Anticipating shortages and price increases

Text: Nursery Stock Trade Fair GrootGroenPlus ANTICIPATING SHORTAGES AND PRICE INCREASES

Both the corona period and the war in Ukraine have a major impact on businesses, also in the nursery stock industry. How do nurserymen handle price increases, increased delivery times of raw materials, and a shortage of production resources? And how does the drought impact nursery stock crops in different areas? To answer these questions, GrootGroenPlus talked to a number of growers and other stakeholders.

Different strategies

We asked Emilie Carré, president of the French nursery Laforet Jeunes Plants. “Covid-19 and later the war in Ukraine have put us into an economic system that makes products that need to be imported less available, more expensive, and with longer delivery times. As a producer, we have to be flexible, to maintain the production cycles, and control the costs. Our goal is to maintain a commercial dynamic with reasonable sales prices”, says Emilie Carré. Laforet developed multiple strategies to manage these limitations as much as possible. Carré: “This means that we have to anticipate when it comes to the delivery times of pots, diversifying suppliers, reducing the number of deliveries by maintaining more stock, developing our potting soil mixtures (less peat), involving our very motivated teams to reduce waste and to reuse everything that can be reused.”

The next problem is the availability of water. Besides the difficulties of the industry, we have to deal with a shortage in water supply, like the rest of Europe. For years, we’ve been trying to use this resource the best we can: recuperation of drainage water, protecting cultivation areas from the sun, mulching the crops, a preference for nightly watering, and training of our employees, to better control irrigation depending on the needs of the plants.”

“We’ve also taken measures when it comes to marketing”, says Carré. “From a market perspective, we are also developing the assortment by offering adjusted varieties such as the planting of Phillyrea hedges (Phillyrea angustifolia Green Quick®), the expansion of our assortment of Mediterranean plants (shrubs and perennials), introducing Mexican garden or dry collections, and by having the guts to use thyme or chamomile to replace lawns. We have our AlterGazon® concept for this.”

It is important to keep an eye on the price

Mart Peeters and his colleague Stijn van Os are managers and owners of the shrub nursery Smart Plants Potcultuur. The shrubs enter the company as cutting and will be grown for a year. After that, the products go to national and international nurseries and trade to grow further, and finally end up at the final customer, for example via garden centres. How does he look at the current situation? “We are dealing with an industry-wide problem”, says Peeters. “The companies in the pot and container cultivation will be hit harder by the increased prices and lack of raw materials than open soil growers, who will mostly be hit by drought.” He does notice the issue of shortage of raw materials and increased prices in his company. “Take potting soil for instance,” he says, “a part of those raw materials come from the area that is now hit by the war between Russia and Ukraine. The potting soil now has a different composition. Fortunately, the properties have remained the same for the most part, but you do notice it.” Peeters is happy that he doesn’t have any issues with the supply of the soil. “Our supplier has managed that very well. They didn’t accept new customers, so they would be able to supply the current customers. I hear from colleagues that they do experience issues. That will probably differ per supplier. The pots are still supplied in time, but in more limited quantities. There really is an issue with the availability of raw materials and increased prices. We have to work with day prices for the pots, and the costs for box pallets have also increased a lot. From 20 to 35 Euros. According to

Emilie Carré.

Water is a necessity

Due to climate change, we have to deal with extreme weather more often, where extreme rainfall is being followed by long periods of drought. Therefore, it is very important to maintain a good water balance. Water is a necessity, especially in the nursery stock industry.

A very important player in water balance is the water board Brabantse Delta. What do they think of the situation? “This has indeed been a very extreme year”, says René Rijken, account manager for agriculture at the water board. “In case of continued drought, we do everything we can to make sure that water users, including nurserymen, get the water they need. At the same time, it is also important to maintain the water, and take the right measures to do that.”

The water board cannot do that alone. It is important to cooperate with different parties. “For the nursery stock industry we’ve found a great partner in Treeport. They help us with maintain a good water quality and reducing emissions. They also help us find out how the industry can help with limiting the consequences of climate change.”

During the extreme drought of the summer of 2018, we were already confronted with issues around the availability of water, and a pump ban for surface water was issued. If the water level in ditches and streams lowers due to long-term drought, the water board might prohibit people from pumping water from these ditches and streams to use in for example nurseries. In some areas, a pump ban has already been issued again. “As opposed to other nursery areas, we don’t have any large rivers here, that we can use to get water from”, says Rijken. “The level in our waterways is low, and the groundwater level is alarming. It’s really in the red.” Something needs to happen. Rijken mentions reducing the need for sprinkling as an important step. “This can be done more effectively, for example by drip irrigation on specific locations, instead of everything from the top down. There are some great examples of that. If the water falls down, you have to store it, not let it get away. If you place a barrage in a ditch, you prevent the water from going to the main water way. We can also wonder if we need as many ditches as we have. In this area, ditches are not used as water buffer. The system can be compared with the highway. It becomes more crowded due to all these access roads. If you close down a few of them, it will all get a more quiet.” Rijken also mentions improving the soil quality as an important aspect. “Ensure the soil is very permeable. I cannot emphasize that enough.” By taking the right measures together, we can cope with extreme weather conditions. 

SMART PLANTS POTCULTUUR

our suppliers, this might continue for a while, and the transport costs will also continue to increase.” It all still fits in with the production process of Smart Plants. Peeters continues: “We order what we need. It is important to keep an eye on the price. What can we charge to our customers? It has to make financial sense. Some products allow for a larger margin. We do need to cover our costs, but we also have to be fair to our customers.”

Same situation in Flanders

“In Flanders, people also have to deal with an increase in prices and lack of raw materials, just like in the Netherlands”, says Didier Hermans from Herplant. “I feel like it is easier for other industries to transfer the price increases to their customers than it is in the agricultural and horticultural industry. It will be tough on many growers. Which isn’t strange, seeing that fertilisers have already increased in price by 40%, gas and electricity is costing 3 to 4 times more, and that the price of potting soil has increased by 15%, and so on. The transportation costs have also increased a lot, and the staff costs have also increased in the past two years by approximately 10 % due to indexation. Fortunately, we have a long-standing relationship with our pot supplier, so we did not experience much of a shortage. But we do notice that not all sizes are available anymore.”

In 2018, Herplant took action regarding the water issue. “We knew that drought was going to be a real issue. We created two large pools, and we got rid of the plots that we could not water. However, if we have months like these, with only 60 litres coming down, those pools don’t really help that much.” Hermans is annoyed by the arbitrariness of the pump ban. “We just concluded a contract for 30 days, and after one day, we hear that the governor has issued a pump ban. There’s no dialogue here. It would be better if we were able to talk to the water boards, like in the Netherlands. However, in Flanders people prefer a policy dictated by the civil service. We feel that dialogue and consultation would be much better.”

Of course, we did talk to a supplier as well. Marco Wilschut is co-owner/director of Van Krimpen BV, supplier of plastic products for the professional horticulture. “The frenzy of the corona era has died down, so the situation is a bit more quiet now”, says Wilschut. “However, that doesn’t mean that calm has returned. There is still a shortage of products, and we are not able to scale-up very fast. There is also a shortage of raw materials. That has increased by a lot, and will probably remain that way.” Many feel that corona and the war in Ukraine are to blame for the shortage of raw materials. Wilschut feels differently; he points the finger at the European Committee. “They decided that as of 2023, every plastic products should contain at least 1/3 of recycled materials. If it doesn’t, a surcharge of hundreds of Euros per tonne should be paid. I do not understand that, since there is no capacity to do this right now. And there may not be for many years. So the large recycling companies are becoming very proactive and are starting to speculate. That results in price increases. We’ve seen this with PET bottles, and the same will happen to flower pots. Recycled materials will become more expensive than new materials, which is crazy.”

Wilschut notices that this way, the suppliers are behind the curve all the time. “Every month, we have to deal with new price increases. We can handle one or two per cent, but you cannot continue like this, so we have to continue to charge it to our customers. And that doesn’t really make them happy either. Raw materials make up more than 50 per cent of the cost price, and that doesn’t even include the costs of energy, production, and transport. What we see now is that large international companies have started focusing on recycling. They can make a profit there. And these companies also have links to the consumer market. One chain has already announced that they will require that 1/2 part of every plastic product should be recycled material. Otherwise, they will not use it. All this is done for the customer that chooses environmentally friendly products… or maybe it’s more about some sort of claw back arrangement? To say it bluntly: ‘the big money has its claws in the recycling industry’. We will have to buy our own waste flows”, says Wilschut. 

On behalf of trade fair GrootGroenPlus: Frans van Wanrooij, secretary.

“Due to different external causes, the tree nursery industry experiences many price increases and supply issues. It is good to see that our participants, both growers and suppliers, have found an inventive way to deal with this, and that they understand each other’s situation.”