Rising costs and a poor harvest have created challenging trading conditions in 2017. Many manufacturers reported having only harvested 60-70% of their budgeted peat volumes. Despite dry weather in spring it has been followed by increasingly wet summer weather during July and August making harvesting more difficult than usual, driving the use of more expensive materials.
Growing Media manufacturers are also facing rising costs of supply at all stages. Production costs rise with labour costs, for example in Ireland costs are going up by 10.4% as the minimum wage increases are implemented.
Cost increases affecting all businesses
Plastic bags have been effected particularly by polymer (Platts) pricing rises, seeing record highs over the past 18 months and forecast to further increase during 2018. Environmental costs are on an upward trajectory with preparation for licencing under way in Ireland with new tougher targets on water quality.
Freight costs, which account for up to 30% of the cost of a bag of compost, are also rising. There is also ongoing uncertainty around Brexit, and weaker sterling is leaving a 22% difference between now and 2015 average Euro rate, and a 13% difference between current rate and the 10-year (0.80/1.25) Euro average.
Sheila Hill, general manager of The Scotts Miracle-Gro Company, said: ?We have experienced rising costs throughout our business and expect more significant increases in key raw materials for 2018 trading year. Specifically, raw materials such as peat and plastic packaging costs will increase by double digits. This is a significant challenge on top of the impact of currency we have absorbed this season.?
?Steve Harper, chair of the Growing Media Association, added: ?Manufacturers are finding themselves under increasing pressure, during a period where costs have risen significantly and millions of pounds have been poured into developing new products and new diluents to reduce the demand for peat.?
