O, Christmas Tree: From Seed to Untaxed Sale

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BOSTON (MainStreet) -- As you trim the tree this Christmas season, you are giving a gift to the family-owned farms that rely on seasonal sales.

"It's all small businesses," says Rick Dungey, spokesman for the National Christmas Tree Association.

Nearly every state (Nevada and Alaska being among the exceptions) harvests Christmas trees, with Oregon and North Carolina as national leaders (nearly 6.8 million and 3 million a year, respectively).

According to an annual consumer tracking poll commissioned by NCTA, last year 27 million real Christmas Trees were sold, with a market value of $976 million. By comparison, artificial trees had sales of 8.2 million in the U.S. and a retail value of $530 million. On average, survey respondents said they spent about $32 per real tree, versus nearly $65 per artificial tree.

Pre-cut trees accounted for 76% of sales; "cut my own" sales were 24%. The majority of trees bought came direct from farms (33%) with 12% sold at garden centers and nurseries, 21% bought at chain stores and 13% from retail lots. Nonprofit groups that sell trees as a fundraising effort accounted for 9% of the marketplace.

Growing pains

A logistical hurdle for growers -- especially smaller, newer ones -- is balancing customer demand with the laws of nature.

NCTA estimates that Christmas tree farms in North America planted about 40 million tree seedlings in the winter and spring of 2011 to replace harvested crops and meet future demand.

A step-by-step guide to what it takes to grow Christmas trees can be found on the NCTA Web site.

The most common trees are 6 to 7 feet high, Dungey says. Although growing conditions can vary, it can take six to eight years to achieve that height.

"When you put trees in the ground you are not going to realize sales on those trees for quite a while, so it is certainly an investment," he says.

Smaller farms have developed strategies for growing their business even if they are limited by time and acreage.

"A lot of choose-and-cut farms that sell trees one-by-one directly to the customer are also going to buy pre-cut trees from larger farms because they don't have trees ready in their fields yet or because they want to get species they can't grow where they are located. They may also have trees ready to harvest, but there are not enough to meet their customer demand," Dungey says.

Fake trees, real downsides

An ever-present challenge to growers is the popularity of artificial trees.

According to industry statistics, from 1965 to 2008 the market for real trees declined by 6%. During that same time, the market share of artificial trees shot up 655%.

The NCTA doesn't mince words when it comes to the plastic competition. Its Web site points out such factoids as: most fake trees (85%) in the U.S. are imported from China; the potential for lead poisoning is great enough that fake trees made in China are required by California law to have a warning label; many imported trees contain PVC; and that they were the invention of a company that made toilet bowl brushes (the Addis Brush Co).

"Regardless of how far the technology has come, it's still interesting to know the first fake Christmas trees were really just big green toilet bowl brushes," the NCTA site snipes.

Hot topic

Dungey says the industry has the continual challenge of "breaking down the myths and misperceptions about real trees," chief among them the fear of having a very pretty fire hazard.

"There are about 27 million to 30 million trees put up in the U.S. each year," he says. "What percentage of those do you think actually do catch on fire every year? Some people guess about 5%. Well, in 2009, which was the last data point the National Fire Protection Association tracked, there were 125 confirmed real trees that caught on fire -- 'first item ignited' -- out of 28.2 million. That's 0.0004%."

"Where have people gotten the message that real trees can burst into flames and do quite often?" he adds. "They get it from the 10 O'Clock Action News and they get it from the people who sell fake trees. When you buy a plastic tree it has words on the bottom that say 'flame resistant' or even 'flame retardant.' But they catch on fire every year too. About one-third of the 'first item ignited' causes were plastic ones."

A taxing debate

The holiday spirit of good will toward all didn't help the Christmas trees business escape some politically charged controversy this season.

At issue was what some -- incorrectly, Dungey says -- referred to as a "Christmas Tree tax."

In the works since 2008, Christmas tree growers have proposed a 15 cent per tree surcharge that would pay for marketing, outreach and branding. The program would be administered by an independent 12-member board responsible for developing and approving promotional and research efforts. It would affect only growers who sell more than 500 trees a year.

Promotion and research boards such as the one sought are created when a commodity-based industry petitions the USDA to create one. Examples are the National Pork Board, Cattlemen's Beef Board/Beef Checkoff (those "Beef, Its What's for Dinner" ads are among the initiatives funded by an extra buck per cow) and the "Got Milk" ad campaign.

The final rule regarding the program was published in the Federal Register on Nov. 8. Two days later, the USDA announced that the program would be delayed "to provide all interested persons, including the Christmas tree industry and the general public, an opportunity to become more familiar with the program."

"In this changing world, it is not enough to grow a great product," says Betty Malone, a tree farmer from Oregon who chaired the industry task force that submitted the request to the USDA. "We want our businesses to be successful and we have to let people know about our product. That takes time, coordination and money. Here we were, a group of farmers trying to pool our own money together to sell more of our crop, and now we're not allowed to because someone decided to call it a tax -- when it's not."

The status of the Christmas tree checkoff remains on hold.

The USDA's retreat can be blamed on a controversy fueled by national media attention and sparked by articles posted on the Web site of the Heritage Foundation, a conservative think tank.

As one such blog entry, titled "Obama Couldn't Wait: His New Christmas Tree Tax," says:

"Nobody is saying President Obama doesn't have authority to impose his new Christmas Tree Tax -- his Administration cites the Commodity Promotion, Research and Information Act of 1996. Just because the Obama Administration has the legal power to impose its Christmas Tree Tax doesn't mean it should do so. The economy is barely growing and nine percent of the American people have no jobs. Is a new tax on Christmas trees the best President Obama can do?"

A follow-up post opined that such commodity promotion programs "skirt constitutional provisions that only Congress has the power to tax" and "violate basic principles of free speech, making some producers pay to communicate messages against their will."

"If you just took three or four minutes to read some facts about it, most people realized it had nothing to do with taxes and certainly nothing to do with Obama," Dungey says. "It is disappointing how reactionary a handful of people can be, and it is certainly unfortunate that some blogger decided to use that as a smear campaign."

"You should see some of the emails from people who said, 'I'm going to buy a fake tree now,'" he adds. "Well I'm sure the factory in China appreciates that. This is America, you can do whatever you want with your money. As for me, I'm going to buy a tree grown by an American farm family, thank you."

Rocking around the Christmas trees

Dungey says that the Christmas tree marketplace may be helped by some emerging trends.

One is that buying a tree is getting easier.

"There's lots of different ways to buy a tree," he says. You can now just buy a tree online and have it shipped right to your door if you want. It's especially good if you live in an urban setting and may not have a car. I know companies that are offering delivery and tear-down services for those people who want it. There are lots of options out there."

In demographic research, the NCTA has found some encouraging findings.

"We also know that younger adults use a real tree at a much higher rate than a plastic tree," Dungey says. "That probably bodes well for the future of the industry because that's a big population bubble thats getting ready to take over our world. Generation Y, Generation Next, there are a whole lot of different names for them, but there are 72 million of them in this country. That's as big a population as the baby boomers, and we certainly know what impact they had on a whole lot of things, from culture to the economy."

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