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 Front Cover
 Center information
 Title Page
 Executive summary
 Background
 Purpose, objective, scope...
 Gross product sales in 2001
 Industry demographics/characte...
 Production profile
 Markets and market profile
 General competition issues
 Thrust of supplementary commen...
 Summary and implications
 Conclusion
 Reference






Group Title: Policy Brief Series - International Agricultural Trade and Policy Center. University of Florida ; no. 05-01
Title: Grower perspectives on the potential impact of expanded international trade of selected plants in the U.S. nursery industry
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Title: Grower perspectives on the potential impact of expanded international trade of selected plants in the U.S. nursery industry
Series Title: Policy Brief Series - International Agricultural Trade and Policy Center. University of Florida ; no. 05-01
Physical Description: Book
Language: English
Creator: VanSickle, John
Evans, Edward A.
Gordon, Ronald M.
Publisher: Institute of Food and Agricultural Science, University of Florida
Place of Publication: Gainesville, Fla.
Publication Date: 2005
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Bibliographic ID: UF00089775
Volume ID: VID00001
Source Institution: University of Florida
Holding Location: University of Florida
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Table of Contents
    Front Cover
        Page i
    Center information
        Page ii
    Title Page
        Page 1
    Executive summary
        Page 2
        Page 3
    Background
        Page 4
    Purpose, objective, scope and methodology
        Page 5
    Gross product sales in 2001
        Page 6
    Industry demographics/characterization
        Page 7
        Page 8
        Page 9
    Production profile
        Page 10
        Page 11
        Page 12
        Page 13
        Page 14
        Page 15
    Markets and market profile
        Page 16
        Page 17
        Page 18
    General competition issues
        Page 19
        Page 20
        Page 21
    Thrust of supplementary comments
        Page 22
    Summary and implications
        Page 23
    Conclusion
        Page 24
    Reference
        Page 25
Full Text

PBTC 05-01


I '-ional Agricultural Trade and Policy Center



GROWER PERSPECTIVES ON THE POTENTIAL IMPACT OF
EXPANDED INTERNATIONAL TRADE OF SELECTED
PLANTS IN THE U.S. NURSERY INDUSTRY
By
John VanSickle, Edward A. Evans, & Ronald M. Gordon
PBTC 05-01 March 2005


POLICY BRIEF REPRINT SERIES


'V


i~fr


UNIVERSITY OF
FLORIDA


Institute of Food and Agricultural Sciences









INTERNATIONAL AGRICULTURAL TRADE AND POLICY CENTER


THE INTERNATIONAL AGRICULTURAL TRADE AND POLICY CENTER
(IATPC)

The International Agricultural Trade and Policy Center (IATPC) was established in 1990
in the Institute of Food and Agriculture Sciences (IFAS) at the University of Florida
(UF). The mission of the Center is to conduct a multi-disciplinary research, education and
outreach program with a major focus on issues that influence competitiveness of specialty
crop agriculture in support of consumers, industry, resource owners and policy makers.
The Center facilitates collaborative research, education and outreach programs across
colleges of the university, with other universities and with state, national and
international organizations. The Center's objectives are to:

* Serve as the University-wide focal point for research on international trade,
domestic and foreign legal and policy issues influencing specialty crop agriculture.
* Support initiatives that enable a better understanding of state, U.S. and international
policy issues impacting the competitiveness of specialty crops locally, nationally,
and internationally.
* Serve as a nation-wide resource for research on public policy issues concerning
specialty crops.
* Disseminate research results to, and interact with, policymakers; research, business,
industry, and resource groups; and state, federal, and international agencies to
facilitate the policy debate on specialty crop issues.
















GROWER PERSPECTIVES ON THE POTENTIAL IMPACT
OF
EXPANDED INTERNATIONAL TRADE OF SELECTED PLANTS
IN THE U.S. NURSERY INDUSTRY












Sponsors
California Association of Nurseries & Garden Centers; Florida Nursery, Growers and
Landscape Association; Hawaii Export Nursery Association; Texas Nursery & Landscape
Association








Researchers

John VanSickle, Director, International Agricultural Trade & Policy Center,
IFAS/University of Florida; Edward A Evans, Assistant Professor, Tropical Research &
Education Center, IFAS/University of Florida, and; Ronald M Gordon, Graduate Research
Assistant, Food & Resource Economics Department, IFAS/University of Florida









EXECUTIVE SUMMARY


The floriculture and environmental-horticulture sector, encompassing nursery plants such as
trees, shrubs, ground covers, vines and fruit and nut plants, as well as bulbs, sod (turfgrass), and
unfinished plants and propogative materials, ranks as the second-most important segment of US
agriculture. To guard against the possibility of the influx of exotic pests and diseases that may
evade inspection, plant quarantine regulation Q-37 is a longstanding federal quarantine procedure
that regulates the importation of nursery stock, plants, roots, bulbs, seeds and other plant
products. With only few exceptions, it prohibits the importation of plants established in soil or
growing media.

The Government of Mexico requested a relaxation of quarantine regulation Q-37 to allow up to
ten plant genera in growing media to be exported to the U.S. The request calls for allowing
shipment of plants in soil related to the following ten plant genera and families:

Bougainvillea (Nyctaginaceae) Mandevilla (Apocynaceae)
Ficus (Moraceae) Dracaena (Agavaceae)
Codiaeum (Euphorbiaceae) Pelargonium (Geraniaceae)
Lantana (Verbenaceae) Euphorbia pulcherrima (Euphorbiaceae)
Dipladenia (Apocynaceae) Scindapsus aureus (Araceae)

A survey, developed by researchers of the University of Florida and supported by producers'
associations of the industry, was conducted among producers of the major producing states to
characterize the industry. The survey was intended to provide a preliminary assessment of the
potential economic impact of any possible relaxation of the federal quarantine regulation Q-37 on
the trade in selected nursery plants imported from Mexico

Taking into consideration the survey data and the supplementary comments provided by
respondents, it can be concluded that the industry is very competitive with competitor firms being
located mainly within a local radius of 50 miles or within the state. This suggests that any
relaxation of the Q-37 could lead to even greater competition and possibly economic losses for
some firms. No one market channel appears to be dominant with distribution being spread
relatively evenly among retailers, landscape contractors/government agencies, and wholesalers.
Demand is greater during the first half of the year than during the latter period. General
competition was a major concern for all producers and, in this regard, market share expansion
was seen as a significant constraint by all categories of firms.

Any relaxation of the Q-37 will trigger concerns for the impacts of three issues, namely: the
impact of exotic pests/diseases on competition, competition from Mexican firms or competition
from US-based firms established in Mexico, with plant health issues being of paramount concern
when the prospect of any relaxation of Q-37 is considered.

It could be concluded that the relaxation of the Q-37 quarantine rule for shipment of live plants in
growing media will have significant impacts on U.S. growers. The highly competitive nature of
the producers for the plant genera identified in the proposed relaxation of Q-37 indicates that U.S.
growers will suffer from the increase in competition this will cause.










In addition to the increase in competition that is expected from relaxation of Q-37, growers also
expressed concerns over the introduction of pests and diseases that could result. Baron (2003)
suggests that this concern may be misplaced, but his work is limited to only those pests and
diseases associated with these plant genera identified in the literature. Other invasive pests and
diseases that could be associated with the 10 plant genera could pose additional problems for the
growers of these plants and other plants in the U.S.










Background


The Economic Research Service (ERS) of the United States Department of Agriculture (USDA)
indicates that the United States is the world's largest producer of greenhouse and nursery crops,
with net farm income for growers being among the highest of all specialty crops. When assessed
by total economic output or the value of the industry and its business activities, the floriculture
and environmental-horticulture sector ranks as the second-most-important segment of US
agriculture. In this context, environmental horticulture includes nursery plants such as trees,
shrubs, ground covers, vines and fruit and nut plants, as well as bulbs, sod (turfgrass), and
unfinished plants and propogative materials.

Plant quarantine regulation Q-37 is a longstanding federal quarantine procedure that regulates the
importation of nursery stock, plants, roots, bulbs, seeds and other plant products. With only few
exceptions, it prohibits the importation of plants established in soil or growing media. This is
because of the possibility of hidden pests and diseases that may evade inspection and the risks
those pests may pose not only to nursery crop production, but to production of other agricultural
crops, landscapes and natural areas. The Government of Mexico requested a relaxation of
quarantine regulation Q-37 to allow up to ten plant genera in growing media to be exported to the
U.S. The current regulations only allow entry into the U.S. of plants from foreign countries such
as Mexico, free of soil. The request calls for allowing shipment of plants in soil related to the
following ten plant genera and families:

Bougainvillea (Nyctaginaceae) Mandevilla (Apocynaceae)
Ficus (Moraceae) Dracaena (Agavaceae)
Codiaeum (Euphorbiaceae) Pelargonium (Geraniaceae)
Lantana (Verbenaceae) Euphorbia pulcherrima (Euphorbiaceae)
Dipladenia (Apocynaceae) Scindapsus aureus (Araceae)


In theory the relaxation of Q-37 as requested by Mexico could allow the conditions for the
introduction of exotic pests and diseases from Mexico into the U.S. In light of the increasing
pressure on the nursery industry to limit the use of pesticides, any introduction of invasive pests -
insects, weeds, nematodes and diseases- could have severe economic impacts.

Those potential circumstances occasioned an extensive literature review to ascertain the pests
associated with each of the ten genera listed above (Baron 2003). All pests found associated with
the 10 plant genera worldwide were sourced from published literature and then categorized with
respect to their being present within the US and Mexico. In addition their endemic status in each
country was ascertained.

Baron (2003) indicates that there are in excess of 400 known pests and diseases associated with
these ten plant genera, worldwide. Of these, the U.S. had more pests found per plant genera (235)
than Mexico (132). A few of these pests and diseases are regarded as quarantine pests, one being
the Pink Hibiscus Mealy Bug which is not endemic to either country. However, all of the known
soil borne pests were reported to be common and endemic to both the U.S. and Mexico (Baron









2003). It must be emphasized, however, that there may yet be undetected and unreported pests
and diseases associated with these ten genera.

As a consequence of the Mexico request, Nursery Operators in the State of Florida, and
elsewhere within the United States, expressed concern that the granting of the request would
impact negatively on their industry. This concern prompted a survey of the nursery industry in
the major producing States to assess the likely economic impact of trade in the target species
between Mexico and the United States.

A survey was conducted to characterize the nursery industry in relation to these ten genera. The
survey instruments were developed by researchers at the University of Florida and were pre-
tested using owners and operators from the Florida Nursery Growers and Landscape Association
(FNGLA). Following refinement of the survey instrument, the FNGLA administered the survey
that was conducted in the major producing states of California, Florida, Hawaii and Texas.
Producer associations in these states were relied upon to provide guidance on the sample frame.
Approximately 1,600 questionnaires were sent out to growers and 260 of the questionnaires were
completed and returned, giving a response rate of 16 percent.


The survey was conducted among those nurseries which produced the above plants in 'liners' or
'plugs' or as finished plants and was supported principally by the Florida Nursery Growers and
Landscape Association with collaboration from the Producer Associations in the states surveyed.
This report provides an analysis of the responses. Section I describes the purpose, objective,
scope and methodology of the survey while Section II contains data and information on gross
industry sales for 2001. Section III contains demographic information on the respondents and the
industry. This is followed by Section IV with production related information followed by Section
V on markets and marketing related issues. Section VI addresses some general competition
issues. In addition, several respondents voluntarily provided comments and the thrust of these are
reflected in Section VII, with a summary and implications of the survey results in section VIII
and concluding comments in Section IX.


I. Purpose, Objective, Scope and Methodology

This survey was intended to provide a preliminary assessment of the potential economic impact
of any possible relaxation of the federal quarantine regulation Q-37 on the trade in selected
nursery plants imported from Mexico.

The objective was to develop a profile and database on the production, consumption and trade in
the selected nursery plants in order to:
i. assess the production and marketing costs in the major producing areas and markets of the
U.S.;
ii. identify and characterize the issues pertaining to trade;
iii. provide an estimate of the potential impact of unrestricted trade between Mexico and the
U.S., in the absence of any specific consideration of agricultural health issues.









The survey was conducted in the major producing states of California, Florida, Hawaii and
Texas, and targeted primarily those nurseries that produced the above plants, whether in 'liners'
or 'plugs' or finished plants. One thousand six hundred questionnaires, a copy of which is
provided in the appendix, were distributed through the respective Associations and two hundred
and fifty responses were received. These responses have been aggregated in the analysis that
follows.


II. Gross Product Sales in 2001

Respondents were asked to indicate their gross product sales in the year 2001, by indicating their
sales volume in one of eleven categories. The responses are summarized in table 1.

Table 1. Responses to Gross Sales Range by State


Gross Sales Range ($000) CA FL HI TX Total
Under 50 5 7 1 0 13
50-99 1 8 1 2 12
100-249 3 21 3 3 30
250-499 0 22 2 5 29
500 999 3 33 2 6 44
1000- 1,999 7 37 1 6 51
2000- 2,999 2 12 2 2 18
3,000- 3,999 0 8 0 2 10
4,000 4,999 1 2 0 0 3
5,000 9,999 6 13 1 0 20
10,000 or above 4 3 0 3 10


Viewed across the industry an excess of 65 percent of the firms indicated gross sales in the year
2001 ranging from $100,000 to $ 2,999,999 as reflected in figure 1.














Figurel. Industry Profile-Sales Ranges


III. Industry Demographics/Characterization

The Floriculture and Nursery Crops Yearbook (2003, Table 001) ranking of states by grower
cash receipts lists California ($ 3.06 billion) Florida ($1.63 billion) and Texas ($1.34 billion) in
the first, second and third positions. Hawaii ranked 26th ($90.0 million). The same source listed
large floriculture growers in 2003, by state, with annual sales greater than $100,0001. Florida
headed this group with 642 growers followed by California (536), Texas (197) and Hawaii (135)
(Table B15). For the year 2003, the average sales at wholesale, per grower, by state were:
California $1.84 million, Florida $1.25 million, Texas $1.45 million and Hawaii $ 0.47 million
(Table B 16).

With respect to the survey the majority of the respondents, (69 %), were from Florida, with 13
percent coming from California and 12 percent from Texas. Within Florida, nurseries could be
found in 38 counties with 28% percent of the responding nurseries being located in Dade County
and 11 percent in Orange County. In California the nursery operations were found in 15
counties with 21 percent in Los Angeles County, 18 percent in San Diego County and 12 percent

1 Crops of these growers include: cut flowers, cut cultivated greens, potted flowering and foliage plants, bedding and
garden plants, and propogative materials.


60

50

40

30

i 20

S0 -RneToa

20






Sales Ranges I Total










in Stanislaus County. The nurseries in Texas were more evenly distributed across 19 counties
with Smith County hosting 10 percent of the operations. Within the state of Hawaii where
nurseries are distributed across four counties, Hawaii County is home to the majority of the
operations. Among the respondents, thirty had operations in another state.


In the survey instrument the nursery operations were grouped into three categories based upon
their annual sales volume of their businesses. Large operations were those with a sales volume
exceeding $10 million; medium sized operations were those with a sales volume in excess of $3.5
million but under $ 10 million and small operations were those with a sales volume of less than
$3.5 million. Among the respondents 80 were in the small category, 15 percent were in the
medium category and 4 percent in the large group. This profile is graphically depicted in the
figure 2.


Figure 2. Distribution of All Firms by Sales Volume


250

200 -
I-
S150
o
100
E
z
50

0
Small Medium Large
Firms' Sizes
















Figure 3. Distribution of Small Firms across States


160

140

120

100

80

60

40

20
0


CA


FL HI TX
Small Size Firms


Figure 4. Distribution of Medium Firms across States


E
M 15
4-

I 10

5
5


CA FL HI TX
Medium Size Firms














Figure 5. Distribution of Large Firms across States


4.5


S3-
4 -




) 2
E 1.5
S1-5
z 1

0.5

CA FL HI TX
Large Size Firms





Large operations were found primarily in California or Florida while the majority of the medium-
sized businesses were located in Florida as were the majority of the small operations. The data
collected did not allow the determination of the total sales for each size class.

Across the industry the respondents employed approximately 12,000 full-time workers year-
round together with 2,600 part-time year-round workers and four thousand six hundred 4,600
full-time seasonal workers. The large operations employed 59 percent of the full-time year round
workers while the medium and small firms each employed 20 percent of this type of worker. The
large firms employed the majority of the part-time year round workers while Florida was the
leading sate in the employment of full-time seasonal workers.


IV. Production Profile

Products

Across the four states Florida led in the ranking with respect to both volume and value of
production, followed by Texas, California and Hawaii, for each of the categories. Looking
specifically at the volume of output overall, production volume was higher in plugs/liners
(26,768) as opposed to units of finished plants (18,838). The value of output for finished plants
totaled $73,469 compared to $11,395 produced as plugs/ liners (table 2).














Table 2. Estimated Production by Type and Value of Target Genera


Target genera Plugs/Liners Finished Plants

Units ('000) Value ($'000) Units ('000) Value ($'000)

Bougainvillae 548(7) 604 (6) 784 (9) 4612 (8)
Fiscus 2185(4) 1258(4) 3285(1) 11538(2)
Codiaeum 1483 (5) 532 (7) 939 (8) 7242 (5)
Lantana 7421 (2) 1713(2) 2879 (2) 5020(7)
Dipladenia 1291 (6) 4075 (1) 450 (10) 2293 (10)
Mandevilla 2625 (3) 1438 (3) 2171 (5) 10452 (3)
Dracaena 484 (8) 449 (8) 2818 (3) 15563(1)
Pelargonium 192 (9) 132 (9) 1430 (7) 3211 (9)
Euphorbia 99(10) 108 (10) 2212 (4) 7759 (4)
Scindapsus 10440 (1) 1086 (5) 1870 (6) 5779 (6)

Total 26768 11395 18838 73469
[Rank order indicated in parenthesis]

The output by type and firm size in the state of Florida indicates that large firms produce only
finished plants, small firms rank first with respect to the volume of output in finished plants
(7,541), followed by large firms (4,484) and then by medium firms (4,342). Small firms produce
more plugs/liners (8,372) then medium firms (7,903) (table 3).


Table 3. Production in Florida by Type and Firm Size


Small -size Firms
Finished
Plugs/Liners Plants


89
2096
1334
3162
140
419
484
162
46
440

8372


280
1530
472
3281
102
326
342
79
64
1065

7541


Medium-size Firms
Finished
Plugs/Liners Plants


210
50
150
4084
1150
2206


53


7903


Large-size Firms
Finished
Plugs/Liners Plants


48
1029
203
537
256
1032
934
0.05
200
103


86
468
240
1141
19
114
863
13
1040
500

4484


4342.05


Target
genera


Bougainvillae
Fiscus
Codiaeum
Lantana
Dipladenia
Mandevilla
Dracaena
Pelargonium
Euphorbia
Scindapsus

Total










The production profiles varied by firm size with respect to the ten genera however as indicated in
the figures 6 through 10.



Figure 6. Florida Small Firms Plugs/Liners Production Profile


Figure 7 Florida Small Firms Finished Plants- Production Profile


* Bougainvillae
* Fiscus
O Codiaeum
O Lantana
* Dipladenia
* Mandevilla
* Dracaena
o Pelargonium
* Euphorbia
* Scindapsus


* Bougainvillae
* Fiscus
O Codiaeum
O Lantana
* Dipladenia
* Mandevilla
* Dracaena
o Pelargonium
* Euphorbia
* Scindapsus















Figure 8. Florida Medium Firms Plugs/Liners Production Profile


Figure 9. Florida Medium Firms Finished Plants- Production Profile


* Bougainvillae
* Fiscus
O Codiaeum
O Lantana
* Dipladenia
* Mandevilla
* Dracaena
O Pelargonium
* Euphorbia
* Scindapsus


* Bougainvillae
* Fiscus
O Codiaeum
O Lantana
* Dipladenia
* Mandevilla
* Dracaena
o Pelargonium
* Euphorbia
* Scindapsus














Figure 10. Florida Large Firms Finished Plants- Production Profile


The respondents were asked to rank the perceived difficulty in shifting production to an
alternative crop on a scale of 1 to 5 with 1 indicating considerable ease and 5 indicating great
difficulty. The general ranking was above 4 for all states but California. Looking at this issue
across firms it was seen that medium-scale firms perceived the greatest ease in changing (3.2). In
contrast, small-scale firms anticipated greater difficulty (4.1) and large-scale firms the greatest
difficulty (4.6).


Pest and Disease Control Costs

Information was sought from the respondents in relation to the percentage of their production
costs spent on pest and disease control, including costs of labor and materials and weed control.
Overall 73.4 percent of the firms spent less than 20 percent of their production costs in this
manner while 18 percent of the firms spent between 20 and 40 percent of their production costs
on controlling pests and diseases. This is reinforced when the data are examined by firm size and
state as indicated in table 4.


* Bougainvillae
* Fiscus
O Codiaeum
O Lantana
* Dipladenia
* Mandevilla
* Dracaena
O Pelargonium
* Euphorbia
* Scindapsus










Table 4. Distribution of firms, by firm sizes and state, for percentage of production costs
spent on controlling of pests and diseases.


Estimated Expenditure Firm Size State
Percent of
Total All Small Medium Large CA FL HI TX
Production Respondents (%) (%) (%) (%) (%) (%) (%)
Costs


0%-20% 146 114 25 7 18 98 5 23

21%-40% 36 31 2 3 3 27 3 2

41%-60% 5 3 2 2 3

61%-80% 10 10 10

Above 81% 2 2 2 1



Location of Competitors

The respondents indicated that their competition was primarily located within a fifty-mile radius
of their nursery or within their state. This applied to all the major producing states except Hawaii
where the competition was somewhat evenly distributed within the state (28%), in another state
(24%) and outside the U.S. (32%) (table 5).



Table 5. Location of Major Competitors by State



Location CA FL HI TX

# Respond % # Respond % # Respond % # Respond %

Local area 21 44.7 96 40.7 4 16 14 27.4


Within
state 20 42.6 110 46.6 7 28 23 45.1


Other
state 4 8.5 7 3 6 24 12 23.5


Out of US 2 4.2 23 9.7 8 32 2 4










Texas and Hawaii were the only states to indicate major competition in another state, both at 24
percent. Hawaii was the only state to indicate a significant level of competition outside the
country (32%).


V. Markets and Market Profile

The information collected in this section of the survey was intended to characterize the markets to
which the target nursery products were supplied, with respect to consumer type, location, both
within and outside the U.S. and seasonality of demand.

Market Channels

Sales from all survey respondents were relatively evenly distributed across all market outlets-
wholesale markets (26.6%), landscape contractors or government agencies (24%) and retailers
(22.6%). A relatively small percentage (10.7%) was sold directly to consumers or end-
purchasers, and there was some supplied to other growers (16.1%), as indicated in table 62.




Table 6. Market Channels for All Respondents and by Firms and States (%)


Consumers or end-users were equally supplied, entirely, by small-size or medium-size firms. The
output of these firms was also somewhat evenly spread across the other market segments as

2 Within the industry, horticultural distribution centers purchase from growers and sell to landscape and retail firms,
municipalities et al. In the absence of other distribution outlets, some growers sell to 'other growers' and may regard
such sales as being to 'wholesale markets'.


Market Channels All
Respondents Firms States

Small Medium Large CA FL HI TX

End Users 10.7 9.02 9.91 18.8 11.1 8.1 3.3

Retailers 22.6 33.65 35.44 74.46 17.5 18.1 11.9 45.1

Landscape
Contractors/Government
Agencies 24 22.35 16.54 13.82 15.7 25.6 2.9 26.4


Wholesale Markets 26.6 20.46 25.52 9.6 7.8 26.1 48.2 16.8


Other Growers 16.1 14.51 12.59 2.12 40.2 19.1 28.9 8.4










indicated in table 5. Large firms concentrated their supply to retailers with 74.6 percent of their
output going to that market compared with 14 percent going to landscape contractors or
government agencies.

State data indicate that other growers is the major market outlet for California (40.2%).Florida
growers are more evenly spread across wholesale markets (26.1%), landscape contractors
/government agencies (25.6%), other growers (19.1%), retailers (18.1%) and consumers/ end
purchasers (11.1%). Wholesale markets are dominant in Hawaii (48.2%) and retailers are the
largest market (45.1%) for Texas growers.

General Location of Markets

The markets are located primarily within a fifty-mile radius of the nurseries (38.2%).
Approximately the same percentage of markets can be found within the home state of the nursery
(29.7%) and in another state (29.1%) with only 3 percent of the market located outside the U.S.,
as shown in table 7.


Table 7. Market Location for All Respondents and by Firms and State (%)


Location All Firms State
Respondents
Small Medium Large CA FL HI TX

Local
Area 38.2 62.4 22.2 5.1 52.8 37.5 7 41

Within
State 29.7 18.4 33.4 50.5 36 25.1 27.1 49.8

Other
State 29.1 17.3 41.1 40.4 10.2 33.9 56.6 9.2

Out of US 3 1.9 3.3 4 1 3.5 9.3


When the data are examined within firm groupings it is observed that the main market location
for small firms is within the local area (62.4%). The largest market for medium size firms is in
another state (41%) while large firms primarily supply markets within their state (50.5%) and in
other states (40.4%). The export market is small comprising only 4 percent of the market of large
firms, 3 percent of that of medium firms and 2 percent of small firms. Viewed across states,
California nurseries primarily supply markets in the local area (52.8%) followed by those in state
(36%). Florida nurseries supply three main locations namely the local area (37.5%), other states
(33.9%) and within the state (25.1%).Hawaii nurseries ship to other states (56.6%) and also
within the state (27.1%). Nurseries in Texas mainly supply within the state (49.8%) and the local
area (41%). Hawaii leads in exports that account for 9 percent of that state's output, tripling the
export percentage of Florida.










US Regional Market Location


For convenience of analysis, the US national market was sub-divided into five regional
groupings, by States. These were Southeast (FL, GA, AL, NC, SC, MS, VA, WV, TN, KY, LA);
Southwest (TX, AZ, NM, OK, AR); Northeast (NY, NJ, CT, MA, VT, MD, ME, PA, RI, NH,
DE); Midwest (NE, IL, MN, IA, KS, ND, SD, MO, IN, OH, WI, MI, NM); West (NV, CA, AZ,
CO, WA, OR, MT, WY, UT) and the 'Islands Group' of Hawaii, Puerto Rico, and US Virgin
Islands. The survey data with respect to these six regional markets are presented in table 8.


Table 8. Shipments to US Regional Markets for All Respondents, Firms and States (%).


Firms States
All
Destinations Respondents Small Medium Large CA FL HI TX


Southeast 49 53.5 30.1 32.2 2.5 68.4 4.2 4.5

Southwest 16.6 14.3 24.5 24.1 3.1 6.4 1 90.5

Northeast 8.2 7.6 12.1 8.1 4.1 10.9 2.1 0.4

Midwest 6.4 6.1 7.8 6.9 4.1 7.1 9.4 2.3

West 17.8 16.3 24 27.6 85.6 5.8 62.5 2.3

HI, PR, USVI 2 2.2 1.6 1.1 0.6 1.4 20.8


When looking at the shipping destinations across the industry, it can


region is associated
(17.8%), Southwest


with the majority of the shipments (49%). This
(16.6%), Northeast (8.2%), and Midwest (6.4%).


be observed that the SE
is followed by the West
The grouping of Hawaii,


Puerto Rico and US Virgin Islands is associated with only 2 percent of shipments.

When viewed within firm categories it can be seen that the shipments of small firms occur
primarily in the Southeast (53.5%), while for medium firms the major shipments occur in the
Southeast (30.1%) and Southwest (24.5%). For large firms the major shipments occur in the
Southeast (32.2%), West (27.6%) and Southwest (24.1%).

When the data are examined by State they show that shipments out of California are destined
mainly for the West (85.6%), those from Florida to the Southeast (68.4%), and those from
Hawaii to the West (62.5%) and the 'Islands Group' (20.8%).The shipments from Texas go
almost exclusively to the Southwest (90.5%).









Seasonal Demand


Across the industry the demand is greater during the first half of the year with that in the first
quarter being estimated at 28.5 percent while that in the second quarter was 34.1 percent. The
demand in the latter two quarters was approximately equal with that of the third quarter being
18.1 percent and in the fourth quarter 19.3 percent, as depicted in table 9.


Table 9: Seasonal Demand for All Respondents and by Firms and States (%).


Firms States

Period All Respondents Small Medium Large CA FL HI TX


Jan.-Mar. 28.5 28.3 28.9 31.2 26.2 28.4 33.7 29.2

April-June 34.1 32.8 36.2 48.4 35.4 35.6 27.5 35.2

July-Sept. 18.1 18.6 17.8 10.7 19.9 17.9 23.5 16.8

Oct.-Dec. 19.3 20.3 17.1 9.7 18.5 20.1 15.3 18.8


Within firm groupings the demand by quarter varied but the pattern of a stronger demand in the
first and second quarters was replicated across all firm groups. Variation is also observed looking
at the quarterly demand by state, although in each instance the demand is also skewed towards
the first half of the year.


VI. General Competition Issues

With respect to general competition issues, responses were sought on the ease of expansion of
market share, the likely impact of the relaxation of the Q-37 regulation for imports from Mexico
and the potential influence of plant health issues.

Market Share Expansion

Five specific possible difficulties to market share expansion were identified in the survey and the
respondents were asked to indicate on a scale of 1 to 5 the significance of each difficulty, with 1
indicating 'no constraint' and 5 indicating 'significant constraint'( table 10). The likely
difficulties identified were : 'production capacity', 'capital for expansion', 'access to markets',
'regulations for inspections and certifications of product', and 'pest and disease concerns'.
Respondents were also invited to indicate other challenges to expansion, as they perceived it.
Across the industry, the issue of 'capital for expansion' received the highest rating (3.2), followed
by 'production capacity' (2.9) and then 'access to markets' (2.8). The matters of 'pests and










disease concerns' and 'regulations for inspections and certification' were of least concern, jointly
receiving the lowest rating (2.4). Respondents specified other concerns to expansion that are
reflected in the following qualitative section. Across the industry this 'others' group received a
rating of 2.5.


Table 10. Ranking of Likely Obstacles to Expansion.


Firms States
All
Obstacles to Expansion Respondents Small Medium Large CA FL HI TX


Production Capacity 2.9 2.9 2.6 2.8 3 2.8 3.2 2.9


Capital 3.2 3.2 3.1 3.7 3.2 3.2 3.5 3


Market Access 2.8 2.7 2.7 3.3 2.4 2.7 3.5 2.9


Regulations/Certification 2.4 2.5 2 3.4 2.8 2.4 3.4 1.9


Pests/Diseases
Concerns 2.4 2.5 2.2 3.2 2.5 2.5 2.7 2


Others 2.5 4.1 3.5 5 5 3.6 4.3 4.9
(1lno constraint; 5 significant constraint)


When viewed within firm size groups the potential obstacles to expansion of market share were
ranked differently. Small-size firms identified the 'Others' category as the most significant
constraint to expansion (4.1) followed by 'capital for expansion' (3.2), 'production capacity'
(2.9), 'access to markets' (2.7),'regulations for inspections and certification' (2.5) and pest and
disease concerns' (2.5). Medium-size firms followed a similar trend to small firms with Others'
(3.5) identified as the largest constraint, followed by 'capital for expansion' (3.1), 'access to
markets' (2.7), 'pests and disease concerns' (2.2), and 'regulations for inspections and
certification' (2.0). Large firms also identified 'Others' (5.0) as the largest constraint, followed
by 'capital for expansion' (3.7), regulations for inspection and certification' (3.4), 'access to
markets' (3.3), 'pests and disease concerns' (3.2), and production capacity' (2.8). A similar
trend, with 'Others' being the dominant obstacle, was reflected across all of the states.

Respondents listed a broad set of issues under the category of 'other obstacles'. Foremost among
these are competition within the industry as well as from other countries, availability of labor as
well as managerial staff, transportation and distribution challenges, and excess supply on the
market.










Relaxation of 0-37 and Imports from Mexico


The opinion of respondents was sought regarding the extent to which the possible relaxation of
the quarantine regulation Q-37 posed a concern in relation to the likely impact of exotic pests and
diseases on current production or the loss of market share, either to Mexico or to US-based
producers with production facilities in Mexico. Responses were requested on a five-point scale
with 1 indicating 'no concern' and 5 signaling 'greatest concern'. The data are presented in table
No.11.


Table 11. Ranking of Concerns about the
concern).


Relaxation of Q-37 (l=no concern; 5=greatest


When all respondents are taken together, competition from US-based producers with production
facilities in Mexico was the highest concern (3.9), followed by competition from and loss of
market share to Mexico (3.8), then 'likely impact of pests and diseases on competitiveness of
current production' (3.6).

For small firms the order of ranking was 'likely impact of pests and diseases on current
production' (4.3), followed by 'competition from US-based producers with production facilities
in Mexico' (4.0), then 'competition from and loss of market share to Mexico (3.8). For medium
and large firms the order was the same as with small firms but the weighting was different.
Collectively, the issues were all weighted between (3.) and (4.5) when viewed across the states.


Firms States
Concerns over the
Relaxation of Q-37 All Respondents Small Medium Large CA FL HI TX


Impact of exotic
pests/diseases on
competition 3.6 4.3 4.1 4.3 4.5 4.3 4.3 3.8


Competition from
Mexican Firms 3.8 3.8 3.6 4 3 3.9 4.5 4


Competition from US-
based Firms
established in Mexico 3.9 4 3.8 4.2 3.5 3.9 4.5 4.2

Impact of exotic
pests/diseases on
competition 3.6 4.3 4.1 4.3 4.5 4.3 4.3 3.8










Rating of Plant Health Issues


The respondents were asked to indicate their level of concern for four plant health issues, namely:
the introduction of exotic pests and diseases; the availability of effective pesticides to combat
/control exotic pests and diseases; development of pesticide resistance by pests now under
control; and the existing differential in the use and availability of pesticides in Mexico and the
U.S. The responses were requested on a five-point scale with 1 indicating 'no concern' and 5
signaling 'greatest concern'.

Introduction of exotic pests and diseases received the highest 'concerned' ranking (4.5), followed
by 'existing differential in the use and availability of pesticides in Mexico and the United States'
(4.4), 'development of pesticide resistance by pests now under control' (4.1) and 'availability of
effective pesticides to combat /control exotic pests and diseases' (3.8) (table 12).

Table 12. Ranking of Concerns related to Plant Health Issues


Firms States
Concerns over Plant
Health Issues All Respondents Small Medium Large CA FL HI TX

Introduction of exotic
pests and diseases
4.5 4.5 4.3 4.7 4.8 4.5 4.7 4

Availability of effective
pesticides to combat /
control of exotic pests
and diseases
3.8 3.8 3.6 4 4.4 4.2 4.7 4.1

Development of
pesticide resistance by
pests now under
control
4.1 4.1 4 4.2 3.8 4 4.3 4.1

Existing differential in
the use & of pesticides
in Mexico and the U.S. 4.4 4.4 4.2 4.4 4.4 4.3 4.8 4.1


Within firm groups as well as across states the general level of concern and the rank ordering was
similar to that exhibited across the industry.


VII. Thrust of Supplementary Comments

Many of the voluntary supplementary comments made reference to the view that the industry was
extremely competitive to the point where there was an oversupply on the market in some
instances. Under these circumstances it was suggested that a relaxation of the Q-37 regulations
would lead to the failure of some firms and the loss of full-time jobs. In this regard some









respondents were strongly opposed to any relaxation of Q-37. An extreme view was that the
relaxation of Q-37 could lead to the demise of the industry.

VIII. Summary and Implications

The data indicate that the majority of the firms have gross annual sales ranging between $
100,000 and milliono. with the majority of these being small firms. The number of full-time
labor employed was three times that of part-time labor and more than twice the number of
seasonal workers, with large operations employing the majority of workers. The rank order of the
genera varied with respect to their importance in the production profile. From the perspective of
value of production Dipladenia and Lantana were ranked at the top for plugs/ liners while
Dracaena and Fiscus were in the top position for finished plants. Finished plants were projected
as being six times more valuable than plugs/liners and large firms produced only finished plants.
All firms perceived great difficulty in shifting production lines, indicating some rigidity in their
production profile.

Taking into consideration the survey data and the supplementary comments provided by
respondents, it can be concluded that the industry is very competitive with competitor firms being
located mainly within a local radius of 50 miles or within the state. This suggests that any
relaxation of the Q-37 could lead to even greater competition and possibly economic losses for
some firms. Possible sources of the increased competition would be indigenous Mexican firms
wishing to export to the US or US firms with production facilities in Mexico, seeking to benefit
from possibly lower production costs, and exporting to the US. Either scenario would result in a
loss of jobs.

No one market channel appears to be dominant with distribution being spread relatively evenly
among retailers, landscape contractors/government agencies, and wholesalers. Small firms supply
markets mainly within their local areas while medium and large firms ship to more distant clients.
Demand is greater during the first half of the year than during the latter period.

General competition was a major concern for all producers and, in this regard, market share
expansion was seen as a significant constraint by all categories of firms. Foremost among the
constraint to market expansion were capital for expansion, the availability of labor as well as
managerial staff, transportation and distribution challenges, and the excess supply on the market.
It should be noted that 'pests and disease concerns' were given the lowest ranking of concern in
relation to market share expansion. In contrast, the introduction of exotic pests and diseases (as a
result of any possible relaxation of Q-37) was given the highest 'concern' ranking when plant
health issues were rated. The respondents appear to be conveying an inherent confidence in the
plant health systems within the U.S. and a lack of confidence in that of the trading partners of the
U.S.

Any relaxation of the Q-37 indicates concerns for the impacts of three issues, namely: the impact
of exotic pests/diseases on competition, competition from Mexican Firms or Competition from
US-based Firms established in Mexico. On plant health issues, the respondents indicate great
concern about the introduction of exotic pests and diseases, existing differential in the use and









availability of pesticides in Mexico and the United States, and the development of pesticide
resistance by pests now under control.

It is evident though that the plant health issues are of paramount concern when the prospect of
any relaxation of Q-37 is considered. In this connection the likely introduction of pests and
diseases that can affect a wider cross section of agricultural crops in the United States in general
and the surveyed states in particular seems to be the main worry. However, research indicates that
known pests and diseases associated with the ten genera are more problematic within the US than
Mexico, and that all of the known soil borne pests are endemic to both countries (Baron, 2003).
This might imply that the probability of introduction of known exotic pests from Mexico, were
the Q-37 to be relaxed in relation to these ten genera, is minimal. However, three issues call such
a conclusion into question and support the continued concern about the plant health risks posed
by any possible relaxation of Q-37. First, Baron's investigation was confined to published
literature and there may yet be undetected and/or unreported pests and diseases associated with
these ten genera, more so with respect to Mexico than with regard to the U.S. Second, this
research project does not take into consideration any level of risks posed by any specific pest or
disease. In this context the introduction of an unknown or new single foreign pest or disease
could pose an undetermined level of risk and environmental consequences to natural areas,
landscapes, and nursery and/or other agricultural crop production.

Third, the responses to the competition issues in the survey indicate that there is a greater concern
over the likely increased competition from indigenous Mexican firms or US-based firms that
would establish in Mexico following any relaxation of Q-37. This concern is heightened by the
highly competitive structure of the industry.



XI. Conclusions


The relaxation of the Q-37 quarantine rule for shipment of live plants in growing media will have
significant impacts on U.S. growers. The highly competitive nature of the producers for the plant
genera identified in the proposed relaxation of Q-37 indicates that U.S. growers will suffer from
the increase in competition this will cause.

In addition to the increase in competition that is expected from relaxation of Q-37, growers also
expressed concerns over the introduction of pests and diseases that could result. Baron (2003)
suggests that this concern may be misplaced, but his work is limited to only those pests and
diseases associated with these plant genera identified in the literature. Other invasive pests and
diseases that could be associated with the 10 plant genera could pose additional problems for the
growers of these plants and other plants in the U.S.









References


Baron, O. 2003. "An investigation into the potential economic impact of importing 10 plant
genera under the possible relaxation of the Federal Quarantine Regulation (Q-37) on trade with
Mexico." University of Florida. Unpublished Thesis.


Floriculture and Nursery Crops Situation and Outlook
http://usda.mannlib.cornell.edu/reports/erssor/specialty/flo-bb/


Floriculture and Nursery Crops Yearbook (2003)
sets/specialty/FLO/


Yearbook (2004)


http://usda.mannlib.cornell.edu/data-




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