‘Tis the Season To Be Connected

The festive period in the U.S. may be a bit more expensive this Christmas. That’s because the price of natural Christmas trees has been rising for some years, due to lingeringly tight supply in the wake of the Great Recession, as well as labour shortages and bad weather, which stunted harvests at some tree farms in Oregon, Michigan, North Carolina and Missouri.

The average live evergreen cost $78 in 2018, which was up a 4% increase from the roughly $75-per-tree price tag in 2016 and 2017, according to the National Christmas Tree Association, the official trade organization for the natural Christmas tree industry.

The Association expects to see a similar pattern this year so if prices creep up another 4%, the average tree would cost just over $81. Yet some tree farmers in states whose crops have been hit especially hard have warned that tree prices could jump an extra $20 or $25.

So what happened? The glut of Yule trees 10 years ago came just as customers started tightening their budgets during the recession, which led to a surplus of trees and selling prices that were less than what the trees had cost farmers to produce. Farmers didn’t find it profitable to stay in business. So growers planted fewer trees after 2008. Now, a decade later, that smaller crop of trees is being harvested for the holidays.

The basic law of supply and demand is a principle that any person or business in the supply chain ignores at their peril. Supply chains have become more complex and connected than ever, which means that business interruption and disruption increasingly top the charts of risk factors that keep insurers and chief risk officers awake at night.

The Christmas tree example above was a combination of environmental and financial risk drivers that led to supply chain choke and rise in price. Socio-economic risk drivers can also play their part as Argos customers will have noted after the retailer warned they could face more than a fortnight of disruption over Christmas after staff at one of its distribution centres voted to strike for 16 days over a pay dispute.

Post Date: 16/12/2019

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