Corn seed cost squeeze tightens
With seed costs battling for the highest input, the U.S. farmer is being asked to pay more to grow crops for less of a return in 2014. Compared to a year ago, the corn market is down 40%, soybean prices are off 11% and wheat is down 26%.
Yet, the costs of seed that the U.S. farmer paid (or is currently negotiating) for the 2014 growing season is not dropping, and balance sheets are beginning to show it.
Research by Iowa State University shows that the cost of planting corn following corn (seeds, chemicals, etc.) per acre has bumped from $201.62 (2006) to $376.81 (2012) making the cost per bushel go from $3.40 to $4.94 in those six years. University of Illinois reported that non-land costs (fertilizer, seed, pesticides, drying, storage, crop insurance, machinery, and overhead costs) surged 92% from $302/acre to $581. Although they aren’t measured on identical criteria, the trends show similarity.
For 2014, the estimated cost of corn following corn production, per bushel, in Iowa has been pegged at $4.84, according to Iowa State University. As of Thursday, the CME Group's new-crop Dec. '14 corn price is $4.49. Specifically, the highest listed expense in ten input items, is corn seed at $264 per bag (185 bu. per acre rate).
So, it's easy to see why the farmer is most concerned about the future of seed costs.
It's noteworthy that unlike a farmer's ability to lay off risk through a hedging contract for fuel, fertilizer, and crop prices, seed costs are a 'pill' that just has to be taken.
"Seed is what it is. There is much talk about guys holding out until the last minute to get some panic deals from seed companies left holding the bag on record seed production with the possibility of significantly less acres being planted in 2014. That all sounds good but I think it is mostly wishful thinking.” IllinoisSteve started a conversation in Marketing Talk about inputs and pricing. “I sure there will be some deals here and there but by and large I don't think you are going to see a fire sale on seed. Don't forget seed companies have had a few good years and will probably stay the course on price and burn a little equity to get through this year. Kind of like cash rents."