A look at the challenges facing South
American and U.S. growers and how they are faring in an uncertain
by Amy Bauer and David Coake
South American flower growers are finding themselves
in tough economic times and facing uncertainty about the future of
duty-free trade with the United States. These challenges have ripple
effects throughout the U.S. floriculture industry, which relies on
Colombia and Ecuador for the majority of its imported cut flowers,
particularly standards such as roses, carnations, Alstroemerias and
The U.S. Congress in late June passed an eight-month
extension to the Andean Trade Promotion and Drug Eradication
Act (ATPDEA), which guarantees duty-free exports to the United
States from four Andean nations: Colombia, Ecuador, Peru and Bolivia.
This extension gives South American flower producers a brief reprieve.
But concerns about the future of such flower exports to the United
States remain close to the surface. The eight-month extension expires
Feb. 29, 2008.
peso value a challenge
At the same time, Colombian growers are experiencing
tight times as the U.S. dollar has continued to weaken against the
Colombian peso. Growers, who are paid in dollars but whose costs are in
pesos, receive fewer pesos for their products each time the dollar slips
and can find it more and more difficult to meet their expenses. The peso
over the past four years has gone from a high of 2,906.50 pesos per
dollar on June 3, 2003, to 1,993.83 pesos per dollar at press time, Oct.
10, 2007, according to currency Web site www.oanda.com.
"We've lost more than 30 percent of our income," says
Ernesto Vẻlez, chairman of the board of directors of
Asocolflores, the Colombian Association of Flower
Exporters, and president of grower and exporter Suasuque S.A.
"That's devastating for any business."
A Miami Herald article from May 28, 2007, "The
Downside of a Higher Colombian Peso," cited a statistic that five major
flower growers in Colombia had either scaled back operations or gone
bankrupt in the past year, and total jobs in Colombia's cut-flower
industry have dropped by 10 percent, or 12,000 jobs, since 2005. Mr.
Vẻlez says a 10 percent reduction in supply of floriculture products
from Colombia is expected this year.
Economists assure Asocolflores that the peso's
strength is cyclical and that the currency is going to depreciate in
value eventually, Mr. Vẻlez says. He says one indicator is Colombia's
overall trade deficit - imports outpacing exports - that has emerged in
the past year. "If this continues, there will be more and more pressure
to buy dollars to import products, and so that may reverse the trend,"
For Ecuadorean growers, however, Colombia's currency
woes are helping them to compete. "The effect has been positive. Before
Colombia's peso was revalued, Colombian growers used to sell at low
prices with which it was difficult to compete," comments rose grower
Gustavo Alzate, financial manager of Hacienda Santa Fe in
Pifo, Ecuador, and a member of the board of directors of Expoflores,
the Ecuadorean Flower Growers and Exporters Association. "It is a
temporary situation that if changed could immediately cause a problem to
the Ecuadorean flower grower if [Colombian growers] decide to lower
their prices again in compensation for a possible peso devaluation in
order to reconquer or win markets."
Christine Boldt, executive vice president for
the Association of Floral Importers of Florida (AFIF),
says she foresees several possible devastating effects for the United
States should such conditions continue to barrage Colombian flower
growers. They could find other countries to which to sell their
products, "meaning they go to Europe or Russia instead of the U.S.
because their [currencies] compared to the Colombian peso are not as
weak," Ms. Boldt explains. Currently, Colombia exports 85 percent of its
cut flowers to North America.
Fully 67 percent of all cut flowers sold to consumers
in the United States in 2006 were imported, with the majority of those
coming from Colombia and Ecuador. This number is up from 58 percent in
2002 and around 50 percent in 1993.
Or, Ms. Boldt cautions, farms could be forced to cut
back on benefits afforded their workers. "If youÕre a company running on
the verge of bankruptcy and youÕre offering 100 percent health care to
your people, you say, 'OK, now I can't offer that to you anymore,'" she
With the Feb. 29, 2008, trade extension deadline
looming, growers both in Colombia and Ecuador find themselves in limbo.
Diego Ucrós is general manager of rose grower Emihana Company
Ltd. in Cayambe, Ecuador, and a member of Expoflores' board of
directors. He says it is good to be assured that Valentine's Day 2008
trade will be free of taxes, "but after that we do not have positive
expectations. We need long-term policies. To manage an industry and a
business with six- and eight-month extensions is difficult," he says.
Colombia already has negotiated and signed a Free
Trade Agreement (FTA) with the United States, as has Peru. If
ratified by the U.S. Congress, these FTAs would supersede the ATPDEA and
provide permanent duty-free status to exports to the United States.
Ecuador, however, has not negotiated such an FTA, and
it looks unlikely that such talks will start. Ecuadorean President
Rafael Correa has said he won't sign an agreement with the U.S. "because
it will destroy our agricultural sector." In an Oct. 1 interview with
The Washington Post, President Correa, who has two diplomas from the
University of Illinois, explained, "We would like to improve our
commercial cooperation with the U.S. É [But] when you are trading with a
country with huge subsidies for the agricultural sector like the U.S.,
the impact of this free-trade agreement would be dangerous for our
Ecuador in 2006 seized U.S.-owned Occidental
Petroleum's assets in that country following the oil company's sale of
part of an Ecuadorean oil field to a Canadian company without Ecuador's
approval. The United States ended free-trade negotiations with Ecuador
following that incident. At that time, Ecuador was under the leadership
of President Alfredo Palacio.
rose grower Mr. Alzate says growers in his country will not be able to
compete with Colombia and Peru if those countries' Free Trade Agreements
are accepted while no such agreement exists for Ecuador. "Having an
extension for only a few months instead of five years as requested
leaves the sector in weak conditions," he says. And Mr. Ucrós, of
Ecuadorean rose grower Emihana, says his company is making efforts to
increase its business in markets beyond the United States.
While there has been some recent activity designed to
garner support for passage of a trade agreement with Colombia, it
appears unlikely that it will happen before the end of the year or even
before the Feb. 29 expiration of the ATPDEA. On Oct. 5, however, the
U.S. Senate Finance Committee approved the FTA with Peru in a
significant step toward ratification by the U.S. Congress.
On Oct. 9, U.S. Secretary of State Condoleezza Rice
spoke to the Council on Foreign Relations at the Organization of
American States in Washington D.C., urging Congress to pass free-trade
agreements with Colombia and Peru, saying that defeat of those
agreements would send a message across the region that the United States
cannot be trusted to keep its promises. Some U.S. lawmakers, however,
are concerned that these free-trade deals could jeopardize American
U.S. growers also are facing tough economic times,
with overall sales relatively unchanged. In 2006, total sales of all
U.S. floriculture crops (which includes cut flowers and greens;
flowering and foliage plants for indoor or patio use; bedding and garden
plants, both annuals and perennials; nursery stock; and propagative
materials) increased by $52 million from 2005, a marginal gain over
almost $17 billion in gross receipts.*
Domestic-grown crops that experienced increases in
wholesale value in 2006 were cut flowers, cut greens, and perennial
bedding and garden plants. Sales of potted flowering and foliage plants,
annual bedding and garden plants, and propagative materials fell in
2006. Although there were other factors, these sales decreases are
largely attributed to a weakened consumer demand due to higher energy
and food prices.
cut flower sales
Wholesale sales of domestic-grown cut flowers totaled
$411 million in 2006, which is about 4 percent more than in 2005.
(Almost 77 percent - $316 million - came from California growers.) The
quantity of U.S.-produced cut flowers sold, however, was up only about 1
While wholesale sales of domestic-grown cut flowers
experienced an increase in 2006, not all crops shared in that rise. U.S.
cut flower crops that experienced decreased sales in 2006 included
roses, carnations, spray chrysanthemums, Gladioli, Irises, Lisianthuses
and Delphiniums/larkspurs. Many of these flowers, particularly roses,
carnations and spray chrysanthemums, faced strong competition from
imports, mostly from Colombia and Ecuador. (See chart above.)
Conversely, the dollar volume of tulips, lilies,
Alstroemerias, Gerberas, snapdragons and orchids sold continued to
increase, mainly because of higher prices but also because demand for
these U.S.-grown flowers remained strong despite competition from
imports, especially for orchids and lilies. Domestic-grown orchids, the
majority of which are produced in Hawaii and California, showed the
greatest price increases. (See chart above left.)
In California, by far the largest
cut-flower-producing state, expanded sales of lilies, Gerberas,
snapdragons and Alstroemerias helped the state earn 4 percent more
receipts in 2006. Regarding prices per stem or bloom, however, except
for orchids, cut flowers from California exhibited relatively flat to
lower prices in 2006.
The 2006 wholesale value of cut greens produced in
the 15 surveyed states reached $109 million, a 2 percent increase from
2005. Florida's value, at $79.4 million, is up 1 percent and represents
nearly 73 percent of the total.
* Figures presented represent the production of
growers in the 15 largest producing states only, which generate more
than 90 percent of all floriculture crops production in the country.
This is a change from 2005, when the U.S. Department of Agriculture
(USDA) monitored growing operations in 36 states. Year-to-year
comparisons include only figures from the same 15 states.
Source: Floriculture & Nursery Crops Yearbook,
September 2007; published by the Economic Research Service (ERS), U.S.
Department of Agriculture (USDA), Washington, D.C. For more information,
You may contact Amy Bauer by e-mail at
or by phone at (800) 367-4708.
• To read and see more,
to subscribe to Florist's Review.