The Fifth Annual State of the Industry Report: Part I
Especially this year, growers are all wondering how their neighbors, friends and competitors are faring, what the production trends are and how the floriculture industry is progressing. For this reason, GPN has once again conducted its Annual State of the Industry Survey – the only truly detailed analysis of the floriculture industry that’s available.
For the third year in a row, Summit Plastic Co. has stepped forward as a co-sponsor to support this effort. And, GPN readers have also given some of their valuable spring production time to answer the survey. Both parties should be applauded for their support. So, with our sincere thanks to the supporters of this effort, GPN presents the Fifth Annual State of the Industry Report.
About the State of the Industry Respondents
Growers, growing techniques and crops grown differ between the many regions across the country. For this reason, it’s important to understand who responded to our survey before we examine how they responded.
The 2000 respondents, as they have in previous years, came overwhelmingly from the Eastern half of the United States. Twenty-two percent of respondents – the largest percentage of respondents – are headquartered in the Midwest, 19 percent in the South, 14 percent in the Mid-Atlantic and 7 percent in the Northeast. The other main location of growers, as should be expected, is on the West Coast, 20 percent.
Please note that five percent of respondents did not indicate the region in which they are based.
With over 55 percent of respondents having growing space between 50,001 and 500,000 sq. ft., the respondents for this year’s survey are also reflective of the typical size of most growing operations (25 percent have operations 50,001-100,000 sq. ft. and 30 percent have operations 100,001-500,000). Responses from other size operations are almost equally represented, with 14 percent have operations 25,000 sq. ft. and under, 13 percent have operations 25,001-50,000 sq. ft. and 15 percent have operations more than 500,000 sq. ft.
Please note that three percent of respondents did not indicate the size of their growing operation.
Where applicable, questions have been broken down by region for the best understanding of the information.
Size of Average Operation
Unlike other questions in the State of the Industry Survey, size of operation does not really lend itself to a year over year comparison. If this year’s respondents from a certain region had a large representation of small growers, the size of the average operation will appear small. This happened last year when two large shade growers in the central region responded, skewing the average size of shade operations in the south. Instead, it is interesting to note the overall averages for type and size of production.
The average for total production space in 2000 was 311,012 sq. ft., less than 40 percent of last year’s total of 709,495. Even taking into consideration the margin of error and the year-to-year variance factor, the 2000 figures reflect a continued slide in total production space from a four year high in 1997.
The region with the largest operations was the West with 500,215 sq. ft. under production, followed closely by the West Coast with 470,491 sq. ft. The types of structures used in these regions were, however, polar opposites. West Coast growers tended to use fixed structures, with very little product grown in either a shade house or in the open field. Growers in the West, however, used open field by a margin of almost two to one. Given the climates, these figures are appropriate. (See chart on page 18 for detailed information by region, year and type of cover.)
When the type of structure or growing environment is analyzed, you can see an interesting trend in the use of fixed cover versus open field. According to the 2000 survey results, a grower’s reliance of open field space increases with the size of the growing operation. So that operations with 25,000 sq. ft. or less average only 954 sq. ft. of open field space (7 percent), as opposed to 10,418 sq. ft. of fixed structures (76.6 percent). Operations with more than 500,000 sq. ft. used 582,949 sq. ft. (46.3 percent) of open field space and 594,500 sq. ft. (47.1 percent) of fixed structure space. The result is that open field space is used almost as much as fixed cover space in the overall averages.
One other trend in production space is also worth noting, and that is the use of retractable roof systems. Though most popular with large growers in the Central region, retractable roof systems have failed to gain widespread use. As should be expected, the most popular types of structures continue to be fixed cover, 51.1 percent of respondents; open field, 41.7 percent of respondents; and shade houses, 6.5 percent of respondents.
Please note that 95 percent of respondents provided complete data that was useable for calculating size of production statistics.
Despite reports of a slowing economy, 22.4 percent of respondents are considering expanding their production space within the next two years – 16.5 percent covered and 13.3 percent open field space. This figure represents a wide variety of growers in size as well as in location.
By region, growers in the Mid-Atlantic States have the most expansion plans, with 44 percent adding production space over the next two Á years. Twenty-five percent of growers in the West plan to expand, 17 percent of growers in the South, 15 percent of growers in the Northeast, 14 percent of growers in the Midwest, 3 percent of growers in Central states and 2 percent of growers on the West Coast.
Expansion plans also fail to indicate any correlation to the size of the growing operation. Growers of all sizes are planning expansions: 23 percent of growing operations 25,000 sq. ft. and under, 33 percent of operations 25,001-50,000 sq. ft., 13 percent of operations 50,001-100,00 sq. ft., 9 percent of operations 100,001-500,000 sq. ft. and 13 percent of operations larger than 500,000 sq. ft.
When the amount of expansion expected for all regions and all sizes is combined, the projected expansions for covered space is approximately equivalent to that of outdoor production space, 14 percent and 11 percentx Á respectively. However, as noted in the previous section, the majority of the increases in outdoor production space will come with larger operations in the West.
Please note, approximately 70 percent of respondents provided complete data that was useable for calculating expansion plans.
Trends in Automation
Respondents to this year’s State of the Industry Survey indicated a continued interest in automating their growing operations. Approximately 26 percent of growers own at least one of the automated machines listed below. Perhaps the more revealing statistic about the industry’s attitude toward automation is the number of growers planning to add automated equipment soon. Approximately 8 percent of respondents will be purchasing automated equipment over the next few years. That’s over 30 percent of the number that currently own such equipment.
For the fourth year in a row, environmental controls remain the most widely used form of automation in the greenhouse industry. Fifty-three percent of respondents already own some form of environmental control system, with another 12 percent planning to purchase a system soon.
The least used piece of automated equipment, regardless of size or location of the operation, is flood floors. Six percent of growers use flood floors, 10 percent use an automated transplanter, 13 percent use an automated transport system, 18 percent use floor heating, 21 percent use sub-irrigation benches, 32 percent use an automated seeder or flat filler, 38 percent use rolling benches and 40 percent use root-zone heating. Growers who intend to add equipment soon place almost the same importance as is reflected in the percentages above.
As expected, the majority of automation users are larger growers, though growers of all sizes are beginning to use certain pieces of equipment such as environmental controls, root-zone heating, rolling benches, automated seeders and automated flat fillers.
Please note, approximately 85 percent of respondents provided complete data that was useable for calculating automation statistics.
Sales and Profits
Not surprisingly, the operations with the largest sales are those with the largest production area. Growers with more than 500,000 sq. ft. of production space averaged annual sales of $4.7 million, operation of 100,001-500,00 sq. ft. averaged $1.6 million, 50,001-100,000 sq. ft. averaged $3.0 million, 25,001-50,000 sq. ft. averaged $332,769 and operations 25,000 sq. ft. and under averaged $433,857.
But sales do not tell the story of who actually made money last year. For those figures, we need to look at net profit statistics. And, these statistics do not seem to reflect any set patterns.
Averages of all the responses to net profit questions show that 39 percent of respondents increased profits last year, 22 percent decreased and 38 percent report profits remaining constant from 1999.
Profits seem highest in the Northeastern states, with 50 percent of respondents taking home more money last year. In the Mid-Atlantic States, 33 percent of respondents Á reported profits, 38 percent in the Midwest, 44 in the South, 30 in the Central states, 29 percent in the West and 35 percent on the West Coast.
Decreases in take home hit the Central states the hardest, with 40 percent of respondents reporting a decrease in profit over last year. Thirty-two percent of respondents from Southern states reported a decrease, 24 percent from the West, 21 from the Midwest, 17 from the Mid-Atlantic States, 13 percent from the West Coast and 10 percent from the Northeast.
And the numbers do not become any more homogenous by size of respondents. It seems that last year was mostly a mixed year as far as profits are concerned, though the majority of respondents did report increased earnings.
Please note, approximately 76 percent of respondents provided complete data that was useable for calculating sales and profits.
How to Obtain a Copy
GPN’s report on the State of the Industry will continue next month, and we will also be providing additional information gleaned from this survey in upcoming articles and news items. However, space does not permit us to include all of the information from our survey. We do offer a publication that includes all data from this survey.
This publication offers breakdowns by size of operation and region for all categories covered in this and other articles. Included are the specific numbers of respondents who submitted information for each category. Also included are additional comparisons between data from the 1997-1999 surveys.
The cost of the complete survey is $100.00. Please submit your order to Bridget White, GPN, 380 E. Northwest Hwy., Suite 200, Des Plaines, IL 60016, or email your request to email@example.com.
Please look for part two of the State of the Industry Report in the June issue of GPN.