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A premium on traits

Corn and soybean producers are in for an increase in their seed bill in 2008. On average, corn seed prices are up an estimated 15% over 2007 prices, and soybean seed prices are up 8 to more than 10%.

The level of increase depends on the hybrid or variety selection, as well as the trait package contained in that seed. In corn, some of the top traited hybrids are seeing price increases well above 15%.

Gary Schnitkey, farm management specialist at the University of Illinois, projects that corn seed prices will increase an average of $11/acre and soybean seed prices an average of $9/acre. That is expected to push total non-land costs for corn production to $314/acre in 2008, an increase of $57/acre from the 2001 to 2005 level. Total non-land costs for soybeans are projected at $199/acre in 2008, an increase of $28/acre.

Higher yields

Strong commodity prices, as well as a bumper crop year for most of the country, should temper some of the reaction to the price jump. And seed companies are quick to point out that the traits contained in today's seeds are delivering higher yields, allowing producers to take full advantage of robust commodity prices.

“Certainly the cost of production has gone up,” says David Thompson, director of marketing for Stine Seed. “And while the costs of traits have also increased, we have seen a value that they bring to the market in the form of higher yields.”

A primary driver in the price increases is the significant amount of money that companies are investing in research to increase crop yields. “Whether it's better genetics or biotech traits, it takes more money to make these yield increases than in the past,” says Tom Strachota, CEO of Dairyland Seed Company.

Strong commodity prices also mean seed companies are competing for production acreage. And companies are being hit with higher labor and fuel costs.

“We continue to look for internal efficiencies in order to keep seed costs down,” says Dennis Judd, marketing director for Pioneer.

Wait and see

Schnitkey says that fertilizer costs on corn ground are expected to increase $27/acre. But even with the higher costs of production, his calculations indicate that corn is still more profitable on highly productive ground.

However, producers might wait to see what prices do over the winter before making final planting commitments. That could translate into a last-minute switch of orders from corn to soybeans, or vice versa, which might create shortages of the elite products. The market is expected to remain volatile into the 2008 season.

“Producers are watching their marketing opportunities, and that will impact the firmness of seed orders into the spring,” Judd says. “We expect last-minute order changes to become more common, so we have ensured that our internal lines of communication are open and that seed is in the hands of producers when they need it.”

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