Rising seed costs & a tale of two seeding rates | Michigan Farm News

Rising seed costs & a tale of two very different seeding rates

Category: Crops

by David A. Hennessy, Yuyuan Che and Hongli Feng, Michigan State University

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As corn and soybean seed costs have tripled over the last 20 years, MSU ag economists are interested in learning why seeding rates are trending in opposite directions. (Photo: United Soybean Board)

Since the dawn of agriculture, seed has been viewed as a critical input. For many crops, it is now a technologically sophisticated and expensive input. Over the past century, and in particular over the past quarter-century, corn and soybean seed expenditure shares in total crop production costs have grown to become major items for row crop farmers in Michigan and elsewhere.

Seed expenditures are typically lower than land rent charges, actual or opportunity costs, but comparable with crop nutrient costs. Figure 1 (Panel-A for corn and Panel-B for soybean) plot nominal indices, i.e., not deflated, of two-year average seed prices in Michigan over 20 years through to 2016.

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(a) Corn

Seed-rate-graph2_7.12.19
(b) Soybean
Figure 1:Nationwide average seed costs and crop futures prices for corn and soybean by two-year average. All costs and prices are normalized to one in 1997 for corn and soybean respectively. Seed prices are from a grower survey conducted annually by Kynetec.

For both commodities, nominal seed prices have tripled over the time frame. The seeds are now different. Packed into and coated over these modern seeds are many valuable attributes that promote high potential yield and quality, as well as resilience to weather and biological stressors.

Biologically the two plants are very different so that, like yin and yang, they fit in well together in rotation. Corn is thirsty, can be hard on the ground, requires a longer growing season and is nitrogen deficient.

Corn is carbohydrate dense while soybean is protein dense. Because they fit so well together in a rotation and as ingredients for animal feed, it is hardly surprising that they have shared many market and technology innovation advances, but sometimes not in the same way.

During this past quarter-century, corn and soybean seed inputs have both been transformed by biotechnology innovations that reduced pesticide, tillage and labor requirements, and that have at times limited access to international markets.

As can also be seen from figure 1, futures prices for both commodities broke upward with support from biofuel policy and international markets around about 2006, plateaued for some years before declining over the past five years.

Of course, increased demand for carbohydrates, biofuels, favored corn production incentives over soybean production incentives. Notice from these figures too that by 2016, the last available year for our seed data, seed prices had become high in comparison to the prices of commodities that they produced.

Standard economic theory would suggest that when input prices are high and output prices low then producers will cut back on the input. Figure 2 shows what has happened to seeding rates in Michigan over this time frame. We direct your attention to four points in the figure.

The corn seeding rate has risen steadily over the period, where the rate of growth has not differed much between the early years and most recent years. The soybean seeding rate has fallen steadily over the period, where the rate of growth has not differed much between the early years and most recent years.

For both corn and soybean, Michigan is typical of the main production regions across the U.S. in these four regards.

Figure-2_MFN_7.12.19
Figure 2 Seeding rates for corn and soybean by the two-year average in Michigan. Note: Data are from a grower survey conducted annually by Kynetec.

Prices are not the only consideration. Research by the authors has found that seeding rates differ by location, corn seeding rates generally decline as one moves north and east while soybean seeding rates generally do the opposite. Similarly, corn seeding rates are generally higher on better land while the opposite is true for soybean.

Glyphosate-tolerant corn is seeded at higher rates than seed without the trait while the reverse is true for soybean. Bt corn is seeded at a higher rate than seed without these trait inserts. But having controlled for these and other factors the four points made about figure 2 apply throughout the country.

We have several questions for interested growers and would appreciate your insights:

1. Why has the corn seeding rate trended upward over time?

2. Why has the soybean seeding rate trended downward over time?

3. For both commodities, why has there been limited response in seeding rate to a high seed price, low commodity price environment?

If you direct responses to [email protected], we will summarize any responses that we obtain and will provide a summary to those who indicate an interest in seeing the summary.

Acknowledgment: This work was supported by the Elton R. Smith Endowment in Agricultural and Food Policy.