Greenhouse Growers Wilt Under Costs

LANSING - Feb 2/06 - MFB -- The future doesn't look rosy for Michigan's nursery and greenhouse growers. Rocketing heating costs, price spikes for plastic products, an uncertain sales market and Michigan's weakening economy are thorns in the side of nurserymen like Bill Ruhlig. But will consumers feel a prick come spring? Maybe and maybe not.

Ruhlig, a Wayne County flower and vegetable grower who sells his products at Detroit's Eastern Market, would normally have two or three greenhouses filled with flower plugs by now, seeded for other greenhouses. But this year, he can't justify the expense.

"I looked at the energy costs this year, and called my customers to tell them I can't do it," he said. "I'm holding it all back until early February."

But denying an extra month of plant growth may not be enough for Ruhlig or many other growers facing nearly doubled natural gas prices this year.

"It's not just the heating costs," he said. "It's everything down the line related to natural gas. The price of plastic flats is almost doubled. A plastic hanging basket will cost a nickel more, and with the volumes many growers deal with, that runs into serious cash. If I don't see a 50-cent increase per flat for my flowers, I'm not going to cover even close to my costs."

Ruhlig, a veteran grower who depends on the fickle buying habits of consumers and wholesalers who come to the Eastern Market, may not have it as bad as some other producers who grow for national chain stores and have already locked in their prices for spring.

"I think most of the consumers I deal with would be willing to pay that extra 50 cents," he said, "but with Michigan being so auto-related and so many people losing their jobs, it's doubtful that they'll pay the extra this year. They may cut way back, and we may have a glut of plants. The economy around here is shaky, and a lot of people bought big houses (during good times), and now, in order to pay their fuel bill, they might cut back on their landscaping."

Growers who deal with smaller, local retail outlets may have a better chance to recover energy costs this year, agreed Gale Arent, executive director of the newly-established Michigan Floriculture Growers Council.

"If growers are dealing with major box stores, most of their marketing was done in the fall or late last summer, and their price and quantity arrangements typically were done then," he said. "These energy costs blindsided some of them. It is virtually impossible for many of them to recover those costs."

While growers delivering plants for large stores can anticipate having to eat their heating costs, growers such as Ruhlig must wait for the spring sales season to determine the mood of the buying public.

"So many times, the big box stores will use flowers or hanging baskets as loss leaders - they'll sell them below cost just to get people into the stores," he said. "That's where people will go to buy."

Even if most growers get a price increase compared to last year, it might not be enough, Ruhlig said.

"Fuel costs have gotten to the point where a lot of growers will face financial trouble this year," he said. "Based on what costs are now, heating costs will be almost double, but the worst part is that it's going to be really hard to get more money for our products. If we can't get it this year, some growers might not be in business next year."

There is some relief in sight. The Floriculture Growers Council and Michigan Farm Bureau were successful in working with Consumers Energy Company and DTE to offer a budget-billing program for greenhouse growers.

"We've always had a budget program for both natural gas and electric power, and it's been very popular," said Jeff Holyfield, spokesman for Consumers Energy. "Customers can sign up at any time, but they wouldn't gain as much now as they would if they had signed up in May and gotten the full 12 months to average out their bills. In May, our customers get a notice of their opportunity to join the plan with their bills, so the more months they can average out, the better they can budget."

While the plan does not reduce the overall gas bill for greenhouse growers, it can help them spread their costs over 12 months.

"At least it takes the peak out of the price, and if a grower is paying for the increase with an operating loan, at least he will not have to pay the interest on an extra bump in the energy bill," said Arent. "This budgeting plan may be more helpful in 2007 than this year, but it may help with this year's late-season bills."

Copyright (c) 2006 Michigan Farm Bureau