The recession may be over, but small family-run plant and flower growers in the U.S. aren’t breathing a sigh of relief. The industry continues to be pummeled by cheap-cut imports, industry consolidation and failed farms, a new research report shows. For the small grower, the bloom is off the rose.
The U.S. plant and flower growing market has fared poorly in the past five years, according to market researchers at IBISWorld. The influx of cheap-cut flower imports from South America has had a staggering effect on domestic farmers, most of whom are small family-run operations. Revenue has been decreasing at an average annual rate of 4.5 percent through 2012. Overall, IBISWorld estimates, the number of operations that failed during that period is 45,565.
The effects of competition from low-cost imports have been exacerbated by a battered economy that has decreased demand for discretionary products such as flowers.
In addition, large retailers, such as Walmart and Safeway, have taken over a substantial portion of the retail market for flowers and nursery items. These stores have the power to set low prices, forcing growers' rates to drop. Improvements in transportation allow large farms, which can afford to ship cross-country, to be the main suppliers to buyers nationwide, since they offer better prices and variety than their smaller competitors.
While small businesses make up the greatest component of the industry, consolidation is resulting in rising numbers of large-scale producers. Competition and cost pressures are forcing smaller farms to close as the industry moves toward large-scale production. A possible outcome of higher concentration will be greater profitability among large farms as fixed costs fall relative to production, IBISWorld said.
While the overall U.S. economy is no longer in a recession, weak discretionary spending will continue to put a strain on flower sales throughout the year. Government support programs will likely pass over this farming industry, since flowers and nursery plants are discretionary goods unlike food. Through 2017, IBISWorld forecasts that revenue will continue to decline. Duty-free imports will continue to infiltrate the market, while the domestic industry struggles to remain on the map through intense price competition. Genetically modified plant seeds may be the lifesaver this industry needs; however, current opposition to the movement leaves their future uncertain.
Reach BusinessNewsDaily senior writer Ned Smith at firstname.lastname@example.org. Follow him on Twitter @nedbsmith.