National Situation and Outlook

In 2010, the economy grew at a healthy rate in the first quarter mainly from refilling inventories. During the mid part of the year, that pace wasn’t sustained due to the lingering effects of the recession and the end of the stimulus. It appeared that consumers and businesses might have become more conservative. Through spring and summer, growth was slow, unemployment was high, and the number of people unemployed for at least six months reached 6.8 million (46 percent of all the unemployed). The Federal Reserve moved to provide further stimulus as Congress became more concerned about a growing deficit. Surprisingly, at yearend the economy made gains particularly as consumers (70 % of the economy) shopped, loosening the purse strings and spending during the Christmas season. Congress passed tax cuts and extended aid to the long-term unemployed.

Looking forward, those same factors will affect the ornamental plants industry.

-The official unemployment rate declined to 9% in January, but many simply stopped looking for work. It is estimated that if these people were called unemployed, the number of unemployed people would be 18.8 million, not 15 million, and the national unemployment rate would be 11.9%.

-Initial jobless claims have trended down somewhat in late 2010 and early 2011.

-The housing market remains difficult. Sales of existing homes were flat to slightly lower late in 2010. November's new home construction rate was higher by only16 percent than the approximately 480,000 pace of April 2009, which was the lowest since 1959, and was half of the 1 million annual sales that economists view as a sign of a healthy market. Forecasts are that home construction will continue at a seasonally adjusted annual rate of about 550,000 homes.

-Consumer sentiment appears to be strengthening, as the University of Michigan’s index reached 74.2 in late January, slightly below December's 74.5. This was far below the value of 88.9 at the start of the recession.

-U.S. GDP grew at a 3.2% rate in the last quarter of 2010, up from 2.6% in the third quarter.

Businesses appeared to remain cautious despite stronger sales and profitability that resulted from a reduced labor force and increased efficiency. Reports indicate that big business has record cash on hand, and is expected to begin to use that cash as confidence in the economy grows.

The stronger U.S. GDP boosted consumers, as did the extension of federal tax cuts and hopes about an improving job market offsetting concerns about rising gasoline and food prices.

The continuing influence of the factors discussed above affect discretionary income. Sales by the ornamental plants industry were affected in the past 2 years, and sales growth may not begin in 2011.

Louisiana Situation and Outlook

Loren Scott in the latest Louisiana Economic Outlook attributes a somewhat stunted state growth forecast for 2011-2012 to continued moratoriums on drilling for oil and gas, and on taxes and regulations placed on the oil and gas industry. Oil prices topping $100 a barrel may be just what the state needs, according to Scott. Prices today are about $90 a barrel. Increased oil prices translate to more money at the pump, which could rally public opinion to loosen restrictions on Gulf drilling. Employment projections for the state’s eight major areas from 2010 to 2011 are:

- New Orleans: up 0.7 %
- Lafayette: down 2.0 %
- Houma: down 1.7 %
- Shreveport: up 0.6%
- Baton Rouge: up 0.8 %
- Lake Charles: up 0.9%
- Monroe: down 0.5 %
- Alexandria: up 0.6 %

Housing markets in Louisiana have been affected at this point. There are dangers in decline of activity in the petroleum industry, and the likely budget cuts in state and local government that could affect demand for housing and public sector construction.

Production and sales of nursery-grown ornamentals have significantly declined over the past three years. Farm gate value decreased 27% in 2009 compared with 2008 and decreased 5% in 2010 compared to 20009. It is anticipated that sales in 2010 will be improved, however many items may be in short supply to do lack of production continuation the past two years. In addition, many overgrown plants have been discarded or liquidated on the market at reduced prices. The declines in nursery crop sales in the state over the past three years has been the only extended down period in nursery crop sales over the past 45 years. Nursery crop sales in 2009 continued to suffer because of fewer residential and commercial landscape installation projects.

Woody Ornamentals: Woody ornamentals account for the vast majority of the wholesale farm-gate value of commercial nursery crops in Louisiana. LSU AgCenter estimates place the wholesale value of woody ornamental sales in Louisiana at $60-$70 million annually. A recovery from the sales decline in 2008 was predicted to occur by fall 2009-spring 2010 but has not yet occurred to the expected degree. Growers are more optimistic for 2011. Container production acreage has increased significantly in the past five years while acreage in field production has been stagnant or decreased slightly. The major container crops are azaleas, hollies, crape myrtles, Indian hawthorns, groundcovers and shade/flowering tree species. The number of acres in bigger container sizes is up significantly. Several woody-ornamental growers have gone out of business in the past year. Shade tree sales are down considerably. Liners are needed to meet the expected demand for new crop planting.

Floriculture/Bedding Plants: Floriculture/bedding plants typically represent about 30 percent of Louisiana’s nursery crop production. At the wholesale level, about 40-50 percent of bedding plant/floriculture crop sales occur in late winter and early spring. Floricultural-crop and bedding-plant production (includes poinsettias, hibiscus, garden mums, lantana, impatiens, petunias and vinca, begonias) have experienced little growth in Louisiana in the past three to five years. Profit margins in floriculture-crop production are shrinking because of energy price increases, transportation cost, fertilizer expenses and other factors. Floriculture and bedding-plant producers need to take advantage of the new Louisiana Super Plant promotion and marketing program planned for fall 2010. Sales of floriculture crops in Louisiana were up significantly in 2010 versus 2009 levels.

Foliage Plants: Foliage plant production in Louisiana has slowed. Most foliage sold at the retail level now is imported from Florida or brought in from Florida by wholesale growers and brokers. In some cases, these imports are grown in Louisiana for several months prior to wholesale sale. Interest in wholesale production of tropical plants, however, has increased recently in Louisiana. Although this category could fall into the floriculture/bedding plant category, outdoor tropical plants such as esperanza, gingers, cannas, bird of paradise, etc. have increased sales potential. Many greenhouse growers have profitable markets for these products.

Fruit/Nut Trees: Fruit/nut tree production is stable in Louisiana at the wholesale level. A slight increase has occurred in the last several years. Container citrus production is on the rise. Availability of container-grown, improved pecan cultivars is significantly below market demand, and opportunities to grow these cultivars for wholesale or retail sales are considerable. Also, many new fruit cultivars could be grown to increase market potential. Citrus, figs, pecans, peaches, muscadines, blueberries, apples and pears represented the vast majority of wholesale production of container-grown fruit and nut trees. LSU AgCenter fruit tree releases are popular with consumers and are under-produced in the state. Sales of fruit and nut trees and shrubs in Louisiana is significantly increasing at the retail level.