Nursery Management Conference: the inflation effect

Editor’s note: The Nursery Management Conference took place Sept. 14-16 in Arlington, Texas. Over the next week, we’ll be giving you a glimpse of what you missed if you didn’t attend.

Timothee Sallin, co-CEO of IMG Enterprises, parent company of Cherrylake, Inc. kicked off the Nursery Management Conference with a market outlook. Sallin shared the factors that determine how the Florida nursery sets its prices.  

One of the many topics Sallin addressed was the effects of inflation on tree prices.

“Growers tend to artificially cap their prices,” he said.

Nurseries don’t raise prices to meet the level of market demand. They’ll sell a tree for $100 because it seems like the right price, and if they do raise prices, it won’t be enough to keep up with inflation.

Sallin presented a graph showing the nominal price of a specific size container tree from 2003 to 2021. The same tree that had an average sale price of $90.70 in 2003 sells for $104.64 today. However, he says cumulative inflation of 48.4 percent since 2003. So that $90.70 tree would cost $134.60 in 2021 dollars.

In order for a nursery to be financially healthy, it needs to be profitable. Sallin says the key to being profitable is to raise prices faster than input costs increase. With supply short across the board, now is the right time to push for higher prices. It takes fortitude, but nurseries need to realize that while their customers may gripe, they will understand.  

“We are in the perfect situation to test elasticity,” he said. “You’ll need the stomach. You’ll see sales stop as people go to the guy down the road who didn’t raise his prices.”

Those competitors that didn’t raise their prices will sell out fast. But as long as plant material is in short supply, you will still sell your stock and you can be profitable doing so.

Watch for more from the 2021 Nursery Management Conference.