Farmers enjoy improving market, but keep eye out for next downturn
By MATEUSZ PERKOWSKI
Christmas tree farmers are seeing the light at the end of the tunnel.
After years of depressed prices caused by an oversupply of Christmas trees, growers say they're beginning to feel that burden lift.
Inventories have shrunk enough that an end to the overhang seems imminent, said Mark Schmidlin of Schmidlin Farms Christmas Trees in Banks, Ore.
"That day is coming," he said. "I've got to believe that or I'd drive myself crazy in this business."
Since he first began planting Christmas trees with his father as a boy more than 50 years ago, Schmidlin has seen the industry repeatedly swing between surpluses and shortages of trees.
The most recent glut has been particularly memorable, he said. "It seems to have been one of the longer down cycles -- and one of the worst."
As often happens in agriculture, the industry's troubles were the result of a burst of optimism.
In the early 2000s, a shortage of trees drove up prices, convincing farmers to plant many more trees than they were selling.
In Oregon, the top Christmas tree-producing state, growers planted about 10.5 million trees in 2001 and sold 6.1 million, according to USDA's National Agricultural Statistics Service.
Planting continued at high levels for several years, far outpacing sales. A tree grows to marketable size in six to eight years, so trees planted in 2001 did not hit the market until 2007 to 2009.
When those massive crops of trees began reaching maturity, the industry was confronted with a surplus that has depressed prices for the past six years, said Jan Hupp, co-owner of Drake's Crossing Nursery in Silverton, Ore., which sells seedlings and cut trees.
"We didn't see the overproduction coming as fast as it did," he said.
At the time of the planting boom, attractive prices convinced many farmers who hadn't previously grown trees to jump into the industry, Hupp said. Unfortunately, many didn't understand the market and overestimated demand.
Planting didn't come into balance with sales until the latter half of the 2000s. By then, the economic pain felt by farmers as prices plummeted resulted in a sharp reduction in planting.
In 2010, the last year for which statistics are available, Oregon farmers planted 5.6 million trees, the lowest number in a decade and 780,000 fewer than they sold that year, according to NASS.
The reversal has the industry expecting an eventual shortage of trees, with the market expected to turn the corner this year, Hupp said. By 2014, buyers may be on waiting lists for trees.
"When it comes, it's going to come hard and it's going to come fast," he said.
The backlog of trees has been shrinking in part because it's not economical for growers to continue pruning large trees that may not sell, Hupp said. One option is simply to let them grow.
"A lot of these acreages are going to go wild and go into the timber market," he said.
Some farmers have also found a market for tree boughs, which are used in wreaths and garlands, said Bryan Ostlund, executive director of the Pacific Northwest Christmas Tree Association.
Boughs are cut over several years, but once the process begins the whole tree is not longer salable, he said. "The important thing is it takes it off the Christmas tree market."
Dismal prices have convinced some farmers to exit the industry altogether, either through retirement or by shifting into more profitable crops like hazelnuts, said Mark Arkills, production manager at Holiday Tree Farms, based in Corvallis, Ore. With 8,500 acres, the company is among the largest Christmas tree growers in the world.
"There were people who dabbled in growing trees who aren't doing it anymore," Arkills said. "We anticipate a continuing tightening of supply."
Some farmers aren't even bothering to harvest and sell the trees to liquidate inventories, preferring to eliminate them altogether, said Irv Wettlaufer, owner of Timbergrove Farms in Beavercreek, Ore.
Not only are growers worried about paying more for harvest than they stand to recoup, they also fear not getting paid by "fly-by-night" buyers, he said. "Quite a few people are saying it's cost-effective to cut and burn them."
Fortunately, Christmas tree stocks have also been reduced because more people have been buying them, according to growers contacted for this story.
Positive indicators were evident as early as summer, when consumers enthusiastically bought fireworks before Independence Day, said Bob Schaefer, general manager of Noble Mountain Tree Farm in Salem.
The trend was further confirmed by healthy pre-Halloween pumpkin sales, which are another preliminary sign of demand for Christmas trees, he said.
On the whole, the company's early orders for Christmas trees were up by about 2 percent, but some retailers and chain stores have increased their purchases by 6 to 8 percent, Schaefer said.
"Overall, there was optimism on the part of most of my customers," he said.
The calendar in 2012 has also been conducive to a strong sales season due to the long stretch between Thanksgiving and Christmas -- the period when most trees are sold, Arkills said.
Real trees also seem to be holding their own against fake plastic ones, he said. "It seems like people are going back more to tradition."
Despite the uptick in demand, the increase in prices has been slight to nonexistent, according to growers contacted by Capital Press. Farmers have been selling trees for roughly $10-$25 each wholesale, depending on size, species and client. That's down roughly 20 percent from the shortage more than a decade ago.
"If you're a very efficient operation, you're probably breaking even," Schaefer said.
Prices can be expected to rise as trees grow more scarce in coming years, both in the West and in competing regions like the Southeast and upper Midwest, said Charlie Grogan, co-owner of Silver Bells Christmas Tree Farm in Silverton, Ore.
Farmers now have alternative crops that are more financially appealing than they did during the Christmas tree planting boom of the early 2000s, so Grogan hopes pricier trees won't spur another severe oversupply.
"I don't see it repeating in my lifetime," he said.