Economic Aspects of the Production and Marketing of Hardy Nursery Stock

Value of the industry

The total sales of produce during 1996, as indicated by the returns for nursery turnover, amounted to IR£21.0m. However of this amount, IR£2.2m came from plants which were bought in and sold without any further growing on. This leaves a net value for plants produced on the nurseries of IR£18.8m. The estimated area and value of the nursery stock industry from 1974 until 1997 are shown in Table 1.

Table 1 : Nursery stock output, 1974-1997 (Source: Department of Agriculture and Food)

Up to 1992, the figures for area of production were provided by the advisory service and the Department of Agriculture then estimated the output per acre following contact with a number of nurseries and ACOT/Teagasc advisors. During this time, only the gross area of the nurseries was recorded and no distinction was made between field and containerised production. The estimated industry value in 1994 was made using the 1992 area with updated information on output per acre.

In the 1994 census the production area of the various plant categories was recorded. So the area shown is the cropping area and not the total nursery area. In addition, nurseries exclusively involved in the production of forest transplants were recorded in the earlier figures but not in the 1994 census. This would explain the reduction in area between 1992 and the 1994 census.

If the output used in the 1994 industry value estimate was based on the performance of efficient growers, then the application of this figure across the whole industry is likely to over-estimate the industry value. The data in Table 8 demonstrate the variation in output efficiency between the segments of the industry. The larger nurseries have a much higher output per unit area than do the smaller nurseries. Moreover, the area used in the 1994 calculation included the forest transplant nurseries. All this indicates that the value for 1994 is probably an over-estimate and that the picture it gives of a very rapid expansion between 1992 and 1994 and then stagnation between 1994 and 1996 is not correct. The increase in crop area and the large increase in employment in the industry between 1994 and 1996 also indicate expansion between 1994 and 1996.

Industry location

The areas for nursery stock production by county, were broken down into field cultivation, mainly trees, and containerised production of ornamental plants. Although Cork has the greatest number of nurseries, in terms of area of production, Kildare is pre-eminent in container production and Tipperary has the largest area of field production. Other counties important for container production include Dublin, Tipperary, Waterford and Limerick although the areas in these counties are small compared with Kildare. Important counties for field production include Cork, Wicklow and Kildare.

Table 2 : Value of nursery stock sales by county, 1996

Table 2 shows the sales value of the industry by county. Because of its domination of intensive containerised production of nursery stock, Kildare has a much larger sales value than any other county. Tipperary, the leading county for field production is in second place for sales value. Together, these two counties account for nearly half the industry value and if Cork, Dublin, Kilkenny and Wicklow are included, then the top six counties together account for three quarters of the industry value.

Production areas

The areas of production for the range of nursery products for 1994 and 1997 are shown in Table 3. The area of field crops has increased from 227 ha in 1994 to 266 ha in 1997 mainly due to an increase in the area dedicated to the production of young trees. The area of forest transplants reduced. Nurseries which specialised in forest transplants were not included in this census.

Table 3 : Production area (ha) of outdoor nursery stock products, 1994 and 1997.

The area of container production has reduced by 10 ha and most of this is accounted for by the drop in liner¹ production and plants in the 'Other' category. The area devoted to the production of containerised shrubs remained the same.

¹ Liners are young plants to be potted and grown on.

The figures in Table 3 refer only to outdoor production and during this time the area of protected production increased significantly. This is shown in Table 4. The area under protection has increased by over one third between the two censuses. This indicates that some of the production of containerised plants has been transferred from outdoors to protected cultivation.

Table 4 : Area (ha) of nursery stock under protection in 1994 and 1997.

Taken together, the figures indicate that between 1994 and 1997 there has been an increase in the production of field crops, particularly young trees and that there has been a greater emphasis on the use of protected cultivation for the production of containerised shrubs. In this context, it is quite logical that, for example, the area of liner production outdoors would be reduced. Nevertheless it appears that for containerised production, the last few years have been a period of consolidation after rapid expansion.

Concentration of the industry

In order to gain an insight into possible differences between segments of the industry, some of the data were analysed by nursery size. We divided the nurseries into three categories on the basis of the value of their sales. Those with a sales value of under IR£50,000 were designated as small, those whose sales were between IR£50,000 and IR£200,000 were classed as medium and nurseries with sales of over IR£200,000 were classed as large.

Table 5 : Number of nurseries and sales value in three size categories.

The number of nurseries in each category, their total sales value and their sales value expressed as a percentage of the total industry value are shown in Table 5. Over 60 % of the nurseries in the census fell into the small category, approximately 30% of the nurseries were medium sized with the remaining 10% classified as large nurseries.

Although the small nurseries constitute 60% of the number of nurseries, they only sell 13% of the produce. In contrast, the large nurseries, only 10% of the total, produce nearly 60% of the industry value. The medium sized nurseries sell in proportion to their number. This shows that nursery stock output in Ireland is concentrated on larger nurseries. A relatively small number of large nurseries generate most of the sales from the industry. A similar concentration has been noted in the nursery stock industry in England and Wales.

Employment and productivity

There were 1,388 people engaged in the nursery stock industry in 1997. (Table 6), of which 665 were full time and 723 were part time. When the part time workers were converted into full time equivalents, the number of full time equivalent jobs in the industry came to 912.

Table 6 : Employment in the nursery stock industry in 1994 and 1997.

This represents a 28% increase over the 1994 level of employment and indicates a buoyant level of activity in the industry. The employment increase is in line with the increase in area of field production but is much greater than the change in the area of container plant production would indicate. It is likely that there has been some intensification of production in the shift towards greater use of protected cultivation for container plants.

Table 7 shows how employment is divided between the nursery size categories and also shows the value of sales generated by each employee.

Table 7 : Labour inputs and productivity by nursery size.

¹ Full time workers plus full time equivalents of part time workers

All three categories of nursery provide a significant part of the total workforce. The large nurseries although few in number, actually employ slightly more people than the other categories. Employment on the small nurseries is influenced by the fact that many of them are part time.

When we divide the value of the sales by the number of workers to calculate output per person, we find large differences in labour productivity (Table 7) . The medium sized nurseries are twice as productive as the small nurseries and the large nurseries are almost twice as productive as the medium nurseries. These are very large differences and presumably represent economies of scale, investment in labour saving equipment and in staff training. The fact that many of the smaller nurseries are part time and run in association with other enterprises may also influence the productivity.

Table 8 : The percent of sales value and of the production area by nursery size category.

Table 8 also indicates that the large nurseries are more productive per unit of production area than smaller nurseries. The large nurseries generate 59% of the industry value but have less than that percentage of the production area. The small nurseries produce 13% of the industry value from a much larger percentage of the production area. These differences in productivity indicate the difficulties in using areas of production to calculate the value of the industry.

The fact that many of the smaller nurseries are part time and run in association with other enterprises may also partly explain the differences in productivity between the nursery size categories.

Exports and imports

The value of exports is estimated to be IR£3.46m and that of plant imports by the nursery stock industry to be IR£2.22m (Table 9).

Table 9 : Estimated exports and imports of plants by the nursery stock industry.

Ornamental shrubs is the biggest category of export but liners and deciduous trees are also important. Herbaceous plants are also significant. The U.K. is the only market of importance at present. Approximately one third of the exports are destined for Northern Ireland with the remaining two thirds being sold to Great Britain. However, this proportion varies between plant categories. For instance the majority of trees being exported and half of the herbaceous plants go to Northern Ireland. By contrast, nearly all the liners being exported are destined for Great Britain. The quantity exported to other countries is minuscule.

Exporting is done mainly by the large nurseries who generate 83% of the exports which makes the exporting of nursery stock even more concentrated than the production. The small nurseries export very little and when they do they are almost all destined for Northern Ireland. The medium size nurseries export to Northern Ireland and Great Britain in roughly equal amounts while the large nurseries export predominantly to Great Britain.

It should be noted that the import figures are not an estimate of the total imports of nursery stock into Ireland. They represent only that fraction imported by the nursery stock industry. Very little nursery stock was imported from N. Ireland, about one third of the value came from Great Britain and the remainder from other sources. Although they were not asked to specify the other sources, a number of nurseries did so and it seems from this that the other sources are predominantly the Netherlands and Belgium.

The main categories of imports are deciduous trees and liners, with the trees coming principally from continental sources and the liners being split between Great Britain and the continent. The shrubs for retail that are imported are mainly of continental origin.

Barriers to expansion

The nurseries were asked to rank the seven factors listed in Table 10 in order of importance in so far as they were acting as a barrier to expansion of the nursery business. To facilitate comparison between the nursery size categories, we have converted the scores to a relative basis where the highest scoring factor in each nursery size category has been assigned a value of 100 and the other factors expressed as a percentage of the highest factor. The results of this exercise are shown in Table 10.

Table 10 : Results of ranking of barriers to expansion by different size nurseries.

Nurseries in the small category were stating that capital and lack of profitability were the main obstacles to the expansion of their business. In the case of the medium sized nurseries, capital is still the principal barrier but profitability has been replaced by staff as the second most important barrier. The large nurseries were emphatic in choosing the non-availability of suitable staff as the major barrier to expansion.