Can We Survive Another Recession?

Can We Survive Another Recession?

If the Great Recession can be likened to a massive coronary for the United States and world economies, then I guess we can say we are still in intensive care and in the process of undergoing extensive rehab. Recent indicators do indeed point to an economy that isn’t responding as quickly as we’d hoped to the medication and rehab we’re in the process of administering. On top of our economic recovery, our national debt and Congress’s reluctance to make tough decisions has put us in a non-enviable position heading into 2012.

I guess that is what Standard & Poor was hinting at in its downgrade of U.S. treasuries earlier in the year, given that a big part of its rating model is a reflection of the current political environment. However, S&P’s unprecedented action hit the markets hard with its conclusion that our government is incapable of making any rational decisions regarding our debt situation. While all of us are frustrated, the decision by S&P couldn’t have come at a worse time.

What Happened

What irks me about S&P’s downgrade and the subsequent market malaise is that once again we let this firm’s actions influence us unduly. Remember this is the same firm that missed the entire mortgage-backed securities problem right under its nose and gave Lehman Brothers a triple-A rating right before it tanked. Yet we let one company with a track record like this once again ignite disruption in the markets? Someone please explain to me the logic in that.

The Federal Reserve and other regulators immediately pointed out the $2 trillion mistake in S&P’s math and warned folks not to take this downgrade seriously, but to no avail–the roller coaster in the stock market had already begun to take shape. The G-7 also stepped up and said that regardless of the rating, it was willing to do what it takes to keep liquidity flowing in financial markets worldwide.

What’s Next

So what does this mean for the economy in general? First, most economic forecasters (with fairly accurate track records) are projecting modest GDP growth during the remainder of 2011 and into 2012. Consumer spending is expected to show modest signs of life after a disappointing showing the first half of the year. There are even modest projected gains in employment, if you can believe it.

Housing activity is still expected to rise only slightly, particularly in the construction sector. The widening spread between rents and costs of home ownership are creating opportunities in the rental market, which may be a good thing since we need a more mobile work force in order for folks to move to areas of the country where jobs are available.

Business investment in new equipment and commercial real estate is expected to increase slightly in 2012–a good thing since government spending is likely to scale back considerably, not only at the national level, but at the state and local levels as well. Commodity price fluctuations should lessen over the next year, easing inflationary pressures.

The Federal Open Market Committee has elected to keep the fed funds rate at near zero through mid-2013, an extension of its earlier policy. It has removed the quarter-percent interest rate it pays on the reserves banks hold at the Fed. Banks will likely be more willing to lend if they are not getting a risk-free, though negligible, return from socking away money at the Fed. This is good news for businesses looking to make strategic investments as we head into 2012.

The Bottom Line

The health of the economy is extremely fragile, with some of our leading indicators continuing to be negative. Fortunately, some are trending positively. Mixed performance in the economy coupled with extreme weather conditions makes for a terribly challenging environment. I remain optimistic about the recovery, but then again, as you know, I find the silver lining in most economic storms.

But what if my optimism does not pan out and things do not continue to improve, even modestly? What if Europe’s financial market unravels and propels the rest of the world into Great Recession: Part 2? What if the gloom and doom economists are the ones who are right and this is only the beginning of financial Armageddon in this country? Can we as an industry make it through another recession like this one?

If I can elaborate on a couple of my comments a few months back, I still have reason to believe the firms that are well positioned with their customers in the marketplace, not overleveraged and clearly articulating their value proposition, will be OK. However, those that aren’t probably won’t be around much longer.

We will likely see continued structural changes across the industry supply chain as we morph into the more compact and efficient industry of the next decade. This will not only mean fewer key players in the industry but deeper, more strategic relationships among those left from the transition. We are not going to look the same; not even close.

Yes, we (as an industry) will still be around (if we maintain our value, relevance and authenticity to our end consumers), but the factors that will guarantee success in the future are going to change. Better brand management, more detailed SKU movement and replenishment analysis, greater efficiency in distribution and logistics, closer integration of genetic innovations and supply levels with consumer demand, and the assimilation of innovative marketing technologies (social media and otherwise) are the new key success factors of the future.

Notice that growing a quality plant isn’t listed. That’s because it’s a given. You’ve got to have quality to even play in the game. Master these key success factors and you’ll not only be positioned better for the potential double dip in the short run (if it does occur), but you’ll lay the groundwork for solid performance during any future economic downturn.

Leave a Reply

More From Finance/Operations...
Gotham Greens Atrium Style Greenhouse Chicago

May 23, 2016

What’s Good For The Environment Is Good For Business [Opinion]

Investing in technology to become more sustainable “always goes hand in hand,” says Abe VanWingerden, co-CEO of Metrolina Greenhouses. “If it is good for the environment, it normally is good for business over the long term.” That connection was abundantly clear in the responses we received to this year’s Top 100 Growers Survey. VanWingerden points to three investments Metrolina has made as good examples of how technology can reduce an operation’s carbon footprint and pay dividends financially. Its biomass system burns locally sourced waste wood — a renewable resource; its ozone water treatment system cleans irrigation water, reducing the need for fertilizers and pesticides, and improving plant quality and precision growing; and electrostatic sprayers reduce water and chemical use, and provide more targeted chemical applications. Other Top 100 Growers have found VanWingerden’s theory to be true, as well. Costa Farms’ investment in solar energy panels on three buildings at its […]

Read More
Petunia 'Supertunia Violet Star Charm' (2015 University of Georgia Field Trials)

May 10, 2016

New Southern-Centric Ornamental Production Conference To Be Held June 12-15 in Georgia

The 2016 Academy of Crop Production is dedicated exclusively to sharing information on advanced ornamental crop production and business management techniques for ornamental producers.

Read More
University of Florida Online Greenhouse Training Courses

April 25, 2016

University of Florida Offering Online Training Courses For Greenhouse Growers

There will be five courses offered, with the first starting on May 30. Courses are available in both English and Spanish and range from beginner level to advanced education.

Read More
Latest Stories
Gotham Greens Atrium Style Greenhouse Chicago

May 23, 2016

What’s Good For The Environment Is Good For Business [O…

Investing in technology to become more sustainable “always goes hand in hand,” says Abe VanWingerden, co-CEO of Metrolina Greenhouses. “If it is good for the environment, it normally is good for business over the long term.” That connection was abundantly clear in the responses we received to this year’s Top 100 Growers Survey. VanWingerden points to three investments Metrolina has made as good examples of how technology can reduce an operation’s carbon footprint and pay dividends financially. Its biomass system burns locally sourced waste wood — a renewable resource; its ozone water treatment system cleans irrigation water, reducing the need for fertilizers and pesticides, and improving plant quality and precision growing; and electrostatic sprayers reduce water and chemical use, and provide more targeted chemical applications. Other Top 100 Growers have found VanWingerden’s theory to be true, as well. Costa Farms’ investment in solar energy panels on three buildings at its […]

Read More
Petunia 'Supertunia Violet Star Charm' (2015 University of Georgia Field Trials)

May 10, 2016

New Southern-Centric Ornamental Production Conference T…

The 2016 Academy of Crop Production is dedicated exclusively to sharing information on advanced ornamental crop production and business management techniques for ornamental producers.

Read More
University of Florida Online Greenhouse Training Courses

April 25, 2016

University of Florida Offering Online Training Courses …

There will be five courses offered, with the first starting on May 30. Courses are available in both English and Spanish and range from beginner level to advanced education.

Read More
Sanitation programs are essential to preventing and removing food safety concerns.

April 7, 2016

USDA Launches GroupGAP Program For Fruit And Vegetable …

The new certification program is designed to help small and mid-size growers, including greenhouse vegetable producers, comply with new food safety regulations.

Read More
Young Plants Farm North Carolina

March 15, 2016

Young’s Plant Farm Obtains MPS-A Qualification

MPS, an organization that develops and manages certification for companies in the horticulture industry, has awarded MPS-A certification to Young’s Plant Farm in North Carolina and Alabama.

Read More
Charlie Hall Feature Image

March 14, 2016

Dr. Charlie Hall Will Offer Keynote Address At Farwest …

The Texas A&M economist will discuss factors affecting short- and long-term demand driving the future of the green industry.

Read More
Seed Your Future Logo

March 8, 2016

Longwood Gardens And American Society For Horticultural…

Under the direction of co-chairs Paul B. Redman of Longwood Gardens and Anna Ball of Ball Horticultural Company, the “Seed Your Future” initiative is designed to combat declining awareness of horticulture while promoting it as a viable career choice.

Read More
Florida Green Industry

March 4, 2016

University Of Florida Study Shows Green Industry Genera…

According to the study, the rise of large retail chain stores with garden departments has made plants and other horticultural products more readily available to consumers than ever before.

Read More
Great Lakes Growers Expansion

February 22, 2016

Great Lakes Growers Expands Its Production Capacity For…

The Burton, OH-based grower has added 25,000 square feet to its operation, helping it to keep up with rising consumer demand.

Read More
National Garden Bureau Logo feature image

February 16, 2016

New Officers And Directors At National Garden Bureau an…

During the ASTA Flower & Vegetable Seed Conference, National Garden Bureau and All-America Selections elected new officers and directors.

Read More
Katherine Wolper

January 24, 2016

Ludvig Svensson Hires Katherine Wolper As West Coast Sa…

Wolper says she looks forward to listening to growers and understanding the concerns, obstacles, and opportunities they face.

Read More

January 20, 2016

Tips For Overcoming Challenges In Family Business From …

Our industry is run by a collection of family businesses, and every one, no matter how big or small, has its share of management issues. But there are several differences between one that is run successfully as a business and one that allows family politics to distract from the organization’s goals. In this year’s State Of The Industry Survey, we noted that labor recruitment and succession are two areas where growers struggle. In talking with the owners of Costa Farms for this month’s cover story, I thought some of the values they have incorporated into the operation’s management structure really stood out as practices that other family businesses could use. The participatory management approach to business and team building is one that Tony Costa, the second-generation owner of Costa Farms, instilled in his children, Maria Costa-Smith and Jose Costa, and son-in-law, Joche Smith, the current owners of Costa Farms. In […]

Read More
I-9 Form

January 13, 2016

Proposed Changes To I-9 Form Important For Greenhouse G…

AmericanHort’s Government Relations and Grassroots Representative Davi Bowen says growers need to become familiar with the new form and should be prepared to make comments if necessary.

Read More

January 13, 2016

Wenke Greenhouses Buys Zylstra Greenhouses

Two Kalamazoo, MI-based greenhouses have merged after Wenke Greenhouses closed on Zylstra Greenhouses at the end of November. The additional property and facilities will allow Wenke Greenhouses to expand its young plant business, among other areas.

Read More

January 13, 2016

Costa Farms Wins With Its Emphasis On Team, Solutions, …

Based in Miami, FL, Costa Farms has gone global by focusing on strategy, systems, and vertical integration. See how the operation continues to expand through its emphasis on team, solutions, and growth.

Read More

January 11, 2016

New Transportation Funding Bill Is Good News For Floric…

According to AmericanHort, perhaps the biggest benefit of the new bill is what it doesn’t include: a proposed amendment that would have prohibited the use of federal funds for vegetative enhancements.

Read More

December 29, 2015

The Home Depot Says No To Neonics

The Home Depot plans to phase out neonicotinoids by 2018, according to a recent statement on the company’s website. The large home improvement retailer stated that its live goods suppliers have reduced the number of plants that they treat with neonicotinoids, and now more than 80% of all flowering plants sold at The Home Depot are not treated with neonicotinoids. The retailer said it will continue this decrease unless: Treatment is required by state or federal regulation, or Undisputed science proves that the use of neonicotinoids on live goods does not have a lethal or sub-lethal effect on pollinators Aside from these exceptions, the retailer has implemented a complete phase-out of neonicotinoid use on live goods by the end of 2018. Meanwhile, The Home Depot has required all of its live goods suppliers to label plants that have been treated with neonicotinoids. “The Home Depot is deeply engaged in understanding the […]

Read More
Gardeners of all ages enjoyed the annual plant sale at McCorkle Nurseries

December 22, 2015

Allan Armitage Explains Why People Will Always Want To …

We may believe that an appreciation for gardening and plants is rapidly draining away, but there is reason to hope.

Read More
[gravityform id="35" title="false" description="false"]