Volume Production Keeps Floriculture Prices Low
The trend toward mass marketing of floral crops, while increasing convenience and affordability for consumers, is forcing the industry to restructure. Prices of fresh-cut flowers, bedding, and garden flowering plants have been generally flat since 2000, and short-term prospects offer scant relief. Now sold alongside common household products in supermarkets, home centers, and discount stores, floriculture crops are increasingly produced in large volumes.
These developments, although a boon to consumers, are subjecting floral crop growers to downward price pressures on what had been higher margin crops. Real wholesale prices have actually fallen in the past few years, particularly for cut flowers, which face unrelenting competition from cut flower imports. Bedding and garden plants, such as mums, geraniums, and impatiens, remain at 2000 wholesale prices, in part due to higher production volume.
Throughout the 1990s, floral and other ornamental crops achieved the fastest sales growth among U.S. crops. With a farm production value of $14.4 billion in 2003, ornamental crops now rank fifth among the top eight agricultural sectors that gross at least $13 billion in annual cash receipts, and trail only corn and vegetables among crops. The recent U.S. economic slowdown, however, not only flattened sales growth, but pushed down prices as well. To at least maintain former sales receipts, many producers boosted production, especially of bedding and garden plants, but low unit prices have squeezed profit margins across the industry. The weak economy, along with high labor costs and competition from imports, forced growers to cut costs and boost productivity.
Labor costs in the floriculture sector are among the highest in agriculture. The labor-intensive and seasonal nature of the ornamental crop industry makes it dependent on hired workers. Growers are responding to higher labor costs with automation, year-round greenhouse production, and outsourcing of seedling propagation, which is increasingly located in Mexico and Central America. But these trends have also raised capital costs and overall debt.
Mass marketing and volume production have led to a greater use of contract growing of ornamental crops. Contract growing reduces the market risk of ornamental farmers because sales are guaranteed in long-term contracts. Some buyers also ensure product quality by supplying such inputs as seeds, seedlings, fertilizer, and technical expertise. These emerging practices in the industry are encouraging specialization in product lines aimed at volume production, but they are also intensifying price competition.
The ERS Briefing Room on Floriculture Crops, USDA/ERS, January 2008