Are You Getting a Good Deal?

October 22, 2016 02:49 AM
 
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Seed and chemical price comparisons give farmers leverage

How much are you paying for seed? Do you know what your neighbor is paying? You might want to find out.

Farmers in some parts of the country are quoted prices upward of 60% more than other farmers for the same seed, says Charles Baron, co-founder of Farmers Business Network (FBN). Data such as this is included in a new tool in FBN’s software that allows members who pay $500 annually to compare seed prices. The company is also opening up chemical price sharing and comparison to all farmers, not just members, through the FBN Prices app.

A second company, Granular, offers seed, chemical and fertilizer price insights through their $3 per acre business management platform.

Both FBN and Granular are at least partially based in California and have backing from Google Ventures, as well as other private firms and agribusiness.

This transparency could provide farmers with leverage like never before. Discovering even a $35 price differential on a bag of seed could save the overpaying farmer $14 an acre, based on each bag covering 2.5 acres.

“One farmer in Illinois paid $146 more for the same bag of P1197 AMXT/LL/RR2 seed than another Illinois farmer only two hours away,” Baron says. “The Seed Price Transparency report [available for all farmers] we are working on evaluates national and regional trends on list and discount ranges farmers are receiving.”

FBN says it evaluated more than 2,200 unique price points across 850 seed varieties of 57 brands from 2015 and 2016 invoices. FBN and Granular both use formal quotes and invoices from farmers to generate comparisons.

Here are examples FBN claims are among its most dramatic findings:

  • Up to 58% difference for Pioneer hybrid P1311 AMXT/LL/RR2/AQ and 111% for Dekalb DKC64-87.
  • Up to 106% difference for Asgrow AG3832 and 55% for Pioneer variety P28T08R. 

Seed prices can vary widely, including discounts for ordering early, paying cash, special financing, zone pricing and local incentives. (See below for more on seed pricing.)

But Baron says some of the discrepancies FBN has found go beyond the variation one would expect from those factors. “What we found is just how much discounting is going on, and how unevenly discounts are applied to different farmers,” he says. “We saw that nationally the median bag of corn seed was discounted 24% from list price, 23% for soybeans. Many farmers aren’t realizing those savings while some are realizing extreme discounts.”

To gain access to seed prices, farmers must be a paying and contributing member. “It’s a sharing system, when you add data you get analytics,” Baron says. 

Members will be able to compare the prices they pay against what others pay for the same products and the brand average. Yield comparisons are available as well.

Don’t just look at prices, however.

The sweet taste of a cheap price can quickly sour if the product falls flat. Examine pricing information and yield averages to determine seed value. Even though a specific seed or chemical might be more expensive, the end benefit, higher yields and income, could be worth it.

“You can see what brands are most expensive compared to lowest cost and who has the best yields,” Baron says. “We want to help farmers understand the best seed selection and buying strategies and what prices and discounts can be expected based on their exact needs.”

FBN and Granular say farmer data is safe when aggregated into their larger data set.

“We know growers are typically hesitant to share data—that hesitation has subsided because farmers have used this information to bring prices down,” says Agustina Sacerdote, director of marketing for Granular. “Transparency can lead to better farm decisions. If I know what my expected yields and financials are for each field, I can better negotiate my rents. If I know what my neighbor is paying for certain chemicals, I know what I should be paying for those same chemicals.”

FBN claims it covers more than nine million acres as of summer 2016. The company says it ground truths the data farmers provide before including it in price comparisons.

“A farmer could tell us their seed price for analysis, but without an invoice we won’t use it in any aggregated analytics,” Baron says.

On more than one million acres, Granular says it is confident in its own analysis. “We’ve recognized large price variation,” Sacerdote says. “For example, a customer is paying $56.68 per gallon of Liberty 280 SL herbicide when the Corn Belt average price is $60.86—that’s a 6.87% difference.”

This customer used about 2,400 gal., she adds, which is close to $10,000 in savings that someone on the other side of the average could negotiate down.

Both FBN and Granular say their farmer-customers are always in control of their data and any data aggregated into benchmarking tools is anonymous. Farms can opt in or out of certain parts of either company’s data capabilities for additional control. 

 

Learn more about FBN’s new offerings and reports in this Farm Journal Media exclusive. The company’s Seed Price Transparency report is found at www.FarmJournal.com/input_price_comparison


How Seed Companies Determine Prices

Seed is one of the most vital inputs for farmers, accounting for 20% of total input spending in a given year. Several seed companies have offered insight into how they determine their prices.

“We’ve started basing prices on the ROI in genetics,” says Cole Hansen, Mycogen Seeds corn portfolio leader. “You could see a hybrid with the Powercore trait technology priced higher than a SmartStax product if the genetics are better.”

Genetics-first pricing is new for Mycogen Seeds this year. The company stresses building a field-by-field approach to selecting genetics that best suit the acre and yield goal a farmer is trying to achieve, and then selecting trait technology to protect it.

“We certainly recognize where we’re at in the ag economy,” says Drew Porter, DuPont Pioneer director of product marketing for U.S. and Canada. “We use that awareness to put out pricing for our growers while offering a wide range of hybrids and varieties.”

Pioneer says it prices products based on the value it provides customers including traits, genetics, seed treatments and agronomic support. The company also looks at field testing and considers a product’s potential before establishing price, Porter says.

“Say you have a $300 bag of corn, we might see a $150 value from the genetics and, depending on the number of traits in the hybrid, the trait package can add $150,” says Chuck Lee, Syngenta head of seeds product marketing. “If we have one trait, it might only add $20 to $30 to the price. We think that’s fair. We like to say the grower keeps two-thirds of the value and Syngenta keeps one-third.”

Value-based pricing is at the core of Syngenta’s strategy. Because of this, they offer several trait platforms, from little to no traits to many, to give farmers options to fit their field and budget.

“We recognize the recent ag environment has been challenging for our farmer-customers, and we have taken this into consideration,” says Jeffrey Neu, Monsanto product communications lead. “Our goal is to ensure we are offering farmers a broad range of products and solutions with the performance and yield potential to support greater farmer profitability.”

Monsanto says it annually gathers farmer and dealer feedback when making product and pricing decisions and compares their portfolio to competitors’ pricing and performance.

“Pricing is more of an art than a science. You’ve got to have some experience listening to the marketplace,” says Tom Hooper, Beck’s director of sales. “It’s more about production planning and supply that allows us to have products the farmer wants.”

According to Beck’s, about 15% of the price of every bag of seed goes to research.

 

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Comments

 
Spell Check

Vince
Reinbeck, IA
10/24/2016 06:25 AM
 

  In other words, the seed companies will price seed for what ever the market will bear. Better grain market and yield areas get higher prices.

 
 
Craven milligan
Ash, NC
10/24/2016 03:50 PM
 

  I like ag web

 
 

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