Freakynomics

In the Dec. 10, 2007 issue of Fortune magazine, Stanley Bing wrote an article with the title "Freakynomics." It is a great spoof of all that the so-called financial experts are predicting, everything from recession to depression, stagflation to inflation. His subtitle is "Getting Your Finances Squared Away For The End Of The Year World."

I believe Bing hit the nail on the head when he finished his article with this statement: "If I don’t believe everything, it’s possible, just possible, that I might end up believing nothing. That would be bad, wouldn’t it?"

I certainly wouldn’t count on financial experts to tell me what to do. Many believe that they have caused the recession, depression and unstable financial situation.

The "experts" have pushed sub-prime mortgage markets, student loan schemes and death bond loan scams. They even have developed a scheme where interest rates can be over 100 percent a year and still be legal. In the good old days, if you loaned money at over 11 percent, you could be prosecuted for violation of the usury law.

At the very least, many of these financial institutions have been deceitful and in many cases criminal. Look at how many people they have put into foreclosure or bankruptcy. Would you trust your business or your personal wealth to the advice of these people?

The simple facts are that you have to take care of your own financial matters and if you seek professional advice, the advisors had better be working for you and not a financial institution or lender. 

Recession-Proofing Your Business

I’ve heard a significant statement repeated whenever people tell us that we are in a recession. It goes something like this: "We had a meeting of our company management and staff and voted not to be part of the recession." The businesses that have this attitude have the best chance of surviving whatever happens this year.

The question is still asked, "Is floriculture recession-proof?" In most cases the person who poses this question is only considering the financial aspect of a recession.

I would make the point that a financial recession is only one of the possible recessions that can be encountered by people in floriculture. Here are five other factors that can cause a floriculture recession:

1. A "Weather" Recession

Most growers have a window of 10 to 12 weekends to sell over 80 percent of their product. Each rainy, cold or snowy weekend can cost a large grower millions of dollars. While financial recessions require two to three periods of poor financial data and are usually reported three to six months later by economists, we in floriculture know if a weather recession hits within days of its occurrence.

When every weekend is great, we make great sales and have a good year. Two or three poor weekends mean we might realize 70 to 80 percent of possible sales, and more than three may mean that we reach 50 percent or less of our sales goal. Therefore, the weather can have a greater effect on our business than a financial recession.

The weather can also affect our sales when our customers are not able to use our product because of lack of water or weather-related events that have destroyed their homes. Weather can have an inflationary, stagnationary, recessionary or depressionary effect on our business. 

2. An "Availability" Recession

If we produce too much of our product, prices decrease and our profits decrease as well. This could lead to a recession. If we don’t produce enough of our product, it should command a higher price, but usually we are afraid to increase the price. Thus, we have total fewer dollars of revenue and, again, a recession situation.

You might want to go to a supermarket and see what’s happening to food prices this spring and summer. The prices of some items, frozen food products for example, have increased by more than 30 percent. Fresh vegetables have also increased in price. A head of lettuce is $1.29 or more. Garlic costs three for $1. Sweet potatoes are 99 cents a pound.

The use of agricultural products for energy has diverted them from food production. The prices of beef and other meats have increased significantly. This will certainly lead to inflation in the cost of food.

If these areas of agriculture can increase prices, why can’t we? We suffer all of the same increases in costs. We can’t afford to swallow them ourselves and still survive. 

3. A "Labor" Recession

Labor will also be affected by the recession in the overall economy. There are many people looking for jobs, but they want full-time jobs with benefits. Since we are a seasonal industry and many times do not offer benefits, we will continue to struggle to find seasonal employees to do the jobs we need done.

The minimum wage is higher, thus the cost of labor is higher. This is an inflationary factor for our business. Some growers use farm labor groups to do piecework jobs in greenhouses or fields. The question is will your labor costs be reduced (recession), the same as last year (stagnation) or higher than last year (inflation)? 

4. A "Transportation" Recession

Oil at $110 per barrel or more! Gasoline at $3.50 to $4.50 a gallon or higher. Diesel at over $4 per gallon. There certainly isn’t a recession in the oil industry, but because of the inflationary costs to growers, it certainly can cause a recession or depression in our business. 

5. A "Customer" Recession

While the general economy is in a recession and some sectors are even in a depression, how will this affect the customers who buy your products? Will they buy less? Will they buy more?

I’m sure the product mix will change. More people will be looking for vegetables. They may not be looking for a $3 tomato plant in a six-inch container. They might be looking for 32-cell flat of vegetables they can mix and match to get a small vegetable garden of their own for less than $20.

Will the customer this year have time to garden? Will they buy the plants and the containers and put them together themselves to save money?

So, in reality, we have six factors that determine where we are in our business: the weather, our product, labor, transportation, our customers and our overall financial position.

As the owner or manager, you have to consider all these factors before you can determine where your business is. Is it in recession, depression, stagnation or inflation?

Here is a story that might put our situation in floriculture today into perspective. In the early 1900s, Henry Ford talked with many people, leaders from all segments of the economy at that time, and told them that he wanted to build and market a horseless carriage – a car. Most of them gave him advice. This was not the right time. There were no good roads. It would take too much time and money and wasn’t worth the effort.

If Ford had listened to his peers and the best thinkers of the day and did what they said, he probably would have raised the fastest horses in North America. Instead, he ignored their advice and built the Model T Ford, which revolutionized the transportation system all over the world.

His peers were pessimists. They said seeing is believing. Ford was an optimist and proved that believing is seeing.

Tough times will come and go. Tough floriculture growers will survive!

Watch out for all the recessions, depressions, stagnations and inflations that affect your business and personal life, and avoid those people that want you to worry about "Freakynomics."

Leave a Reply

More From Finance/Operations...
Aquaponics At Brogue Hydroponics

March 30, 2015

Aquaponics Is Making A Splash At Brogue Hydroponics

The owners of Brogue Hydroponics explain why they expanded into aquaponics, and how the shift has helped them uncover a new market opportunity.

Read More
Hendriks-Half-Open-Roof_GGS

March 26, 2015

10 Greenhouse Products For First-Rate Growing Environments

From coverings to fork-lifts, greenhouse suppliers offer a variety of products to make growing easier. Check out the slideshow to learn more about these, plus several other products that can offer you value, versatility and durability.

Read More
Rose rosette on Knockout rose, April 2012. Photo credit: Alan Windham, University of Tennessee

March 25, 2015

$58 Million In APHIS Farm Bill Funding Will Support Horticulture Priorities

Nearly $58 million as been allocated by the USDA's Animal and Plant Health Inspection Service (APHIS) to support the industry's Plant Pest and Disease Management and Disaster Prevention Program, under Farm Bill Section 10007. The program will support mitigation efforts for specialty crops, including providing research and other funding to address plant pest and disease priorities for the specialty crop industry, including floriculture and nursery crops.

Read More
Latest Stories
AFE scholarship_Ryan Dickson

March 25, 2015

AFE Educational Grant And Scholarship Application Deadl…

Apply now for American Floral Endowment (AFE) scholarships or educational grants. Applications can be found online. For educational grants for 2015-2016, applications must be submitted no later than June 1. Scholarship applications are due May 1. AFE will award $40,000 in scholarships for 2015.

Read More

March 23, 2015

UF/IFAS Appoints Joseph Albano As Director Of Mid-Flori…

The University of Florida's Institute of Food and Agricultural Sciences (UF/IFAS) has a new directors for its Mid-Florida Research and Education Center (REC) on Apopka, Fla. The role has been filled by Joseph Albano, a research horticulturist from the U.S. Department of Agriculture with more than 25 years of experience.

Read More

March 17, 2015

Pike Nurseries Implements Employee Stock Ownership Plan

Independent garden retailer Pike Nurseries has announced it will become an employee-owned company. Pike Nurseries management has combined with its sister corporation in California, Armstrong Garden Centers, to operate under an established Employee Stock Ownership Plan (ESOP).

Read More
GrowIt! App Wins Gold At Design100 2014 US Mobile & App Design Awards

March 10, 2015

GrowIt! Mobile App Now Available For Android

The mobile app GrowIt! Garden Socially can now be used by gardeners with Android-based smartphones. Now available on the Google Play Market, GrowIt! helps users find plants to fit their lifestyle and connect them with other local gardeners.

Read More

March 4, 2015

Second Annual GreenhouseConnect Will Bring Growers and …

Following a successful inaugural event in Tampa last fall, Greenhouse Grower has announced the dates of its second annual GreenhouseConnect: October 26-29, 2015. Representatives of an expected two dozen leading greenhouse operations from across the U.S. will join senior-level suppliers at Rancho Bernardo Inn in San Diego for several days of one-on-one strategic meetings, a growers-only roundtable, informational sessions and a variety of networking events.

Read More

March 4, 2015

Maryland Green Industry Associations Unite

The Maryland Nursery and Landscape Association recently announced that it is expanding its reach to include the greenhouse industry, meaning it has become The Maryland Nursery, Landscape and Greenhouse Association (MNLGA). The change comes as a result of the planned dissolution of the former Maryland Greenhouse Growers Association and the invitation for those members to join the existing and renamed association.

Read More
IPPS Sharing Plant Production Knowledge Globally Logo

February 25, 2015

International Plant Propagators Western Region Sets Ann…

The annual meet for the International Plant Propagators' Society (IPPS) Western Region has been set for this September. It will take place September 23 to 26 in Modesto, Calif., and will include learning sessions, tours to local nurseries, a research poster display and poster presentations, various networking opportunities and an awards banquet to close the event.

Read More
myers industries Lawn and Garden Logo

February 24, 2015

Myers Industries, Inc. Lawn And Garden Business Sold, N…

The management of Myers Lawn and Garden Group, along with Wingate Partners V, L.P. have recently acquired the Myers Industries, Inc. Lawn and Garden business. The new company is named The HC Companies, and will continue as a North American leading provider of horticulture containers supplying the greenhouse, nursery and retail markets.

Read More
american-hort-logo

February 17, 2015

AmericanHort Announces New Board Members

AmericanHort recently announced the election of new officers and members to the board of directors. Each will assume their positions on the board during Cultivate’15, July 11 to 14 in Columbus, Ohio.

Read More
All American Selections

February 17, 2015

All-America Selections Elects New Officers, Names New J…

While meeting during the Flower and Vegetable Seed Conference in Tampa, Fla., hosted by the American Seed Trade Association, All-America Selections elected new officers for a two-year term. Read on to learn about the new officers, as well as all of the new judges that were added in 2014.

Read More
Greenhouse Grower.com on your desktop, on your phone, on your tablet

February 11, 2015

GreenhouseGrower.com Relaunches With Responsive Design …

Greenhouse Grower magazine, the nation’s leader in profits, production and education for greenhouse growers, announces the launch of its completely redesigned website, GreenhouseGrower.com. The new design is the product of direct user feedback and GreenhouseGrower.com analytics, and includes responsive design for ease of mobile use.

Read More
Andy Higgins

February 3, 2015

MasterTag Names Andy Higgins As Its New President

Former CEO and president of Ecke Ranch, Andy Higgins, joins MasterTag as its new president. He brings more than two decades of industry experience to the position.

Read More
Syngenta Bioline Hires Ronald Valentin For Technical Lead Role

January 28, 2015

Syngenta Bioline Hires Ronald Valentin For Technical Le…

Ronald Valentin has been appointed technical lead for Syngenta Bioline, effective January 2015. He will be responsible for technical support of Bioline biological control agents and will be instrumental in helping growers develop integrated pest management (IPM) solutions.

Read More

January 27, 2015

Give Equal Time To The Number Crunchers

Before investing in a new business opportunity, check in with the financial gurus of your organization to make certain you have the cash flow to back up your efforts.

Read More
Plant Introductions, Inc. partners Mark Griffith, Dr. Michael Dirr and Jeff Beasley and Bailey Nurseries President Terri McEnaney.

January 20, 2015

Bailey Nurseries’ Purchase Of Plant Introductions Inc. …

When Bailey Nurseries purchased its long-time breeding partner, Plant Introductions, Inc. (PII), in early January 2015, it freed the PII team to concentrate on what they do best: develop new plants. Bailey Nurseries will take on the business management side of the partnership, but otherwise the relationship it has enjoyed with PII for years will be largely unchanged.

Read More
Plant Introductions, Inc. partners Mark Griffith, Dr. Michael Dirr and Jeff Beasley and Bailey Nurseries President Terri McEnaney.

January 13, 2015

Bailey Nurseries Acquires Plant Introductions

Bailey Nurseries has acquired Plant Introductions, Inc. (PII), effective January 1, 2015. PII has developed numerous innovative new varieties that have been marketed worldwide, many introduced by Bailey Nurseries.

Read More

January 7, 2015

How Inflation Affects Your Business And Why You Can’t I…

Awareness of the true increase in costs after inflation is a necessary part of good financial management for greenhouse operations.

Read More

December 4, 2014

New Developments In Shipping/Logistics Software

Improved shipping and logistics software from Picas Software and MapMechanics makes it easier for growers to plan loads efficiently and automate day-to-day distribution planning.

Read More