Seed Price Triples Over Last 20 Years

July 20, 2017 12:12 PM
 
Seed vs. total operating costs

Input prices have dropped in recent years with small changes in seed

When Oklahoma farmer Jerod McDaniel took over his grandpa’s farm in 1995, he paid around $100 per bag for corn seed. Historic USDA figures support his math. Today, USDA estimates corn seed costs about 300% more. Corn and soybean yields grew by 35% and 33%, respectively, during the period.

“Sure, my yield has gone up in 20 years, but I’m not sure if it’s enough to justify a threefold increase,” McDaniel says. 

Companies say seed prices are justified based on benefits farmers receive, many of which, such as biotech traits, didn’t exist 20 years ago. “The biotech revolution changed the whole pricing structure because so many management decisions are tied in with the seed,” says Jeff Hartz, Wyffels director of marketing. “The big value pieces are biotech and the raw genetic power.” 

That power is intended to enhance revenue. “In corn, if you go back to the yield increases over time you’re talking between a $450 and $500 increase in incremental revenue associated with the footprint a bag of seed covers,” says Scott Stein, Monsanto U.S. corn portfolio lead. “A lot of that value is driven by the breeding and seed we’ve created.”

Seed companies base prices on “genetics, traits, seed treatments and agronomic support,” says Drew Porter, DuPont Pioneer director of product marketing for the U.S. and Canada. 

“It’s easy to see the advancements on a tractor or combine, but a kernel of seed looks very much the same it always has,” says Brent Stauffacher, Mycogen Seeds corn portfolio marketing leader. “Hidden inside, though, are new genetics that have improved total yield and higher yield consistency, as well as better above- and below-ground insect protection, advanced seed treatments and overall seed quality.”

The market has evolved—and so has weed and insect pressure. With some technology now more than 20 years old, many farmers question how much value they’re receiving.

“I’ve noticed some of the traits are getting less useful, like with weed resistance, so we end up increasing the number of times and amount of chemicals we apply,” McDaniel says. “And with insecticide, we don’t have to put it in a box on the planter, it’s on or in the seed, but I’m still paying for insecticide with my seed or chemical cost. I’m not anti-technology, but how long are they going to milk that cow?” 

At Monsanto, Stein says tech fees are based on a “whole bag” approach. “I understand farmers’ concerns when you compartmentalize the different components in a bag of seed. But there have been changes over time—we’ve added more traits, seed treatments.”

This year, farmers are reconsidering trait mixes to cut seed costs. “Growers purchased corn hybrids with fewer traits,” says Chuck Lee, Syngenta head of seeds product marketing. “In soybeans we saw a large shift to Liberty Link, which sell at a lower price than Roundup Ready varieties.”

In this era of low commodity prices, such scrutiny is critical. 

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Jim
CENTRAL, IL
7/21/2017 04:26 PM
 

  The problem is too many unorganized buyers and too few sellers, who can command whatever price they want. Why isn't seed like many other products? Take computers. I paid something like $4800 on the 1980s for state of the art IBM XT. A few years later, the faster AT was half that price. Then the Dell added more technology, bells and whistles for even less. Compare their abilities with our current technology machines for a few hundred dollars. Competition. Companies had to provide more for less. Seed technology is controlled by so few companies that they dictate the price. Remember all those surveys we filled out? How much would you be willing to pay if....? We should not tell them we would pay more than cost of insecticide, for instance, just because it is more conveniently now in the seed. We should tell them that if you do that, and sell similar raw genetics to me for the same or less cost than seed without that trait, then I will buy it. That, creates competition. Remember the stern letter from Monsanto about RR seed? "You should consider this trait cost as part of your herbicide cost." Yet not only did we pay for the trait, but had to buy Roundup at an inflated price. The convenience and simplicity led us to pay more, and is now costing us with resistant weeds.....which they told us would not happen. Don't succumb to surveys that ask, "would you be willing to pay more, if....". Some of this is our own fault.

 
 
Norm
Underwood, MN
7/21/2017 07:41 PM
 

  Check your math. Doubling the price is a 100% increase. Tripling is a 200% increase, not 300%.

 
 
threefortys
cokato, MN
7/22/2017 07:09 AM
 

  has everybody forgotten the art of barganing, this spring i had i seed dealer shoot me a price for seed and it wasn't name brand either and then i told him what i could buy name brand seed for he just sat there and looked at me, and it was traits for traits, and then he had the gull to call me the next morn and wanted to negotiate his seed price, i won't use the words that i told him but it was along the sentiment that he was screwing me the first time. it is surprising that if you walk away from the seed and fert offers when purchasing the price can change, all these input dealers have captured there share of the seven dollar corn now, time to get back in reality.

 
 

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