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
© Copyright 2016 DTN/The Progressive Farmer. All rights reserved.