The end of the year is nearing, but are the growers reaching the end of their financial possibilities? No, generally not, according to the income estimate for 2018 by Statistics Netherlands and Wageningen Economic Research. The average income from all types of agricultural and horticultural businesses fell sharply compared to 2017. This also in particular applies to horticulture, mainly due to rising costs. At the same time, it also appears that in horticulture still more money is earned than anywhere else.
Income from company, x 1,000 euros per year (unpaid annual work unit)
Recently the arithmetic experts from Statistics Netherlands and Agrimatie presented the new figures in The Hague. You really should look through it yourself, but the general tendency is already mentioned. The income fell for the second year in a row. In greenhouse vegetables this decline was a lot sharper than among the flower and plant growers, particularly due to bad prices. That is not the case in floriculture, with the orchid as the main exception. But even here, as data and sector specialist Greenhouse Horticulture at Wageningen Economic Research Jan Benninga pointed out, there are exceptions.
Note: The Belgian statistics agency Statbel has made a similar analysis of Belgian agriculture and horticulture. You can find these figures here.
Income in 2018 x 1,000 euro per year (unpaid annual work unit)
The average turnover per company is estimated at 2,900,000 euros and has risen in 2018 by more than 9% compared to 2017. This is mainly because of an increase in scale (+ 6%).
On balance, up to and including October 2018 a 2.2% lower price has been achieved compared to the same period in 2017. Phalaenopsis, with 27% of the total indoor plants turnover at Royal Flora Holland by far the largest product, has a difficult year in 2018. The trend of lower prices already started at the end of 2017 and is due to overproduction. This overproduction was caused by expansion of the acreage and intensification of cultivation. In a market situation with overproduction, the lower quality generally decreases first in terms of price formation. In the case of Phalaenopsis, these are the so-called one-branch plants, the plants with one flowering branch. The prolonged hot summer meant that the percentage of one-branch plants was relatively high, when the greenhouse temperature could not be kept at an acceptable level. This was the reason that differences between companies have been high in 2018. In addition, there was less market demand due to the hot weather.
On the whole, the other houseplants have realized a slightly higher price in 2018 than in 2017, with relatively good prices for green plants for the second consecutive year. Products with a positive price development were cacti and succulents (15%) and Zamioculcas (6%). It should be noted that 2017 was a very good year in terms of pricing. Products with poor pricing in 2018 were pot rose (-9.3%) and pot hyacinth (-11.8%). Only a substantial part of the supply of kalanchoe was not sold (1%).
The bedding plant market is a seasonal market, and demand is highly dependent on the weather. This was also quite noticeable in 2018. The early spring was wet and cold until the end of March, after which the conditions were fine. The early products violets and primula have also done poorly in terms of price (violets -18%), the other products did well. Often the pattern is that when violets have a bad year, the other bedding plants also have a bad year. That was not the case in 2018. On average, for all bedding plants the price was 4% higher than in 2017 with a 1% lower supply. No less than 7% of the violet supply was run through.
Income change between 2017 and 2018 x 1,000 euro per year (unpaid annual work unit)
The turnover of the average cut flower company in 2018 compared to 2017 increased from 1,472,000 euros to 1,695,000 euros (+ 15%). This is the result of an increase in scale (+ 9%) and an overall higher price at a lower supply.
The market for cut flowers in 2018 was characterized by an overall 3.7% lower supply via Royal FloraHolland (with 98.5% of sales the largest auction in the Netherlands) and a 1.3% higher price. The largest product in acreage and turnover, the spray chrysanthemum, including Santinis, has had a good year in 2018 in terms of price, with a 9.7% higher price. The supply of chrysanthemums in 2018 was 3.2% lower than in 2017, despite a 12.1% increase in acreage (Statistics Netherlands estimated 370 ha for 2018). For disbudded chrysanthemums, prices in 2018 were 4.5% lower than in 2017, with a 1.5% higher supply.
The second product in terms of turnover, the tulip, achieved a 2.9% lower price in 2018 through October with a 6.3% lower supply. The third crop in terms of turnover, the rose, achieved in 2018 a 2.1% lower price than in 2017, with a 1.5% increase in supply. Regarding the other cut flowers, the positive outliers in terms of price formation are Cymbidium (9.5%), Tanacetum (9%), Iris (8%), Helianthus (7%) and Bouvardia (7%). Also worth mentioning is the expansion of Eustoma with 19% more supply. The price of this product, however, fell by 5.3%. It seems that the Eustoma market is more or less saturated. Another spectacular riser is Limonium with in 2018 a 21% increase in volume compared to 2017, which was accompanied by a 7% lower price.
Effect long warm summer on the market
Characteristic for 2018 has been the prolonged dry warm summer in Western Europe. On the one hand, there is generally little demand for flowers during warm outdoor conditions, on the other hand conditions have been difficult to produce flowers of an acceptable quality. As far as demand is concerned, the total volume sold was 3.7% lower than in 2017. However, in 2018 a lot of the supply (1.8%) has been run through (normally this is around 0.5% of the supply). The running through was highest with Gerbera (9%), Alstroemeria (8%) and Anthurium (2%).
Only in October did the demand pick up again. Temperatures higher than 30 degrees Celsius in greenhouses not only lead to lower production at that time, but also to a lighter production in terms of weight. Especially in perennial crops where the same crop is harvested for a long time, such as rose and Cymbidium, the extremely hot conditions affect the production negatively until November. This has an effect on the long-term supply and therefore also on the price.
The year 2018 has so far been a lucrative year for supplying electricity to the public grid, given the high electricity prices and favorable ratio between gas price and electricity price (spark spread). This resulted in an average higher revenue of 36,500 euros from energy per company (+ 50% compared to 2017).
Costs significantly reduce income
The second major trend in horticulture as a whole is that costs are rising sharply and the average income is therefore decreasing.
Besides energy (high natural gas and electricity prices) one has to think about labor and plant material. Jan told us that in order to reduce labor costs in cultivation and on the cultivation floor, plenty of investments are being made in potting and placing robots that are already common in container cultivation. Growers are doing everything to prevent high labor costs.
As far as the plant material is concerned, the increase in costs is mainly due to charging the high labor and energy costs to the grower. In particular for the orchids also a further intensification (shorter duration) of the cultivation and cultivation in smaller pot sizes (more plants per m2) play a role.
Interestingly, according to Jan, growers are calculating and more often come to the conclusion that they should do the propagation themselves. This can have a multitude of effects, on the market and on quality. Initially, the grower will play it safe and propagate more than he needs. Then he has a margin, he has the possibility to select the best 100% and, for example, discard the remaining 10%. But on the other hand, the crop protection product package is becoming increasingly limited, which jeopardizes his cultivation but also the export. For example, in the UK the white fly is on the quarantine list, but not in the Netherlands. Because the products to take preventive action against this are taken away from the grower, his sales will be at risk. Clean propagation material can probably partially obviate such problems, but that becomes more difficult to control with in-house propagation. Finally, the ever-increasing scaling-up implies the intrinsic risk that, if things go wrong, the consequences will be greater.
The chapters Pot Plants and Cut Flowers are directly taken from Agrimatie. More information about income, revenue, profitability and more, broken down by specific (other) agricultural sectors, can be found here.