ND nursery copes with declining shelterbelt sales

BISMARCK -- Brian Johnston wanted a challenge. He got one: Rescuing the faltering Lincoln-Oakes Nursery in Bismarck, which had been "hemorrhaging cash for years" and was close to closing, he says.

It's too early to declare victory. But results so far are encourarging.

"We're still losing money," Johnston says. "But we're getting to where it isn't such a big loss and we're able to stay in the game."

The veteran entrepreneur was named CEO of the North Dakota Association of Soil Conservation Districts in late 2011. His mission was to restore profitability at Lincoln-Oakes Nursery, owned and operated by the association.

The nursery, which raises and sells many of the trees planted in Upper Midwest shelterbelts, had been hammered by years of poor business practices and declining interest in shelterbelts. In 2002, the nursery sold about 5 million trees. The number fell steadily to about 1.5 million in 2013, a 70 percent drop.

It's uncertain if sales will stabilize or continue to decline -- and whether Lincoln-Oakes can remain economically viable if sales keep dropping, Johnston says.

But the nursery's outlook is brighter than it had been, says James Kart of Kenmare, N.D., president of the North Dakota Association of Soil Conservation Districts.

"We're on the right track to recover as best we can. It's hard to predict the future, of course, but we're doing everything we can think of," he says.

This probably would have been the nursery's final year in operation without the changes that began with Johnston's hiring, Kart says.

Since taking over, Johnston has made many changes at the nursery. They include:

• Closing the nursery's location in Oakes, N.D., about 200 miles southeast of Bismarck. The main Lincoln location (on the former Fort Lincoln Military Post of Bismarck) continues to operate. Two benefitted employees at Oakes were given a chance to transfer to the Lincoln location, but didn't accept the offer. The nursery now has eight benefitted employees, the same as before.

• Scaling back employees' health insurance, making it less liberal and more competitive with what other organizations provide.

• Discontinuing sales of varieties of trees and shrubs that weren't popular enough with customers.

• Fumigating fields to reduce weeding and labor costs. Fumigation, which is highly regulated and conducted by an experienced company, involves putting plastic over fields and pumping in fumigants to sterilize the soil.

• Beginning to plant seedlings in five-row groupings instead of three-row groupings. This is more efficient.

• Reducing the use of seasonal workers and using more daily labor to reduce unemployment insurance costs.

• Beginning a year-end sale to the general public of surplus trees that otherwise would be discarded.

"We're bringing in some pretty good cash for stuff that we used to throw away," he says.

• Changing how nursery employees view their jobs.

"When I got here, I'd hear (from employees), 'Well, this is how we've always done it,'" Johnston says. "What I've really encouraged is taking a fresh look at how we do things."

Johnston's previous business experience, though extensive, didn't include trees.

"But sound business practices work across the spectrum. If you put them into practice here, they work," he says.

The transition hasn't been easy, says Bill Elhard, a 13-year Lincoln-Oakes veteran with an agronomy background who manages the nursery.

"It's been a rough road. Some people fought the change, some people have embraced it," he says.

Shelterbelt basics

Shelterbelts, also known as windbreaks or tree breaks, once were a big deal on the windy Northern Plains. They help reduce soil erosion, provide wildlife habitat and shield farmsteads and livestock.

North Dakota, in particular, is known for its shelterbelts. Since the 1930s, more than 55,000 miles of windbreaks have been planted in the state, according to information from the North Dakota Forest Service.

Some people reserve the term "shelterbelt" for windbreaks designed to protect farmsteads and livestock, and use "field windbreak" to describe tree rows meant to protect fields. In common usage, though, "shelterbelt" is increasingly popular as a description for both types.

As the name suggests, a shelterbelt consists of one or more rows of trees or shrubs. Typically, each row contains a different type of tree or shrub, with the arrangement designed to benefit wildlife and the environment.

Declining interest

But changes in farming practices, including bigger farm equipment, have made farmers more inclined to remove existing shelterbelts than to plant new ones. Big piles of dead trees, recently removed from existing shelterbelts, are a familiar sight in fields across much of North Dakota. Usually, but not always, the dismantled shelterbelts were at or near the end of their useful life.

Nobody keeps track of how many shelterbelts are being removed, and it's difficult to say how many new and replacement shelterbelts are being planted. But by all accounts, new plantings are down sharply from a few decades ago.

One example: North Dakota's Grand Forks County sometimes is billed as "the shelterbelt capital of the world."

A 2011 Agweek story found that 120,000 to 230,000 trees were planted annually from 1950 to 1965 in western Grand Forks County. The one exception came in 1958, when 77,250 trees were planted.

In contrast to the 1950 to 1965 plantings, an average of about 24,000 trees was planted annually in western Grand Forks County from 1999 to 2006, when many of the trees planted from 1950 to 1965 had reached the end of their useful life. The Western and Eastern Grand Forks County Soil Conservation districts merged in 2006, skewing subsequent annual planting numbers.

Dying market?

Lincoln-Oakes Nursery could break even financially this year, Johnston says.

But that would require tree sales to stabilize or even climb a bit, and it's uncertain whether that will happen.

Johnston notes the North Dakota Industrial Commission has approved a $1.8 million grant to the state Association of Soil Conservation Districts for a statewide tree-planting initiative.

The initiative will pick up some of the cost of planting trees for people who aren't eligible for such assistance under other programs.

Declining crop prices also could help tree sales, encouraging farmers to plant trees on marginal land instead of cropping it, Johnston says.

"I don't know if you'll ever see them (tree sales) quite like they were. But there are some places we could see them do better," he says.

Dwight Aakre, veteran farm management specialist with the North Dakota State University Extension Service, doubts shelterbelt tree sales will stabilize anytime soon.

"I think they served their purpose, and now their time has passed," he says.

Shelterbelts interfere with increasingly big farm equipment, he says.

Conservation practices such as no- and limited-till farming further reduce the need for shelterbelts, Aakre says.

Sales will dictate whether Lincoln-Oakes Nursery remains a viable business, Johnston says.

"I can fix the business model. But I can't fix a dying market. I'm not convinced this isn't a dying market. It's definitely declining," Johnston says. "If we go under 1.1 million or 1 million (in annual trees sales), I don't know if it's viable for us to be in this. If the market is staying here (at 1.3 million to 1.5 million), we have a chance."

If tree sales continue to decline, some wholesale nurseries that also provide shelterbelt trees likely will go out of business. That would benefit Lincoln-Oakes and other survivors, Johnston says.

He says his work, though challenging, has been rewarding, too.

"I took this job because it seemed like a worthy undertaking. And there's been a lot to it, a lot of layers," he says.

For now, at least, "the heavy lifting is done. We have to keep fine-tuning. But it (future success) is going to depend on whether tree numbers stabilize," he says.