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...

January 15, 2018

Missouri Greenhouse Grower John Tomasovic Dies

The patriarch of Tomasovic Greenhouses & Nursery, Inc. in Des Peres, MO, was a legend in the plant industry, and widely involved in many associations.

Read More

January 15, 2018

Perennials Icon Louis Stacy Dies

The founder of the former Stacy's Greenhouses in York, SC, passed away on Wednesday, January 10, 2018.

Read More
Charlie Hall Feature Image

January 9, 2018

AmericanHort Launches New Video Series on Profit Margin Management

This week, AmericanHort is kicking off a four-part video series that offers perspectives on managing profit margins from AmericanHort’s Chief Economist, Dr. Charlie Hall.

Read More
Latest Stories

January 15, 2018

Missouri Greenhouse Grower John Tomasovic Dies

The patriarch of Tomasovic Greenhouses & Nursery, Inc. in Des Peres, MO, was a legend in the plant industry, and widely involved in many associations.

Read More

January 15, 2018

Perennials Icon Louis Stacy Dies

The founder of the former Stacy's Greenhouses in York, SC, passed away on Wednesday, January 10, 2018.

Read More
Charlie Hall Feature Image

January 9, 2018

AmericanHort Launches New Video Series on Profit Margin…

This week, AmericanHort is kicking off a four-part video series that offers perspectives on managing profit margins from AmericanHort’s Chief Economist, Dr. Charlie Hall.

Read More
Tax-Money

January 9, 2018

What You Need to Know About the New Tax Bill

The United Fresh Produce Association, which represents the needs and interests of fruit and vegetable growers, recently updated its members on how the recent passage of the Tax Cuts and Jobs Act might affect their businesses. Many of the insights provided by United Fresh also apply to greenhouse growers and nurseries.

Read More
Doug Cole, Owner of D.S. Cole Growers

January 4, 2018

D.S. Cole Growers Blazes Its Own Path to Growth

Known for its commitment to sustainability and innovation, this grower is one of the pioneering trailblazers changing the way horticulture does business.

Read More

December 31, 2017

Ag Exemption for New Trucking Regulation Still Under Re…

The Federal Motor Carrier Safety Administration’s trucking electronic logging device mandate, which took effect on December 18, includes an Hours of Service exemption that may or may not apply to greenhouses and nurseries.

Read More
Tillandsia Air Plants (Plantiflor)

December 15, 2017

Bonsall Nursery Devastated By California Wildfire

Rainforest Flora lost its main greenhouses and outdoor growing property in the Lilac Fire in San Diego.

Read More

December 9, 2017

Southern California Wildfires Narrowly Miss Most Grower…

Here’s an update on horticulture businesses in the areas affected by the California wildfires.

Read More

December 5, 2017

Skagit Horticulture Builds New, Inclusive Business With…

By merging two large-scale producers, Skagit Gardens and Northwest Horticulture, the new company has realized its strengths through focused divisions that emphasize efficiency and success.

Read More

December 4, 2017

Raker-Roberta’s Young Plants Debuts as Roberta’s Finali…

On December 1, Eric Wallien of Roberta’s Inc. in Waldron, IN, officially purchased C. Raker & Sons in Litchfield, MI. The new identity of the company is now Raker-Roberta’s Young Plants, according to a Dec. 1 letter to Raker’s customers, suppliers, and business partners from Vice President Susie Raker-Zimmerman. “There have been minimal changes in management and we will be providing the same products and services on which we have built our reputation in the industry,” Raker-Zimmerman said in the letter, which also announced the name change and new logo. The sale of C. Raker & Sons was announced in September . A series of events affecting Raker’s financial situation caused the need for the operation to find an alternate solution. Roberta’s had been a customer of Raker’s since 2011, and the fourth generation, family owned grower-retailer was a fan of Raker’s commitment to quality. The agreement to purchase C. […]

Read More

October 10, 2017

Sharpen Your Skills in Cost Management and Profitabilit…

The University of Florida is offering a new online course on costing and profitability. The course will take growers through the process of how to accurately evaluate cost of production, labor efficiency, pricing, and equipment investment decisions.

Read More
Willoway Nurseries Team

October 1, 2017

How Willoway Nurseries Gets Its Staff Engaged in The Co…

Willoway Nurseries in Avon, OH, is creating a culture with people who think, act, and feel like owners. Learn how its team is taking the business to the next level.

Read More

September 21, 2017

Horticulture Is All About Connections

The beauty of our industry is that we are more than willing to reach out and help those around us. What connections can you make today to help your business, and what can you offer to help another grower?

Read More
Worker taking cuttings at Vivero Internacional.

September 11, 2017

Vivero Internacional Elevates Clean Cuttings to New Hei…

One of the last independent cutting operations, this fast-growing company raises the standard for delivering clean, high-quality unrooted cuttings.

Read More
Selecta Sponsor bed at Raker trial gardens

September 5, 2017

C. Raker & Sons Acquired By Roberta’s Unique Garden…

Ownership will change hands in December, and Raker will supply young plants for the 2018 season. Beyond that, leadership of the two operations say they are excited to move forward with a partnership that will continue to supply the industry, and gardeners, with top-quality plants.

Read More

August 1, 2017

MPS Honors D.S. Cole Growers for 10 Years of Sustainabi…

At Cultivate’17, a ceremony to mark a 10-year milestone since D.S. Cole Growers became involved with More Profitable Sustainability (MPS), as the first U.S. grower to achieve MPS certification, took owner Doug Cole by surprise. Separate celebrations also recognized Metrolina Greenhouses and Dümmen Orange for achieving MPS certification.

Read More
Nexus greenhouse construction for Knox Cannabis Facility

July 27, 2017

Ornamental Growers Will Revolutionize Cannabis Industry…

Professional growers have much to offer the emerging cannabis market, according to the co-owner of Knox Medical, one of the licensed cannabis producers in Florida.

Read More
Ball ColorLink logo

July 11, 2017

Get Guidance on Running Your Business from Ball ColorLi…

Representatives from Ball ColorLink will be on-hand at Cultivate’17 to answer questions and present business-building tools and industry insights to growers.

Read More