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An exclusive Nursery Management survey revealed U.S. nursery growers will spend almost $450 million on capital expenditures in 2011, including trucks, tractors and other production equipment.
Growers across the board are reporting low cash flow, and many banks are leery of lending in the current economic environment. So spending is down from the past.
But still, the spending is there. Nursery growers plan to spend $173 million on commercial vehicles alone. The average annual purchase comes out to $25,250.
Growers will spend another $55 million on tractors, or an average purchase of $12,404.
Randy Bracy, president of Bracy’s Nursery in Amite, La., said his company’s spending is down, but you still need to maintain your fleet and equipment.
“We’ve already bought a couple trucks this year, and we probably need to buy a couple more. We’ll wait and see how the fall goes,” Bracy said. “Same with tractors. We have enough in place, but we need to replace some older ones with newer models for maintenance reasons and whatnot.”
Bracy said his company’s capital expenditures over the past several years have been more geared toward maintaining current production, rather than adding more acreage.
Terri McEnaney, president of Bailey Nurseries Inc., headquartered in St. Paul, Minn., said her company is being more careful right now with the money it spends.
“We’ve certainly scaled back our capital budget for this year. I’m not saying that we’re not investing in capital, we’re certainly spending less than we have in past years,” McEnaney said. “Our biggest expense right now is probably developing our new Illinois growing facility.
“Every year we put together a capital budget, see how the spring goes and then determine what we really need to invest in, and what we can hold off on. We rank projects as an A priority, B priority or C priority and go from there.”
But the company is interested in automation or anything that can reduce the work force.
“We’re very interested in any investment that would reduce labor costs long term. This is our company’s biggest expense. If it’s something that reduces labor, we’re definitely going to look at it,” McEnaney said.
Still moving forward
 Agricultural economist Charlie Hall is the Ellison Chair in International Floriculture at Texas A&M University. He said his research shows many nursery growers are still steaming ahead despite the current economic conditions.
“Capital expenditures are down no doubt, but from the nursery growers we interviewed this year, 78 percent said they were still planning expansion this year. I guess you can say they’re eternal optimists,” Hall said. “I’d say most are trying to add inventory rather than strictly add equipment, but when you’re expanding your production capabilities, it’s inevitable that you have to add some equipment.”
But Hall said plans on adding new growing space and actually doing it are two different things.
“Of those 78 percent wanting to add inventory, I’m guessing about 75 percent won’t do it. But that’s the mindset. And to tell you the truth, I don’t think that mindset has changed that much since before the recession,” Hall said.
“We’ve definitely learned lessons during that time, but we take a look at o`ur industry and see a lot of our peers have gone out of business. We think, ‘There has got to be market out there to capture.’ There were customers out there buying from these companies, and they still have to be buying.”
Proceeding with caution
Bart Worthington, general manager of Mountain States Wholesale Nursery in Litchfield Park, Ariz., said his company is being very judicious with available capital. He said his company’s sales are probably off by 50 percent since they peaked in 2006, but are headed back up.
He estimates sales in 2011 will beat 2010 by 10 percent or more.
“We’re just trying to maintain what we can right now. We’re still in survival mode right now,” Worthington said. “There’s just not enough cash available to do some of the things that we want to. We’re patching things together, keeping the yard tractors running and doing what we can.”
Mountain States had purchased new equipment as sales had peaked, so that helps keep maintenance down.
“We’re very fortunate that we’d purchased some very good equipment, like several Cat loaders we use on the yard, when times were better,” he said.
Worthington would like to overhaul the company’s computer systems, but for now the company is getting by with minor upgrades and adding memory to computers that need them.
“Of key importance is making sure our trucks and trailers are safe. We rent our tractor trailers from Penske, and they do a good job maintaining them. But we own our trailers and we need to make sure they’re safe, legal and have good tires,” Worthington said.
For more: Bracy’s Nursery; www.bracys.com. Bailey Nurseries Inc., www.baileynurseries.com. Charles Hall, http://EllisonChair.tamu.edu. Mountain States Wholesale Nursery; www.mswn.com.
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