Battle for Seed Share
Sep 1, 2009 12:00 PM, By Mark Moore
Competition among seed companies generates incentive programs and tempers price increases
The Seed industry is a competitive business, but 2009 may have set the high-water mark on just how competitive the industry has become.
Corn seed remains the largest component of the commercial seed market; one industry expert pegged its global value at $9 billion for 2009. “Although the planting of corn in the U.S. declined, the overall value of the U.S. corn seed market rose as a result of increased adoption of GM [genetically modified] crops with stacked traits,” says John McDougall of Phillips McDougall, a private agricultural consultant. “The soybean seed market experienced strong growth, increasing to almost $4.3 billion globally, aided by a strong rise in soybean plantings.”
The number of corn and soybean acres fluctuates from year to year, but the overall total remains relatively constant. To increase market share, seed companies must do battle at the farm gate.
Historically, most of the discounts on seed occur around November. But this season, aggressive pricing spilled over into the first quarter of 2009, triggering a flurry of market reaction as companies defended their business.
“In the 2009 buying season, we saw some aggressive pricing very early, which escalated later on,” says Doug Vail, general manager, Mycogen Seeds. “It's the most competition we've seen in a long time.”
What helped drive some of this competition was an industry awash in seed due to excellent growing conditions in 2008.
Frank Ross, vice president and regional director, North America, Pioneer, says overall demand for corn and soybean seed will continue and companies will be aggressive in defending market share. “Pioneer has gone through a number of years of losing market share,” he says. “But we have spent the past three years focused on increasing our point of sale, and sales and support staff, and this has paid off this past year through increased market share in corn, soybeans and canola.”
Early commitments
Industry representatives indicate that their companies will bring aggressive marketing and sales programs early in the sales season.
“We are already launching our business campaign with an aggressive push to contact producers prior to September 30,” says Bill Wyffels, president of Wyffels Hybrids. “We are providing our customers significant incentives for early commitments. We have always worked to bring our best pricing early, but opportunities will be even greater this year.”
Part of the aggressiveness will be to solidify orders and help stem a small, but growing, trend in the industry for producers to wait later in the season to finalize seed orders.
Some of growers' hesitancy to finalize that seed-buying decision may have been tied to the wide swings in other input prices. And more seed also meant some of the hot new hybrids or varieties were in good supply.
This year's seed supply was less than usual, so producers who think they can wait and still get the seed they need could be in for a surprise. “Producers can be assured that they will get the best deal out of us when they order early,” Vail says. “If they order early, they are more likely to get the seed they want.”
Seed companies like to see early orders. “It's a challenge for an industry to move around 30 million bags of seed corn,” Vail says. “We need early orders to manage the logistics.”
Moderate price rise, stacked traits
Seed prices are likely to rise, but may be taking a breather. “I think the industry will see a moderate trend upward, given a good seed production season,” says Gary Leeper, national sales leader for Dairyland Seed. “But I don't think we'll see the large increases we have seen the past few years.”
Stacked traits are still king. “Even though producers were a bit more price conscious in 2009, they were still looking to buy the full package of traited products,” says Ryan Parkin, area team leader with Becks Hybrids. “I see that trend continuing in 2010. Producers want to protect their seed investment, and they are seeing the performance of the elite products and the return on investment.”
The influx of new seed technologies will move the market forward. “Growers continue to … want the elite hybrids and varieties,” Ross says. “That drives productivity on their farm.”
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