Supply problems might be more of a problem for regional companies than for the majors.
Plan your seed purchases early to set up marketing decisions
The seed salesman is showing up earlier these days, and it pays to develop a strategy for your seed purchase decisions. This year, seed prices rose throughout the harvest season as commodity prices impacted cost of goods and weather affected corn seed supply.
"It’s difficult to commit to next year’s expenses when you have yet to receive any income from the current cropping season, but earlier is better for seed planning," says Chris Barron of Carson & Barron Farms, author of the AgWeb.com blog "Ask a Margins Expert."
"Seed selection sets the foundation for your whole management system for the coming year," he adds.
Another compelling reason to have your seed plan completed early is for the development of your marketing plan, Barron notes. Once you have a rotation plan set and specific acres of production assigned, you can begin to calculate costs.
"The best margin opportunities could be in front of you," he adds. "With a clear picture of your expenses, production and marketing plan, it will be much easier to capitalize on margin opportunities."
Tight Supply, Higher Prices. Early seed decisions are crucial in years when supply is expected to be tight. The 2011 growing season saw many seed fields damaged by wind, hail and floods. Those production problems are leading to tighter seed supplies, but the extent depends on the company. Alan Koerperich, western business manager for NuTech Seed, estimates seed supply is going to be off 15% to 20% of his company’s projected production numbers.
It’s not total seed supply that will be down; the tightness comes in the hot hybrid numbers. There will be seed, notes Dan Kallem of Curry Seed, but there might not be many seed sizes to choose from.
There also are local concerns regarding supply of seed with the traits needed to handle specific disease situations. For example, Goss’s wilt was severe in many areas of the Midwest. With the heavy return to corn on corn, it’s expected there will be a higher demand for specific products that have shown better tolerance to this disease.
Supply problems might be more of a problem for regional companies than for the majors, who have their production fields spread out. Most seed companies plan their supplies with a short crop in mind, says Nick Weber of Monsanto public affairs. "These include overproduction in case of a crop failure, growing acres under irrigation, multiple locations and winter seed production," he says.
Still, most companies will rely on ramped-up seed production in the Southern Hemisphere to make up for shortages. Winter production is likely to increase the cost of producing a bag of seed.
"We are up a little bit," Koerperich says. "We’re up about $10 a bag." Industrywide, $20 to $30 per bag increases have been rumored.
"AgDay" staff contributed to this story
- Mid-November 2011