As the housing market has recovered, the growth in demand for ornamental trees, palms and shrubs has outpaced the growth in supply. This has led to rapid escalations in plant material prices, limited availability and smaller specifications.
Today, as we take stock of the current market conditions and look forward to the next 12 months, it appears that the plant material shortage will continue to be felt throughout 2015 and will be more severe in its impacts as we move through Spring and into the Summer.
The key driver of demand for plant material is new construction and in particular new housing starts. Florida housing starts have been recovering since 2010. In 2013 Florida housing starts were 124% higher than 2011. 2014 starts remained steady at 85K units, and the first quarter of 2015 indicates that more growth can be expected this year.¹
Texas, likewise, has been experiencing strong housing growths since 2010. Housing starts in Texas have grown from 83,840 in 2010 to 130K in 2012, 147K in 2013 and 165K in 2014.²
Globally, the same pattern of housing recovery can be seen at the South Census Region level, which represents the majority of the market for Florida grown nursery trees, palms and shrubs.³
Impacts on pricing and specifications
The plant material demand associated with these housing starts is driving nursery sales and leading to rapid escalations in plant material prices. The price of a 30 gallon Live Oak has increased from a low of $31 in 2011 to a current price of $107.4 Despite these major price increases, nursery supply is still unable to keep up with demand.
Nurseries are selling out of inventory and releasing crops early to fulfill excess demand. This leads to smaller specifications as trees are sold before they are able to reach maturity. In the case of the 30 gallon Live Oak, trees were commonly sold at 2.75” – 3” caliper in 2011 due to the oversupply at the time – this was an inch over the industry standard of 2” caliper for a 30 gallon Live Oak.5 Today, due to the shortage, the same 30 gallon Live Oak is being sold at 1.5” – 1.75” caliper. In other words, the market is paying 245% more for a tree that is 50% smaller in 2015 compared to 2011.
To better understand the full impact of the plant material shortage on prices, we need to compare the price of trees of equal caliper. To source a 3” caliper Live Oak in 2015, one must purchase a 65 gallon size container.6 The current price of a 65 gallon Live Oak is $222. Thus the price of 3” container live oak has increased from $31 in 2011 to $222 in 2015 which is over 600%.