Nursery and greenhouse crop production have experienced increasing margin compression due to rising production costs and competitive market forces. Prior to the COVID-19 pandemic, price increases were slow, while input costs were steadily rising, leading to tighter profit margins. The pandemic amplified these challenges by disrupting supply chains and significantly increasing demand, creating inflationary pressures across the industry.
To navigate these financial challenges, growers require precise data on cost structures to inform decisions regarding pricing, SKU rationalization, and customer profitability. The Index of Prices Paid by Growers, launched in 2017 under the Your MarketMetrics program, was developed to track inflationary pressures on essential inputs used in plant production, marketing, and shipping. The index uses a weighted average approach to estimate inflation in input prices, allowing growers to make informed financial decisions.
Between 2007 and 2024, the index increased from a base value of 100 to 165.0, meaning production costs have risen by 65% over this period. Labor costs saw the most significant increase. Since the pandemic began, input costs have surged by 22.5% compared to pre-pandemic levels in 2019. Annual cost increases have varied, with the highest inflationary spike occurring between 2020 and 2022, followed by a more moderate rise in subsequent years.
This analysis focuses on the unique financial pressures faced by growers in the green industry, highlighting costs associated with plant propagation, production, and shipping. While general economic inflation indicators such as the Producer Price Index (PPI) and Consumer Price Index (CPI) exist, they are inadequate for assessing cost trends in the green industry. Similarly, USDA’s Index of Prices Paid by Farmers and Index of Prices Received by Farmers contain irrelevant data points for nursery and greenhouse growers.
To address this gap, the Index of Prices Paid by Growers provides a specialized measure incorporating major production inputs, including:
The index is based on financial data collected from major industry growers, allowing for the calculation of a weighted cost structure. Each cost component is assigned a relative weight based on historical expense patterns.
Production-related costs account for 67.8% of total sales revenue, while general and administrative expenses (32.2%) are excluded from the index. The primary focus of this index is year-over-year (YOY) changes, as these data points help growers set pricing strategies and prepare for future cost increases.
The 2024 index stands at 165.0, signifying a 65% increase in overall production-related costs since 2007. Since 2019 (pre-pandemic), input costs have increased by 22.5%. Year-over-year inflation trends include:
- 2021: +8.1% (compared to 2020)
- 2022: +9.5% (compared to 2021)
- 2023: +0.5% (compared to 2022)
- 2024: +2.5% (compared to 2023)
The green industry saw an increase in profit margins during the pandemic, as growers raised plant prices more aggressively than in previous years. However, less than half of growers adjusted prices sufficiently to cover all input cost increases. With labor expenses continuing to rise, further cost increases are expected in the coming years.
The most significant cost increases since 2007 include labor costs (which have increased 95%), containers (which have increased 68%), and freight and trucking costs (which have increased 67%).
Labor remains the most significant financial challenge, not only in terms of wages but also in availability. Growers face rising recruitment and retention costs alongside wage inflation. Other cost categories have also increased, albeit at a slower pace.
While a preliminary estimate of rising costs in 2025 is presented here, the annual forecast for 2026 was initially planned, but data limitations and uncertainty regarding upcoming trade policy measures (e.g., tariffs and retaliatory actions) have led to a delay in projections until the Summer Supplement is released in June 2025. This will allow for more precise forecasting ahead of industry trade shows and pricing negotiations for 2026.
Implications for Growers
Customized Indexing: Since costs vary by region, growers should develop their own cost-tracking models. Your MarketMetrics provides a customizable spreadsheet for this purpose.
Managing Margin Compression: The findings emphasize the growing cost-price squeeze, with inflationary pressures likely to persist.
Pricing Strategy: Total costs establish the price floor, while consumer willingness to pay determines the ceiling. Growers must balance these factors to maintain profitability.
Long-Term Sustainability: The industry must continue adjusting prices to keep pace with rising input costs. However, growers should remain cautious of demand elasticity — higher prices may impact consumer willingness to buy plants.
The Index of Prices Paid by Growers is an essential tool for tracking cost inflation in the green industry. With production costs rising 65% since 2007 and inflationary pressures continuing, growers must strategically adjust pricing models to maintain margins. Labor remains the most significant expense driver, and cost increases are expected to persist in the coming years. By leveraging data-driven decision-making, industry players can better navigate financial challenges and sustain profitability.
For the complete analysis, go to the AmericanHort Knowledge Center at AmericanHort.org/resources.