Price pushback on traits
While the industry remains committed to newer traits, this year producers often rejected higher-priced traits after several years of significant price hikes. “With the level of seed price increases seen over the past few years, producers started to push the pencil more,” says Gary Schnitkey, professor of agricultural economics at the University of Illinois. “And as they got more on-farm experiences with the various products, they started to see that they might not need the latest and greatest seed technology to make a profit. The value has to be there for a seed to be worth the price.”
So far, this fall’s early harvest pace has accelerated seed buying as producers evaluate products and secure product for 2011. It’s unclear if last-minute discounts will be seen, although companies will be under pressure to hold prices at current levels. “There will be pressure to hold on to, or gain, market share,” says Tray Thomas, Founding Partner of the Context Network. “Price cuts might help their market share numbers, but these companies have a tremendous investment in research. Reducing prices much will make it hard to meet Wall Street expectations, and negatively impact share prices.”
That could have a long-term impact not only on the seed companies but producers as well. “Reduced seed and technology prices mean less money for research and development,” Thomas says. “Current R and D costs simply can’t be supported if there are deep price discounts.”
Supplies are adequate, companies note, with no major hiccups in seed production this year. However, the hot products will run out first, so growers should make their decisions early.