Christmas tree prices are up this year and supply is tight. The most likely causes are the Great Recession and the weather. A third possibility, though, is a bit less evident.
This is the story:
The Christmas Tree Supply
Where?
Oregon is the #1 Christmas tree producer in the U.S. You can see that North Carolina is not even close:
Why the shortage?
- 1. Recession
Because farmers wait close to 10 years to harvest a Christmas tree, their current problems began during the Great Recession. With households buying fewer trees, revenue declined. And you know what happens then. Less revenue and farmers plant fewer trees. It took until today to feel the impact.
- 2. Weather
When the rains did not come in Oregon and the Southeastern U.S., farmers’ irrigation bills soared or their trees “fried.” Those that survived could have grown more slowly and been less robust.
- 3. More Attractive Substitutes
Cultivating a Christmas tree is a labor intensive endeavor. Only one part of the process, a tree’s natural shape needs to change from vertical to conical. Many of the trees also need to be “bundled and looped” for a helicopter pick-up:
In Oregon, growers have easier-to-grow alternatives. Instead of Christmas trees, they could switch to hazelnuts.
But the surprising alternative is marijuana. Estimated to be Oregon’s most valuable crop, marijuana is attracting Christmas tree farmers. (I should note that while the media have said Christmas tree growers are switching to cannibus, I did read that no data exists to confirm it.)
Our Bottom Line: Supply Determinants
Since 2016, prices have gone up $5 to $10:
As economists, looking at the determinants of supply, we would see why. After all, the cost of production did go up, the number of growers went down and drought conditions increased expenses.
The result? Our supply curve shifts to the left with quantity decreasing and equilibrium price rising:
And the USDA statistics confirm our graph:
My sources and more: Yesterday, WSJ had the Christmas Tree story and a springboard to unexpected territory. In the Daily Breeze, I found some factual disagreement but the Mercury News clarified it all. Then Capital Press told more about the marijuana crop and AtlasObscura, and Oregon Live, Christmas trees.
Our featured image is from atlasobscura.com/Noble Mountain Tree Farm.
