Processing Bareroot Trees during December
The end of an era is coming. After 73+ years, the L.E. Cooke Co Bare Root Nursery Division will cease operations after the 2018 spring shipping season.
For clarification, the L.E. Cooke Supply Company that makes the Miracle Garden Tie and imports the MAX Tapeners for distribution will continue on as a separate business as will a small nursery for grafted liner production to the nursery trade.
We acknowledge this nursery closure will make an impact on the market and especially on many of the longtime friends we have made over the nearly 75 years supplying trees and shrubs for the horticulture industry. In an effort to minimize the impact, we began having discussions with several existing nurseries during the summer of 2016 informing them of the plans and providing them with sales numbers of the products we had sold so they could ramp up their planting and budding plans to compensate. We have worked with Dave Wilson Nursery (Hickman, CA) concerning the trees, Weeks Berry Farm (Keizer, OR) for the berries and vegetables and Far Western Nurseries (Visalia, CA) for the high volume grape vines. They were provided with the varieties and numbers we sold, but what they chose to add in both volume and additional varieties in limited time is all in their hands.
The L.E. Cooke Co has retained its skilled workforce through this final growing season and has a full quality product line, like normal, ready to ship for early 2018. Bookings have been solid for the 2017-18 season. Because of the planned shutdown, nurseries may have interest in picking up extra trees this season in anticipation of shortages created for the near future. A current availability list is on our website: http://www.lecooke.com/images/availability_list.pdf.
How did this come about? There is no easy answer other than we cannot make a profit in our chosen industry due to a number of factors -some economic, some regulatory. The company was debt free before the great recession of 2008. During the recession, we did not cut back nearly hard enough for several years – after all we had actually grown our business during every other recession in recent memory. There were several years of heavy losses and corresponding borrowing. Then as the recession slowly wound down and sales returned close to normal numbers, the Governor declared California in a state of drought. Not only did his new water use limitations hurt our sales in our largest markets of the West, but we spent over a million dollars in lowering wells, drilling new wells and tying them together. The bank we work with has been wonderful and if we felt we could work off the new debt over time with profits, we would have done it.
But a continuing market decline and the State of California’s actions and policies pushed the final buttons for the decision.
As a company and family, we have been committed to the Independent Nurseries of North America in our niche market of supplying some of the finest bare root trees in the industry. We always felt that Independent market served the country best with the most diverse products, customer training and stability of year to year volume (even during recessions). Contrary, we felt the box store model drove prices down for everyone, stifled new products as they offered a narrower scope of products and turned off the gardening public when they were not trained how to be successful keeping their plants and trees alive. Thus we shied away from pursuing the Box Store business both directly and indirectly through wholesalers.
The Independent Nursery market keeps shrinking. Not many years ago, we had over 1700 active nurseries buying from us. Today, the number of active accounts has dropped to under 500 and declining almost weekly.
10-15 years ago over 70% of our volume was going direct to retail markets. The year-to-year stability in orders was nice – even when recessions came and went. Today over 60% of our volume is going to wholesale growers. There are huge fluctuations in demand from year to year. Now we grow large numbers of trees for 2 and 3 years and then shred them into mulch for a total loss at the end of harvest simply because the wholesalers have swings in inventory or found the items elsewhere for a few pennies a tree cheaper.
California is not friendly to businesses. Especially ones like ours that are labor intensive. 60-65% of our cost is labor. We have always tried to pay our year round employees as best we could afford even while competing in a nationwide market. California minimum starting wages will be $11.00 January 1 and will rise to $15 per hour over the next few years. Approximately half of our labor cost comes during harvest and shipping season and 60% of that labor are temporaries that earn minimum wage. The escalating minimum wage also puts upward pressure on wages for all our other year round employees. This is competing against labor in other grower nursery states at $7.25 an hour (less than half the cost of our future minimum wage) and Worker’s Compensation is only a suggestion in some states, or not fully mandated as it is in California, were it amounts to roughly 11% of the cost of labor. One option was to look at being only a West Coast nursery and abandon the rest of the country who can buy trees cheaper from the Southeast.
Diversity cuts like a two edged sword. We grow over 1,200 distinct product sku’s (x range of sizes). For many years this diversity of products for a wide range of climate zones and geographical areas was a wonderful thing as individual parts of the country experienced recessions, droughts and other events that affected regional business volume. This diversity now hurts us. With sales declining, we should have cut the product mix and concentrated on fewer varieties and longer, more efficient runs. As it is now, we are budding/grafting almost all year long. Workers are jumping from one variety to the next, many with different pruning, tying and other cultural needs. Each additional variety adds to the complexities of planning, planting, cutting buds, budding, field variety markers, selling, labels, tags, inventory counts and computer entries and inventory overages/shortages, etc. Each incrementally adds to the overall cost of the operation.
In addition we are maintaining over 24,000 trees or shrubs in the budwood orchard and really need to cut that in half – getting rid of low volume movers. But we hate to destroy what could be the remaining source of many varieties that would cease to exist in this world once the tree or trees are gone. Well it looks like that will happen anyway.
Finally, there is a never ending problem of convincing customers that the 80-100% mulch mixes that they are getting from the municipalities’ waste recycling is mostly deadly to trees that are canned in it. If we reduce sales staff, it also reduces the never-ending training we need to give for your success.
As sales dwindle year after year, government and regulatory costs continue to grow.
Water costs currently are directly tied to electricity used for pumping. The State of California elected officials overwhelmingly think agriculture wastes water and is building systems to measure, monitor, report and penalize water users. Fees are proposed that will be in addition to direct pumping costs with the goal of using the fees as incentive to cut water use and support the ever-growing bureaucracy to regulate it. The fact is we already invested hundreds of thousands of dollars to convert to 100% field drip irrigation and cut water usage to 1/3 of former usage. While we feel we could meet the reduced water allotments rumored to be coming, there would be dramatically increased costs to monitor and report as well as pay for the state bureaucracy to manage the mess.
We have some fuel pumps. The Water Quality Board and Air Quality Boards continue to make more regulations and more reports requiring more regulatory staff to process them and more fees to pay for the staff to make more regulations and more reports. You get the drift. We have some great double walled tanks to get rid of if you are interested.
Speaking of Water Quality Boards - Nitrogen usage reports by crop are now required. That might be fine for almond growers or alfalfa growers where the usage rates are known. But try that on a row of nursery stock with multiple varieties in a row and hundreds or even thousands of varieties over 600+ acres where there is no data on nitrogen use of field grown nursery crops. Even our budwood orchard does not have measurable harvests to count against nitrogen use because we harvest budwood, graft wood, hardwood cuttings, softwood cuttings and seed instead of fruit, let alone ornamentals with no fruit at all. This land needs a crop that can be measured and monitored to satisfy the needs of the regulators.
All of the above are bricks in a wall. None individually is insurmountable. Actually, even all together, there is probably a way through them, although different than what we have been doing. The last brick in the wall is the change in overtime rules for California Agriculture. California has long had overtime rules and those rules have just been dramatically changed for agricultural workers. We will be at time and a half for wages over 40 hours a week or 8 hours a day this winter. In the past Ag rules had overtime at 60 hours a week and 10 hours a day. It is harvest and shipping season where we bump into that as a major problem and cost. Yet in other nursery states, our competitors have no overtime laws to add cost. So to avoid the overtime issues, more labor could be hired, if it could be found. We currently hire 300 seasonal workers to get 200 to stick. Hiring almost double that is an impossible task, not to mention stretching our management structure beyond capacity. Then, it would require additional tree diggers to keep up with the volume, at a cost of close to $200,000.00 each.
What would we do differently if we had it to do all over again?
1) The Independent Nursery Retail market. There are some of the finest people working hard in that part of the industry. They are not necessarily disappearing, but the old guard that knew how to handle and sell bareroot is disappearing. The newer generation has to make fast inventory turns to pay for the land they own and cannot afford the space to wait for canned bareroot trees to root in. 30 years ago we had started a container operation and found it competed with our own wholesale customers so we closed it. We probably should have resurrected it so we could supply our own canned trees to the retail market. Other wholesale nurseries selling canned fruit trees seem to be purchasing solely on price and not the best varieties for homeowners, but rather commercial farmer varieties with quality geared for shipping and storage to the markets, not best flavor that we seek. Thus they are not buying much of ours.
2) Another option would have been to narrow the breadth of varieties, boost their volumes for efficiencies and lower the costs on them for the wholesalers who cater to the box stores. That would have reduced the huge maintenance costs of the 24,000 trees in the budwood orchard plus all the planning and scheduling required to propagate, bud, grow, dig and count 1200 varieties. 200 varieties would have required much less overhead and sales staff to run. But then, we are not a big fan of the damage the box stores have done to this industry and we are as much a victim as the retailers.
Regrets
Clearly we weep for our employees. Many have been with us for 20, 30 and even 40 years. The office and sales staff feels more like a family than employees and they treat each other that way. When we advised them last fall (2016) of the tough decisions made, they continued to stick with us all the way to the end. There are no words that can take away the pain felt for the disruptions of their lives this event is causing. Most have said, “I expected to go through to retirement with L.E. Cooke.” That said, we have great people that would be an asset to other companies and letters of recommendation are being written.
Unique Varieties. We have introduced over 150 varieties to the trade over the years. There were several more we were planning to introduce that were put on the shelf because of the planned closure. Some recently introduced products are just getting ramped up in the trade and still hardly known. Some other really exciting ones never saw the light of day. We are looking to license some of these and need to get them into the hands of other growers before the budwood orchards are removed and the trees lost forever. The history and memories from our budwood orchards have been emotionally crushing knowing they will likely be gone.
Finally, we will miss the many friends we have made in this industry. We will be able to keep in contact with some via the grafted liners, but sadly, not with all. We have a lot of good customers and many of them have become family friends as well. That is part of the beauty of this industry – great people.
Ron Ludekens
President
David H. Cox
CEO and General Manager