It’s important to keep perspective – State of the Industry 2022
by Courtney Llewellyn
The new varieties and the networking and the education sessions are all great reasons to attend AmericanHort’s annual Cultivate conference, but the highlight every year is the State of the Industry address. It provides a critical snapshot of the industry’s previous year as well as qualified predictions for the next year along with information about what the organization is working on on behalf of growers nationwide.
President and CEO Ken Fisher kicked things off, noting that AmericanHort has 18,000 individuals and 1,600 companies representing a $348 billion industry. “We want to have a seat at every advocacy table to defend this industry,” he stated.
Fisher added that as far as the economic outlook was concerned, “it’s not a disaster but perhaps a ‘Caution’ sign.” He left the dirty details of that to AmericanHort Chief Economist Dr. Charlie Hall.
Hall, an attendee favorite, did not disappoint while delivering his annual “sermon.” “2021, from the get-go, was the very best year in the green industry, period,” he said, “and yet even it was a mixed year on the retail level.” He noted that sales were up 19% over 2020, the average sale was up 8.6% and transaction counts were up 13.9%. Year to date in 2022, the average sale is up 8.3% over 2021, even though sales and transaction counts are down.
The landscape sector would’ve been much higher in 2021 without its labor constraints, but it was higher in its metrics as well.
“We approached 2022 very optimistically. Then, of course, Mother Nature stepped in,” Hall said. “You’ve heard the saying ‘Men plant, God laughs.’” And due to the wild world that exists in mid-2022, Hall admitted he couldn’t sort out how much of the horticulture industry’s sales year-to-date are based on the weather or price increases or inelastic demand.
He reminded all in attendance that “it’s important to keep perspective.” Everyone was up over their pre-pandemic numbers (from 2019), and no business surveyed for 2022 YTD is running at a loss. “We have convinced consumers we are necessities in their lives,” he added promisingly.
Here’s where the sermon got real, though. In regards to supply chain issues, Hall stated simply, “Russia lost its mind. There was no reason for Russia to invade Ukraine, but it’s disrupted everything.” Because of that, however, we’ve been re-localizing production and shipping; America is “de-risking.”
As for labor, he commented that there are 11.3 million job openings right now, with 5.7 million people looking for jobs – but we’re never going to be able to match everyone’s skills and desires to reach 0% unemployment.
“We’re also in ‘The Great Wage Catch-Up’ right now,” he added. “We need to retain people by making our respective businesses the place to be.”
Discussing input costs, Hall said that with fuel, it’s a lack of refineries, not an oil supply, that’s causing the pain at the pump. “But the writing is on the wall,” he said. “No one wants to build a multi-billion-dollar oil refinery when we’re moving toward alternative fuels.”
Per his predictions, the projected input cost increase for 2021 was 10.1%, for 2022 it is 8% and for 2023 it’s at 3.6%. He hopes “there’s a little runway left” for the industry to increase prices. Those in all sectors of horticulture need to explain to every customer that they’re not asking for price increases – they’re offering risk management.
“Inflation – we knew it was gonna happen,” Hall said. “It is the result of additional cash flow and working capital.” What is the Fed doing about it? Raising interest rates. Hall believes this strategy has a 50-50 shot at the “soft landing” the Fed is aiming for. The market has already priced in inflation – and consumer expectations of inflation influence how they spend.
“We’re in better shape than we were prior to the Great Recession … but there is a 50% probability of recession between now and Cultivate’23,” he admitted.
Speaking more to what AmericanHort is focused on was the organization’s executive vice president for advocacy, research and industry relations, Craig Regelbrugge. He said their priorities should be no surprise:
- Ensuring our workforce: Access, affordability and development
Regelbrugge said there is lots of room for improvement in the Farm Workforce Modernization Act, which was passed in 2021, but the industry likely won’t see much action before the midterm elections. New wages and program rules are coming for the H-2A program, and he said AmericanHort is “all-in on this issue.”
He gave kudos to the Biden Administration for releasing the largest number of H-2B visas the country’s ever seen; AmericanHort is working on a more permanent solution for these as well. He was also pleased with the support for the Floriculture and Nursery Research Initiative (FNRI, at endowment.org/fnri), a Gen Z program, which the House Appropriations Committee is adding $1 million in budgeting to next year.
AmericanHort launched a labor survey on July 28 on their website, seeking input from growers. It will be open until Aug. 19, 2022.
- Plant health and the horticulture market: Safe and efficient trade, confronting emerging threats and crop protection access through a science-based approach
To make things safer for everyone, there is support for certification programs like the Offshore Greenhouse Certification Program and a systems approach to nursery certifications. Those in the industry convinced USDA to continue allowing tissue culture imports, which Regelbrugge saw as a win. He noted the industry also received enhanced funding for IR-4 (ir4project.org), a project which helps specialty crop growers address pest management concerns so they can produce healthy fruits, vegetables, herbs and other crops as well as flowers, shrubs and landscape plants.
On the pest front, he suggested growers pay attention to boxwood tree moth, cotton seed bug and tobamoviruses (which often resulting in necrotic lesions on leaves). Risk management measures include advocating for greenhouse pest crop insurance.
- Solutions through research and innovation: Basic and applied science and plant breeding and protecting intellectual property
- Securing business profitability and growth: Competitive tax code, business succession, risk management tools and adapting out environment and sustainability
On the political front, Regelbrugge noted the considerations for the 2022 midterms include the fact that midterms traditionally disfavor the president’s party; only 13% of voters feels the country is on the right track; there is deep dissatisfaction with leaders of both major parties; there is soaring inflation (9.1% at the time of the Cultivate conference); there is increasing generational turnover; and more independents feel the system isn’t working.
“I believe these feelings will extend to 2024 and beyond,” he said. Making his predictions, he said Republicans are highly favored to win the House; it’s a toss-up for the Senate. He added that the Jan. 6 investigation, the Dobbs decision and global conflict are all wild cards for how November will play out.
“Opting out does not get us to the place that we need to be,” Regelbrugge said of the political scene. “We need to come together. We need to act collectively. Democracy requires care and feeding, just like the plants in our industry. Transitions happen and can be healthy. And you’ll be seeing more of the younger generations taking over soon.”
Hall had his own points to make before the audience could metaphorically shout their amens. “Make sure you’ve got your value propositions right,” he said. “Make sure you’ve got your investment strategy right. There will be a market ‘correction.’ Make sure you put people first.
“You have an opportunity right now, regardless of the economic circumstances,” he concluded. “The hay is out there. Just put it in the barn before it rains.”
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