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Seed prices level off

Gil Gullickson 11/10/2010 @ 12:13pm Crops Technology Editor for Successful Farming magazine/Agriculture.com

A few weeks ago, I swapped stories about past teachers with a colleague.

Some I mentioned were memorable. A math teacher who worked his love of horse racing into pony-filled story problems. (Fun, but I learned little.) Or the principal who told me if I wanted to argue, go downtown and find a brick wall. (Not fun, but I learned lots.)

There was one South Dakota State University economist, though, who stood out. His mantras stuck like a barb in my brain. His best nugget of knowledge? “A lot of things can be done, but they have to be done economically.”

I recalled this logic when inquiring about the 2011 seed corn outlook. Prices have spiraled in recent years as seed firms continually added insect-resistant and herbicide-tolerant traits to hybrids. Every time prices ran past $100, $200, and $300 per bag, some industry watchers predicted that farmers would balk.

They might have, but their pocketbooks didn’t. Economics fueled the explosion in traited hybrids, as higher seed prices coincided with higher yields. From 2000 to 2009 -- a time when trait use snowballed -- average U.S. corn yields climbed from 136.9 bushels to 164.7 bushels per acre. Improved genetics and weather likely played a part in the yield spike, but traits also helped protect this yield potential.

In 2010, the ultimate trait package -- the eight-trait SmartStax hybrid package -- aimed at cracking the $400-per-bag level for top-tier hybrids. Its six insect-resistant traits cover the gambit of above- and below-ground insect pests. Its two herbicide-tolerant traits give farmers two different modes of action.

This time, though, farmers pushed back. Monsanto still sold about 3 million acres of SmartStax traits in its hybrids, shy of 4-million-acre expectations for 2010. Once in the retail chain, prices retreated during the selling season. Sales of some hybrids dipping below $300 and some dealers subbing SmartStax hybrids for triple-stack ones at no extra cost.

So what gives? This time, economics flipped, as slumping corn prices heading into the 2010 growing season likely played a part. Meanwhile, SmartStax was new and hadn’t yet proved itself in the field.

“In hindsight, we did learn something from farmers in that we have to demonstrate the value to them before they pay more for it,” says Brett Begemann, Monsanto executive vice president for seeds and traits.

Price backoff

Monsanto is curbing prices for SmartStax in its brands. Last year, farmers paid around $60 per bag more for Monsanto’s SmartStax hybrids than its triple-stack hybrids within a geography. This year, the SmartStax premiums will back down to about $20 per bag over triple stacks in the same geography.

That’s had a ripple impact on seed-pricing decisions industry-wide for 2011.

“The producer can expect to see most prices at or below last year’s,” says Brian Humphries, national sales manager for Wyffels Hybrids. “That is due to some of the technology costs being lowered.”

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