Minding Ag's Business

Why Should Seed Cost Dodge the Bullet?

By Marcia Zarley Taylor , DTN Executive Editor
Assuming the same 170 bpa yields conventional or GM corn, someone who earned a 30-cent/bu. non-GM premium could be expected to capture a $61/acre net benefit. That advantage slips to $35/acre qith a 15-cent/bu. premium, Granular says.

What's sacred about seed costs? Are they sharing the budget pain this season? Will a switch to non-GM seed really save money?

Midwest land grant economists have been railing since last July that growers would need to slash 2016 corn budgets on rental ground about $100/acre on average to stay profitable with $3.60 corn.

Cash rents got most of the attention, since they remain the Number One cost on such farms. Fertilizer is second, and fortunately DTN retail surveys show most nutrients--especially nitrogen--down about 20% from year ago levels, if you waited until late in season to order. But negotiations with landowners and fertilizer retailers sometimes turn emotional, if not downright unpleasant, as farmers attempt to chip away at expenses.

2015 Tennessee Corn Yield Champion Bruce Magoon argues there's no reason to spare seed costs from the budget axe. He raised a non-GM corn yield of 271 bpa in the National Corn Growers Association no-till, strip-till nonirrigated class and challenged my recent budget saving diatribes.

"Seed cost is the elephant in the room," Magoon says. Weed resistance has taken away the advantages of Roundup over the past few years, so scouting and spray costs are going up even with stacked varieties, he observes.

Magoon's non-GM seed costs run about $115/bag, versus $300/bag or more for those with stacked traits. That puts his costs at a fraction of some Midwestern averages.

Magoon says he spent a mere $46/acre for seed in 2015 and kept chemical costs to $33.50/acre. In contrast, southern Minnesota Farm Business Association records showed average farmers spent $129/acre for seed and about $34.50/acre for chemicals in 2014, the most current figures available. Magoon's per acre cost advantage over the Minnesotans: $79.50/acre.

Mike Preiner, Granular co-founder, points out profitability can vary significantly between GM and non-GM crops, based on geography and management practices. But studying a pool of farmer experiences can help growers make the decision with more confidence.

The company's service benchmarks what their customers in 35 states spend for inputs. Generally those growers received minimal discounting by seed companies in 2016, unless they opted for less expensive varieties. The smallest of these operators farmed 3,000 acres and most are much larger, so should have qualified for volume buys.

Preiner identifies five key areas for weighing the decision to switch to non-GM crops:

1. Premiums can offset higher management costs, but are shrinking. In 2015, Granular found premiums ranged from $1 to $4/bu. for non-GM soybeans and 20 cents to 40 cents/bu. for corn. Due to high farmer interest this season, however, those margins are narrowing fast.

2. Lower cost non GM-seeds. Germplasm runs $10-$15/acre cheaper for soybeans and $40-$60/acre for corn, Granular finds, based on its actual customer records.

3. Extra operational costs. Segregation and cleaning can add $15-$30/acre for special handling of non-GM products.

4. Input costs. Non-GM crops typically require more sophisticated pest management programs, often adding $10/acre for soybeans and more than $20/acre for corn.

5. Yield potential. Quantifying yield differences between conventional and GM varieties can be difficult. Magoon thinks he can find corn genetics that perform on par with GM-seed in his area, although selection can be tough.

Don't discount the need for better pest management and crop scouting, DTN/Progressive Farmer Crops Editor Pam Smith cautions.

"The pest complex for Tennessee could be slightly different than Minnesota or even Illinois," she notes. “In 2015, some western Illinois farmers growing non-GM varieties discovered the hard way that European Corn borer is not extinct and they experienced some significant losses. We've become somewhat complacent about scouting for these pests because the traits have controlled them in the past. Above ground pests such as black cutworm,corn earworm, fall armyworm, true army worm, stalk borer and Western bean cutworm should also be on the radar."

A good pre-emergence weed control program becomes even more important in a non-GM setting, as well as diligent crop scouting in season, Smith emphasizes.

Provided conventional crops yield on par with GM, Granular's Preiner estimates that someone who raises 170 bu. non-GM corn at $3.50 could expect a $61/acre advantage when premiums run 30 cents/bu. (see chart). That advantage drops to $35/acre when premiums dip to 15 cents/bu.

Even with zero premiums and extra management costs, it still may pay to switch to non-GM corn, based on Granular customers' experiences, Preiner says.

As long as yields remain comparable, seed savings should give non-GM corn about a $10/acre net benefit, Preiner says.

That's the point for Magoon, the Tennessee corn yield champ. "We do sell some non-GMO corn at a premium and have been getting about a 50-70 cent per bushel premium, but it is a small market of about 30,000 bu per year," he says. "Most of our corn is sold to non-discriminating buyers. The real savings for the majority of corn farmers will be in the seed cost.

"I'm not interested in yield contests per say," he says. "I'm more interested in running at a profit. At the end of the day, it's about economics."

Magoon wants to start a discussion. Anyone else interested in sharing their experiences?

Follow Marcia Taylor on Twitter @MarciaZTaylor

Comments

To comment, please Log In or Join our Community .

MARCIA TAYLOR 3/18/2016 | 10:49 AM CDT
How many non-GMO new hybrids have the top 3 seed companies come up with in the past 3 years?

How many seed corn varieties can you buy with only a single trait? Such as just round up or just corn borer or just Herxulex?

You might find the answers to these questions rather telling....
--Bruce Magoon
MARCIA TAYLOR 3/18/2016 | 10:41 AM CDT
Thanks for the observations, Raymond. I'd rather let readers comment, but if you have questions just email the link at the top of the column.
andrew mohlman 3/18/2016 | 8:45 AM CDT
The large reduction in inputs is not occuring and will not happen only larger prices for grain is in future sorry number of slaves is dropping large farms have employees that require positive income.
Raymond Simpkins 3/17/2016 | 1:38 PM CDT
I don't think he will get much discussion because nobody at DTN ever answers anyones questions. But I will give Magoon my 2 cents worth. I plant about 25 percent non gmo corn and get good yields with them.My fear is with the mild winter we are do for an on-slot of insects this year. If we ever have corn borer like we did 20 years ago your money saved on seed would more than be gone just in treatment let alone lost yield. I sell seed and the company I sell for does not have a volume discount for say, which is the way it should be. I don't see seed cost coming down much, because the seed companies are all owned by huge corporations and they all know we need seed to grow a crop. Fertilizer and chemicals can be flexed but not seed. We have no market premium for corn in our area. Beans yes but not corn. I think traited crops will always have a place but so will non gmos. Rented ground is not going to be the problem but land that was bought at high prices. These investors want a 3 precent return ,and on 10,000 dollar land thats a 300 dollar fixed cost. Good luck to all this spring.