like to take a moment of your time to share the details of the upcoming Florida Agriculture Financial Management Conference. This is a brand new, educational program designed to help Florida ag producers weather the challenges of our economy. This program has been made affordable in large part by a 2009 USDA Specialty Crop Block Grant awarded to FNGLA. Information is relevant to all agriculture commodities so a special invitation has been extended to all ag producers in Florida.
Times are tough and providing industry members with proper financial planning is critical. FNGLA has partnered with team members from Farm Credit, McGladrey & Pullen, and the University of Florida to gather key financial gurus from across the country. The stars must have been aligned during our planning process because we have an awesome line-up of speakers.
The 1½ day conference will be held at the Rosen Plaza in Orlando, FL on May 20-21, 2010. It is open to all Florida agricultural commodities and the cost of registration is $90 per person if you register before May 3, 2010. Hotel rate for the conference is $89 plus tax and reservations can be made by calling 1-800-627-8258.
Visit the FNGLA web page where you can download the brochure. http://www.fngla.org/shows/financial/index.asp
We know industry members who are financially strong will be the driving force that helps return Florida’s economy to brighter days. Please help spread the word throughout Florida!

News From the Field

I figured it might be nice to relay information to the grower community from my trips out to the field to visit nurseries. Since it is hard to leave the production area and get out and about, I thought it might helpful to bring the nursery to your door.

Here are some interesting things that I found visiting with Cliff Richardson the production manager at Royal Crest Nursery located in Polk City.

One of the things they are utilizing for ease of movement of plant transport are plant racks that minimize the number of contact points of handling plants. They have eliminated a few times they pick up and set down plants. The racks are placed on the trailers, then the plants are loaded directly into the racks. When the racks are driven to the loading dock they are forked with a loader. The loader then drives right into the semi where the plants are unloaded and stacked for shipment. Each rack holds about 54 three gallon plants. They also have modified racks with high sides to accommodate trees.

Another labor savings device they are using is the hair mat for weed control. This is a weed barrier that suppresses the germination of seeds from the soil surface. Cliff said they can send one person to weed 25,000 three gallon pots in less than an hours time and eliminate and weeds before they go to seed. Thereby saving labor costs.

ASHS Nurserry Production Workshop ""Managing and Thriving in Tough Times, When Every Dime Counts!" "

If you didn't make the workshop at the ASHS Meeting it sounds like it was a good one.



Here is the report in the nursery working group report. This is what nursery owners and managers are doing to survive.



"Managing and Thriving in Tough Times, When Every Dime Counts!" was held on Sunday July 26, 2009 from 8:00 to 10:00. It was coordinated and moderated by Gladis Zinati. The workshop was well attended (>34 people), well-rounded, included five speakers who spoke from different perspectives (industry, research, and extension) and the feedback was excellent, lots of interaction between the speakers and audience both during and after the workshop. Dr. Charles Hall (Texas A&M University) discussed current economic trends and their impact on the industry. He reminded us that economics goes in cycles and we are currently in a downturn but have probably bottomed out. Supply and demand is working and things are beginning to improve. Housing market and the weather have large influence on the green industry. In a period of “hypercompetition,” successful firms have increased sales and profits by innovating and reducing costs, tweaking value propositions, and reserving enough capital to outlast the competition. Dr. Robin Brumfield (Rutgers University) spoke on strategies producers in the Northeast are using to reduce costs and increase profits. These included promoting local production to reduce the “carbon footprint” and providing better service. Dr. Jennifer Dennis (Purdue University) discussed how producers can manage cash flow during tough times: need a written business plan with cash flow analysis, monitoring of inventory, and understanding the needs of the customer. Teresa Olczyk (University of Florida) discussed how Florida producers are coping by avoiding monoculture production and diversifying plant materials and services. Kim Lovelace-Young (Forrest-Keeling Nursery, MO) discussed how they are increasing production efficiency using Lean Production methods, BMPs, and alternative fuels and marketing for the ecosystem and focusing on quality.