September 1944. Franklin Delano Roosevelt is president. World War II continues throughout Europe; the Allies have completed the liberation of France. The U.S. economy is driven by the war effort, which has helped to create jobs. Industrial productivity outpaces nearly every other country—twice the productive output per person than Germany, and five times that of Japan.
The Great Depression ends; consumer spending actually increases, despite the shortage of some goods.
Prices and Costs
In the Sept. 1, 1944, issue of American Nurseryman, editor Fred Kilner and an unnamed reader speak to the trend of increasing the prices of nursery goods:
Not so long ago it seemed wise to call attention to the increasing costs which made it necessary to obtain higher prices than in recent seasons. As remarked in the preceding issue, when some nurserymen found the public easily paid the higher prices which they themselves put up with some apprehension, they sought on the basis of a short supply to put the prices up farther. But it should be remembered that prices unduly high are just as unfair to the public as prices unduly low are unfair to the nurseryman. That some leading nurserymen already are taking this attitude is indicated by the comments just received from an executive of one of the larger nurseries. He writes:
“Personally, I am happy that you are endeavoring to flash the red light on the current tendency of the nursery industry to force prices too much above any level which could, by any stretch of the imagination, be justified by increased costs of production – in fact, to raise prices to such an artificially high level that they are not economically sound.
“It is true that production costs are higher and that the price level of many nursery items had been too low prior to 1942. It is also true that most of our materials and supplies are under price ceilings and, with wage stabilization and other legislation and governmental regulations, the wages in our industry have not generally increased so rapidly as the rising cost of living; certainly the increases in wages in our industry are, in no way, comparable to the increases in industrial wages.
“As you know, very few nurseries have any accurate information about what it costs to produce and/or process nursery stock. Too many unthinking nurserymen reason that if the costs of labor and supplies are up fifteen per cent, prices must be increased more than fifteen per cent. Labor and supplies are important cost factors, but they are not the only cost factors. In fact, I don’t think that any wholesale grower of nursery stock could prove that labor and supplies constitute even fifty per cent of the cost of production.
“For example, we pack out a great many retail nursery orders. I have cost records, since 1937, which are 100 per cent complete and accurate – every little and big item is charged against that operation, from pens and pencils up to equipment and overhead. These cost records show that the cost of filling and packing retail orders increased from 18.9 cents per package in the spring of 1943 to 23.9 cents per package for the spring of 1944 – 5 cents per package. I have not made a study showing the exact increase in the selling price of the stock in an average package, but I would estimate that the selling price of the average package has increased more than $1 in one year, and this increase is largely in selling price rather than in larger orders.
“In raising prices to such an unsound high level, some growers (particularly small fruit growers) are about to ‘kill the goose that lays the golden eggs.’ It is relatively easy to get into production on small fruits in one or two years. The prices of small fruit are being boosted to a high level which will force the larger operators to get into production and will encourage many small growers to pyramid their plantings. Obviously, this situation will rapidly create surpluses which will cause prices to nose-dive to unprofitably low levels by 1946 or 1947.
“I gathered the impression at the mail order nurserymen’s meeting at Chicago that only a few of the wiser, deeper-thinking operators are concerned about the effect of higher prices. As to the others, their only justification for profiteering prices is their opinion that the consumer will pay it. No one seems to be concerned about the consumers’ reaction if Germany surrenders and there are 10,000,000 people out of work next March or April, when this stock must be sold. No item is actually sold until it reaches the consumer, and if the consumer ‘strikes’ and refuses to pay exorbitant prices, the current acute shortages rapidly will become surpluses which must be burned. The current purchases by dealers for the spring of 1946 do not mean much, because many of these orders at high prices will surely be canceled (or never paid for) if the anticipated temporary setback happens to fall during our spring selling season in 1945.”