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Major agricultural lender forecasts improved growth for Oregon nurseries in 2015

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Oregon’s gross nursery sales look like they will exceed $800 million in 2014, and they could very well go even higher than that in 2015, Bob Boyle told OAN members at the November 21 meeting of the OAN Willamette Chapter, which took place in Salem. “I think I’m as bullish now on the industry as I’ve been in a long time,” he said.

Boyle serves as regional vice president of the commercial lending group at Northwest Farm Credit Services, and is based in Salem. If he is correct about 2014, it would be the highest total since the industry bottomed out at $641 million in sales in 2011. The all-time record is $988 million in 2007.

Boyle said that there are several factors suggesting things will improve for growers:

  • Production shortages. Growers didn’t follow their normal replant rotations due to the bad market during the recession, so what they did plant will be in greater demand. “The plant material just isn’t out there, in numbers, like we’ve seen in the past,” he said. Growers are able to ask higher prices on preorders, in exchange for the assurance of a reliable product supply.
  • Grower optimism. Boyle and NWFCS surveyed a group of nursery industry borrowers at a meeting earlier in the year, and some 76 percent predicted their sales in 2015 would go up at least 6 percent. This included 38 percent who predicted sales would rise 6–10 percent, 16 percent who predicted a rise of 11–15 percent, and 22 percent who predicted a rise of more than 15 percent.
  • Better lending ratios. Borrowers in all major industry sectors — bare root growers, container/B&B growers, and greenhouse growers — have better ratios of earnings to debt coverage than they did when things bottomed out in 2010.
  • More valuable land. The average value of an irrigated acre peaked at $11,265 in 2008 before plunging to a low of $7,925 in 2010. That has now recovered and exceeded the old high, with a mark of $12,825. This is allowing borrowers to refinance based on the new values, and obtain cash flow relief.

In addition to these factors, consumer confidence is high, homebuilding activity is improving, and there is plenty of room for the housing industry to recover even further. There will be an estimated total of 1 million housing starts in 2014 according to the National Association of Homebuilders, which is an improvement, but still behind historical averages. NAHB forecasts 1.2 million starts in 2015 and 1.5 million in 2015.

The picture isn’t entirely rosy, however. Boyle told OAN members that labor availability will only become more difficult, there will be regulatory challenges, and interest rates will probably start to rise again once unemployment drops a little further and the Fed raises its discount rate.

“I’m really optimistic about your industry today,” Boyle concluded. “I think we have some hurdles, but I’d rather be on this side of the curve than where we were three years ago.”