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Landscaping Business Cut by Rising Fuel Costs

 
Ken Sweet
FOXBusiness
 

Even the landscaping industry cannot escape the wrath of high oil and gas prices.

People in the business, from landscaping supply retailers to golf course superintendents, said businesses is slowing and margins are being pummeled by high transportation costs and lackluster consumer spending.

The segment of the industry hurting the most is lawn care equipment and maintenance, according to companies that sell lawnmowers.

Home Depot (HD), the nation’s largest home improvement chain, said sales of high-profit riding lawnmowers that run on gasoline have been “basically flat” this year, while sales of less-costly electric and push mowers have seen double digit sales increases.

“We have seen a lot of interest in electric and wireless electric mowers with these gas prices,” said a spokeswoman with Home Depot.

Sears’ (SHLD) is seeing similar sales patterns at its stores.

Still, both Home Depot and Sears said they forecast sales of riding lawnmowers to remain flat rather than decrease because people who purchase the gas-heavy machines usually have lawns that are too large for a push mower and have little choice but to purchase the larger machines.

Smaller landscaping supply stores said their costs are rising as well.

“I’m seeing a lot of surcharges at the bottom of a lot of my bills,” said Jeff Seibenthaler, owner of the Ohio family-owned landscaping company Seibanthaler’s.

Seibanthaler’s doesn’t mow lawns, but it does transport its plants and planting material over about a 25-mile area, he said.

“Our biggest item is diesel fuel for our fleet of trucks,” Seibanthaler said. “We’re holding our own and we haven’t made any price increases. But we tried to get people to maximize the loads, run an extra trailer and try to plan our days better.”

Golf courses are hurting as well.

Mark Woodward, chief executive of the Golf Course Superintendents Association of America, said his organization’s members are working to find ways to cut costs as prices for keeping a green perfect have risen drastically.

“Fuel has really hit us hard this year,” he said. “And it’s not like we get a break on that. People expect well-maintained fairways, roughs and greens.”

Woodward would know: He just finished his job as superintendent at the famous Torrey Pines Golf Course, the site of the 2008 U.S. Open. During the Open, Torrey Pines had up to 30 mowers running during the day.

Woodward and other golf course superintendents are trying to cut costs any way they can.

At the Open, Woodward said he placed equipment around his facilities in key locations and set up break areas for employees to avoid driving the mowers back and forth from the shed. 

Also, Woodward has had to raise greens fees by “a couple dollars” at his courses in order to offset rising costs.

He says demand for golfing has been affected, as well. While Torrey Pines isn’t hurting because of its destination status, his other two courses have been seen lackluster interest.

“Torrey Pines is a premier course and will always get people traveling to play,” he said. “If you’re paying $180 for a round of golf, you’re not worrying about the economy.”

One positive aspect of higher prices is that some people are staying home and gardening.

Seibanthaler said he has seen an increase in sales of fruit and vegetable plants and supplies as people have planted their own gardens.

“I know it’s a cliché, but this whole stay-cation thing that people are talking about seems to be true,” he said. “We have people looking at their backyard, and thinking ‘maybe I should improve and enjoy what I have here.”

 
 

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Contango

No, it's not a dance craze. Contago is a condition of supply and demand, essentially a fancy word to say that prices for items, typically commodities, are cheaper now than they would be at some point down the line.

Anything that¿s sold in the futures market can be in a case of contango. Futures are exactly that: a contract to buy an item or asset at a price in the future. This is the case with oil, with traders buying and selling contracts to acquire a barrel of oil in months down the line. When a market is in contango, spot prices, or the price of a commodity if you were to buy it right now, are lower than forward prices.

Why is that important? Well, it usually tells you the supply of a given commodity is plentiful (since, according to Economics 101, a large supply usually leads to cheap prices).

Incidentally, if you think contango is a mouthful, its opposite condition is known by the equally tongue-tying term backwardation.