Through the first quarter of 2022 we continue to see many supply challenges persist. In addition, pressures such as rising fuel costs are further challenging the economic environment within our industry. Product shortages continue in many categories and inflation remains high. The following is our current summary and industry forecast for the months ahead. We will continue to monitor these conditions and provide updates, so you can be better prepared.
Raw Material Shortages
Key commodities and raw materials required for green industry products remain at record high prices with most indicators predicting a steady rise due to the Russia-Ukraine crisis and continued labor shortages.
• Consumer prices are up 7.9% over the past 12 months with no signs of inflation slowing down.
• U.S. and Canadian gas and diesel prices have skyrocketed in recent weeks. The U.S. national diesel average is $5.25 per gallon, up 65% YoY and not expected to improve in the short-term. Canadian national diesel average is $2.03 per liter, up 55%+ YoY and is expected to rise with the addition of the 2022 Carbon Tax which is effective on 4/1/2022.
• COVID-related manufacturing shutdowns due to new strains in China persist, affecting the semiconductor industry with a direct impact on irrigation controllers and lighting transformers.
• Steel, zinc, aluminum, and brass scrap are up 25%-50% YOY impacting irrigation, lighting products, and technology. • Fertility raw materials costs have increased significantly. In the past 12 months, urea costs have increased 141%, phosphate costs are up 83%. Sulfate of potash (SOP) is up 39%, and muriate of potash (MOP) is up 54%.
• Seed crop losses from 2021 resulted in higher-than-expected pricing in Q4. To offset cost increases some contractors are looking at turf alternatives such as clover, wildflowers, and native species. Spring availability may be limited on some varieties.
Manufacturers continue to face labor shortages, while demand remains high.
• More than 30% of manufacturers report that it’s more difficult to find talent now than before the COVID-19 pandemic, and nearly 80% expect to have trouble attracting talent going forward.
• Significant increases in service industry wages (including restaurants) are drawing hourly associates away from manufacturing jobs.
Freight shortages and higher pricing continue to increase lead times and cost for many products – especially freight intensive products such as hardscapes, fertilizer, and plant material.
• Record levels of congestion in major U.S. ports are contributing to shipping and freight delays.
• Container shipping costs from Asia are up as much as 12x since the beginning of 2021.
• U.S. freight shipments are up more than 10% and U.S. freight expenditures are up more than 29%.
• U.S. diesel retail fuel prices are up nearly 65%.
• Driver shortages and high demand now mean there are more than 14 loads waiting to be shipped for every available truck.
Landscape Materials Outlook
Based on our assessment of the current situation and industry conditions, we expect continued shortages and/or price inflation on many of the most frequently purchased products within our industry.
• Hardscapes / Plants / Mulch / Soil / Fertilizer: Many of our manufacturers and vendors are adding transportation surcharges due to rising fuel prices. This is impacting all our product lines – especially those most freight intensive such as hardscape and nursery products.
• Irrigation – PVC Pipe: Global resin shortages are expected to limit PVC pipe production and keep costs unusually high.
• Irrigation / Lighting: Electronics will be in short supply for the foreseeable future due to ongoing semiconductor chip shortages.
• Turf Seed: Market instability for seed will likely continue into new crop for 2022. Seed availability will be better once new crop is harvested.
• Nursery Products: Plant material in larger than 7-gallon sizes is expected to remain in tight supply through 2022. Items such as large upright evergreen screening material, commodity items and other specialty intrinsic items likely will remain in short supply for several years.
We also believe that manufacturers and growers will implement further price increases this year across numerous categories including core irrigation products, PVC pipe, plant material, and hardscape products. We are working diligently with our supplier partners to mitigate the impact of these factors and provide you with as much advance notice as possible.
Things you can do to protect your business
• Plan supply needs as far in advance as possible.
• Coordinate with your SiteOne branch or sales representative for all upcoming projects. We will do everything possible to secure required inventory for your projects ahead of pending manufacturer price increases.
• Limit project quote windows for your customers to 15-30 days while we remain in this unprecedented and dynamic period.
• Share this information with your customers.
As new information becomes available, we will continue to keep you informed. Thank you for allowing us to be your partner and please let us know if there is anything else we can do to help.