Seed-buying facts

Agriculture.com Staff 03/16/2010 @ 2:49pm

The agronomist greeted the 20 farmers on his portion of his company's field day a couple years ago with a question.

"So what's the first thing that pops in your mind?" he asked regarding an upcoming multitraited corn product.

"Three hundred dollars a bag," growled a grizzled farmer.

That farmer's not alone. Spiraling seed costs have prompted producers to closely eye what they're buying.

A report compiled by Guanming Shi, Jean-Paul Chavas, and Kyle Stiegert, University of Wisconsin (UW) agricultural economists, gives insight into recent buying patterns. It's based on surveys (conducted by dmrkynetec) involving farms from 2000 to 2007 in 12 Midwestern states.

Some study findings include:

  • Zone pricing impacts seed costs. The UW economists found seed prices rise from south to north, peak near the center of the Corn Belt (such as central Illinois) and decline further north.
  • Seed company mergers can play a role in increasing seed prices. Simulations used by the UW economists showed biotech mergers within the herbicide-tolerant trait market could potentially increase herbicide-tolerant seed prices by $19.08 per bag. Still, mergers between biotech firms producing different genetic traits could slice prices. Simulations showed mergers could reduce prices by $5.99 per bag for European corn borer-resistant seeds, $25.10 for rootworm-resistant seeds, and $31.09 for double-insect stacks. A merger between a biotech firm and a seed company could hike conventional seed prices by $32.37 per bag in one simulation. Conventional seed corn plantings have greatly decreased in recent years. Conventional seed corn plantings dove from 67.5% in 2000 to 20.6% in 2007. Still, the UW economists found evidence that mergers between biotech firms and seed companies could drive the entire seed price complex higher by hiking conventional seed corn prices.
  • Larger farms pay more for seed corn. This seems at odds with volume discounts. Increased prices may be due to the fact large farms are more productive than smaller farms, and the larger farms are in areas where corn hybrids are tailored to local growing conditions, the study says.
  • Bundling traits might not cost you as much as you think. The economists found the premium paid for a herbicide trait and two insect traits bundled in a stack was $40.49 per bag. Although that's greater than the price of any single trait, it's less than the sum of each trait priced individually of $65.41 per bag. In this case, the line companies use about practices like these increasing efficiency -- and passing savings onto farmers -- may have merit.

That may be of little comfort when you write out the check for seed. Still, remember price is just one part of the equation. Performance is another.

"There's a very small customer base out there that is solely price driven," says Myron Stine, vice president of sales for Stine Seeds. "It still comes down to price to value and what growers get for their money."

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