Big building issues

By © Mulderphoto, ADOBE STOCK

Dave Daily, BFG Supply Co.

Greenhouse Management: What is your overall impression of the greenhouse market regarding the last two-plus years?

Dave Daily: Of course, there are the challenges everyone’s talking about like labor, freight and supply chain issues. But there has been tremendous growth over the past two years. And I think, despite the challenges, it has been a pretty good season this year. Last year a lot of growers and retailers were ordering items early, and for the most part, they got their deliveries. The industry is experiencing some ups and downs, but we’re big believers in this industry. We think that the long-term trends are favorable. We’ve also been growing as a company with several acquisitions the last couple of years including DeCloet Greenhouse Manufacturing in 2021 and Green-tek this year.

GM: What advice are you giving customers in terms of ordering items like growing media or containers for fall or even next year?

DD: Similar to the last two years, it makes sense to plan earlier than usual and put in orders as early as possible. I would say that applies to containers more so than growing media. There are some challenges with the availability of containers that could impact supply. Anticipate continued longer lead times.

GM: If there are challenges that will impact container supplies, is there more interest in containers made from alternative materials?

DD: We have customers who choose containers made from things like fiber or coco husks, or they buy fabric bags. But they’re usually a smaller, niche grower or retailer. And none of the alternative containers can compete with the scale in which plastic containers are produced.

GM: What are you hearing in the market about freight costs? Are they flattening out at least a little bit?

DD: Freight costs had been starting to flatten out a bit over the past, like in the March-April-May timeframe. They haven’t been going down, though. As fuel prices increase, so will the freight costs. International freight is in the same pattern. Containers from Asia two or three years ago were in the $4,000 or $5,000 range. It went up $20,000 or $30,000 but came down a bit and is remaining around the $15,000 or $20,000 range.

GM: Did a lot of your customers use some of their extra capital from the last couple of years of growth on capital improvements?

DD: This past year has been one of the strongest for sales of greenhouse structures and greenhouse equipment like heaters, fans or irrigation systems. Some growers had a good liquidity position, or they had a lot of cash.

GM: Are you anticipating those capital improvements to continue or are you hearing more about people scaling back a bit on projects?

DD: Where we sit today, there’s just a large amount of uncertainty regarding where the economy is going. I think the good news is that our industry tends to do reasonably well during economic downturns. I think for the next few months, it’s going to be strong as we work through the open orders and the existing structures that we’re manufacturing right now.

Dave Bishop, Trinity Greenhouse Structures

Greenhouse Management: What has business been like in the last year or so? 

Dave Bishop: We went through a time in the industry where everything is moving quickly. For instance, the cannabis business is proof of that. You could send out a proposal, it would be signed within a week and then they can start on it. 

Right now, the biggest thing that I’ve noticed is that everybody is cautious. Everyone is taking more time to make decisions, sometimes 30 to 60 to 90 days. 

GM: Why do you think that is? Why has there been that shift?

DB: I think, in the beginning, it was related to the issues with supply chain and things like that. But right now, it’s related to the state of the economy. There’s so much instability with inflation hitting record highs. ... All of this trickles down to affect businesses everywhere.

GM: When you are navigating this marketplace with those concerns, how does that change how you do business? 

DB: I don’t know if that changes a whole lot. I think the biggest thing is trying to press on and keep filling the pipeline. But I think we are seeing people be much more cautious with expenditures and the overall cost of doing different projects right now. The mood out there is cautious.  

GM: When you look at being cautious, how do you take that in mind as you’re looking ahead to the next 12 months or so?

DB: Two years ago, I didn't know that everything we’ve experienced would happen, right? Supply chain pricing, steel prices going up a lot — all of that has an impact. If you would have asked someone two years ago, there’s no possible way they could have foreseen what is happening right now. So we know that we really can’t project. That’s the unfortunate thing — we don’t know what’s going to happen. We just have to hold our cards pretty close to the vest. 

By © By © studiodr, ADOBE STOCK

GM: You mentioned cannabis — is that still the growth market you’re seeing the most investment from, perhaps more than vegetables or ornamentals? 

DB: Cannabis is still the biggest market for investment. But certainly the food market is increasing, I would say. And then the ornamental market — one thing that’s come out of COVID is that growers and retail garden centers had great years because people didn’t travel and spent money at their house. So there’s definitely some increase in the ornamental market. But definitely cannabis is still the top layer. We’ve definitely seen the food industry grow, but not that much. 

Primarily, [the cannabis market keeps growing] because more states are opening up. It goes from zero to 100%. It’s not really driven by existing customers. There are some operations out there that are big and have multi-state licenses, but what keeps driving this at all levels is, say, New Mexico opening up, New York opening up and all of the states still on the docket for next year. That’s what keep driving business because as a state opens up, they have needs. 

GM: How has the supply chain been of late from your perspective? 

DB: It’s better than it was — I’m sure it’s better than it was six months ago. But it’s still a mess, it’s still difficult. Some things have settled into more of a normal, but other things, not so much. 

The longest lead time items are items that require technology, like control systems, certain types of coverings and any kind of technology-driven piece. Those are the most difficult. 

GM: So if a grower was interested in expanding or building right now, what would your advice be? 

DB: I think overall, you plan way ahead. The supply chain affects the whole build, which is not just the greenhouse. It’s the overall workforce. Getting electricians, getting plumbers, getting other specialists — getting them in to do what they do has been moved back considerably. So whatever time it normally took to get a project done, they have to plan better. They either have to move quickly or work way ahead. [There are] just delays that there didn’t used to be. Everybody’s backed up. 

By © By © JENOCHE, ADOBE STOCK

Mark Davis, Atlas Manufacturing

Greenhouse Management: What are some of the major issues that you’ve been dealing with this year? 

Mark Davis: I think supply chain issues are probably the number one thing that you hear about the most. For us personally, we haven’t been affected too negatively in that respect. I think we’ve been fortunate enough to create some good relationships with some of our key vendors, but lead times certainly have slowed somewhat, particularly for certain items. Also pricing and inflation are everyone’s issues. You hear from others in the industry and growers that talk about some of their supply chain problems, whether it’s trays or peat or lead times on a lot of different things. I think that’s probably the number one issue: the lead times. Lead times certainly have lengthened considerably. You have to plan better.

GM: So, the supply chain and lead times are the biggest things that you’ve been dealing with. Is there anything else that’s also big?

MD: At the same time, all of this is connected to some degree as it relates to the supply chain and some inflationary measures, whether it’s product or input cost for products that either we’re making or our suppliers are making. And some of that is directly related to escalating freight costs, which again is tied to the fuel situation that’s going on. [Because of this,] we’re seeing freight becoming more and more of an issue. Not that you can’t secure the shipping to have it shipped to any location, but just this year, the cost of shipping has escalated pretty dramatically.

GM: What all have you done to deal with these issues that you’ve seen success with? What wins have you been celebrating?

MD: Obviously, you have to have a good relationship with your suppliers. You have to plan further out and hopefully you can somehow forecast what your inventory needs may be, but sometimes it’s hard to do. But if you keep good relationships with the key suppliers, particularly your steel and aluminum suppliers, that’s key because, in greenhouse manufacturing, those are your two major inputs. And I’ve heard some horror stories out there where people are looking at six-month lead times. Fortunately, we’ve been able to navigate through that and haven’t had to experience that type of lead time, which has been huge for us. I mean, that just stops the project altogether when you’re out of certain types of material.

GM: Do you expect these issues to continue into next year, or do you think other things might pop up? What all are you trying to prepare for?

MD: Well, I think we’ve got to continue the course like the way we’ve been operating for the last year, and that’s trying to plan more efficiently and more effectively. Because I do expect it to continue. I thought that by the time we got into 2022, some of these things would have subsided a little. But that was not the case. I think when we got to 2022, things actually worsened as far as supply chain issues and lead times. So, to [plan] on the side of caution, I think we just need to plan that this is something we’re going to have to live with maybe through the end of this year, at least. And I hope I’m wrong about that.

GM: Yeah, hopefully. But it’s better to be prepared for something that doesn’t happen than to not be prepared and have it happen in the end, right?

MD: Right. If you’re prepared to the best of your ability, then hopefully, if you’re pleasantly surprised, then you can kind of cut down on some of your inventory. I think that’s what I’ve seen and heard that most people are doing. Whether it’s growers or manufacturers, they’re really increasing their inventory, which also has probably helped to create some of the lead times and some of the shortages you see across the entire industry.