Conventional (non-GMO) seed planting is on the rise, even as grain price premiums fade away. Tight margins and profit-making opportunities are driving the trend. Scott Apple started his transition to conventional corn when commodity prices were still at an all-time high, and he didn't do it to capture premiums. His 1,900 acres are all planted to conventional seed and sold into local markets.
"It was a cost reduction decision," recalls Apple, who farms near Bowling Green, Ohio. "I didn't need the traits. Rootworm isn't a significant problem, and other insects aren't usually a problem. If they are, there are plenty of options to clean them up."
When he was planting traited seed, Apple appreciated Roundup Ready soybeans and planted Liberty Link corn when it was available without the Roundup Ready trait. He avoided Roundup Ready corn due to concern that resistant weeds would develop with year after year of use.
"Since my neighbors didn't share my concern, we got them [resistant weeds] anyway," he says, explaining why he no longer plants Roundup Ready soybeans either. "With resistant weeds, why pay the tech fee if the herbicide doesn't work?"
A viable economic option
Apple isn't alone in asking that question, reports Scott Odle, president, Spectrum Premium Non-GMO Seed Corn. Sales increased in 2015 over 2014, and all indications are for a bump again this year. He is seeing more competition in the non-trait corn seed business, which he feels is a good sign. He notes that it adds to the sector's credibility that non-GMO seeds are a viable alternative.
"Guys are pushing the pencil," he says. "They can buy triple stacks for $260-290, double stacks in the $210s and straight Roundup Ready in the $180s. We're at $158-168 with discounts. If they can get by with a low dose of Capture or something and not worry about corn borer for now, maybe they can make $30 an acre when others are losing money."
Odle, an early adopter of traited-seed on the 4,000 acres he farms in west central Indiana, is not anti-GMO. Like Apple, it is a matter of economics. Unlike Apple, Odle captured premiums for his corn and beans in the past, shipping containers of non-GMO grain to the West Coast and elsewhere.
Whether he will in the near future is questionable, according to Morrie Bryant, senior marketing manager, DuPont Pioneer. Market premiums [for non-GMO grain] dropped by 50 percent or more in 2015 and have not recovered. Bryant stays in constant touch with both grain merchants and end users to ensure the company has adequate seed to meet future demand.
Exports and feed market
Export slow for non-GMO
"Non-GMO supply is ample right now, and export customers have been very quiet regarding both corn and soybeans," he reports. "One exporter told us the market is swimming in non-GMO soybeans right now."
Tom Malecha, vice president, Processing and Food Ingredients, CHS, is one of those swimming as he supplies customers with non-GMO processed soybean products. Just as tight supplies in 2012 and 2013 drove premiums as high as $2.50 per bushel in 2014, high yields that year slashed 2015 contract premiums to around a dollar. That is where they have stayed.
"We haven't yet set premiums for next fall, but I expect they will start out around a dollar," he says. "The good news is that demand for non-GMO beans is up across all markets. I expect it will continue to grow among European and Asian countries, in particular Japan, South Korea and to an extent Taiwan. Demand is also up in China, which requires 99.9% pure non-GMO soybeans for the domestic food market."
Potential feed market growth
Growth in food use is important, but the elephant in the room is animal feed. "We need to watch what happens in the feed sector," notes Bryant. "If consumers demand non-GMO fed poultry and swine, that would significantly change the domestic demand picture."
In the meantime, Malecha suggests the current market surplus gives end users confidence the U.S. can supply them and will do it less expensively. At the same time, he adds, grower interest is also increasing, with more growers looking for contracts each year.
He is confident these experienced growers know how to handle both market and agronomic risk. Apple says shifting back to all conventional wasn't a big deal in corn, given the herbicide options that exist. He does admit that going trait-free requires a higher level of management.
Weed and seed challenges
Scouting is critical
"You need to scout and make sure weeds don't escape, and you have to keep an eye on bugs," he says. "It gets back to management. Instead of being easy, like with Roundup Ready soybeans, we actually have to do our job again."
While they differ in the extent of damage, Bryant and Odle both note reports of European Corn Borer (ECB) damage in some areas in 2015. Bryant suggests there could be heavy yield losses in spots with heavy feeding, but Odle reports even growers with ECB feeding broke even due to their lower seed costs.
Gilbert Hostetler, Prairie Hybrids suggests one reason he and others non-GMO seed producers like Odle, are not seeing such dramatic losses is the disparity between corn borer resistance in different hybrids. Non-GMO seed companies by their nature have to look for more resistant hybrids.
"We have a few genetic lines we don't sell anymore," says Hostetler. "We had one we sold for only one season as it seemed to attract the moths. There are others the moths don't like."
The seed challenge
For many considering the switch, access to the right genetics is the challenge. It is one reason Odle co-founded Spectrum Seed. Bryant acknowledges that elite hybrids may or not be available in some areas, depending on past demand in that area. The tricky thing, he notes, is gauging future demand.
"A year ago, we thought the move to non-GMO might be like the Oklahoma Land Rush as commodity prices fell," he says. "Although we did see growth in a year where total acres decreased, for the most part it remains a niche market like white or waxy corn."
One difficulty for large companies assessing market demand is that growth is not necessarily tied to established markets. Brian Neuvirth, his dad and his brother switched to non-GMOs for their own needs in southeast Minnesota. Increasing herd health problems with their 750-sow farrow to finish operation had them looking for solutions. Six years ago they made the switch to non-GMO soy and corn, which they market through their pigs.
While a University of California at Davis study showed no difference, Neuvirth cites improved herd health, increased litters and gain. He also gets a premium for their non-GMO fed, antibiotic free, heritage breed animals.
Initially he experienced a learning curve and sourcing problems when making the switch. "We needed some in-season insecticide one year and have since moved away from corn-on-corn," he says. "Each year we found more seed to choose from. You need to find the hybrids and varieties that work for your farm and a supplier you can work with."
Hostetler supplies the Neuvirths with seed. His family-owned company has never carried traits, instead emphasizing genetics, seed quality and the highest possible germination rates. Today he is sitting in the catbird seat with sales of non-GMO seed up 20 to 22 percent the past two years. That was even in 2015 when many existing customers switched as much as half their acres to soybeans.
Like Odle, Hostetler sees increased competition as a sign of non-GMO inroads, and not just competition from other conventional seed marketers. "We are hearing about large giveaways on GMO seed by major companies," says Hostetler. "My response is we have one price and everyone is on the same page with no special deals. Customers are choosing the non-GMO seed for its value."