The Road to $450 Seed Corn Will Be A Road Less Traveled

Soybean planting finished for me today.  Seeing the last soybeans going into the ground on May 21 versus last year when I didn’t start-planting corn until May 24th is just what agriculture is about.  Every year is different in farming and will always be a challenge.  However, I will take 2015 spring planting conditions over what happened to me last year anytime.

On one of my farms where I planted soybeans this spring, a thought passed through my mind as I traveled over those acres that this was the 30th time I planted this field.  I had bought that farm in my 20s and now here in my 50s I’m still at it.  Oh how different things are now versus then but I’m still not getting 90 bushels per acre of soybeans.  In fact, my soybean yields aren’t that much higher than they were 30 years ago.  However, my spray tank has four modes of chemical action trying to kill all the different weeds I have.

I have to do that because I have weeds that won’t die when you apply glyphosate.  30 years ago glyphosate was so expensive we didn’t use it much.  Then we had our biotech revolution and you all know the rest is history.  Glyphosate became the oxygen for many in today’s agriculture and companies like Monsanto, DuPont and others joined in the biotech revolution to make their billions.

So in 2015 we have an agricultural economy dominated by big biotech players who have put controls on what is offered to farmers.  For instance there are traits for a myriad of possible pest problems as well as herbicide tolerance, which are offered to farmers at a premium price.  I joined the biotech revolution probably 20 years ago with BT corn.  I could never figure out the benefit of Roundup Ready soybeans and in 2015 I’m still there.  However, I’ve got 4 glyphosate resistant weeds to worry about, blown in by pollen.  That has increased my herbicide cost, as my soybean burn down is more nuclear than it has ever been before.  I still grow that BT corn, which has been a good news story with regard to yield over the last several years.

So in terms of whiz-bang, agriculture certainly has its share new innovative products that you can overcome almost any hurdle with.  Much of this is taken place in the seed industry, where big companies have developed biotech traits in my opinion to raise prices substantially.  They have also created technology use agreements, which effectively control farmers from keeping their seed.  We have even reached the stage in 2015, where new herbicide tolerant soybeans are being introduced to control the super weeds produced from previous glyphosate applications of the past.  It’s a vicious cycle and one that I think makes little sense.  You’ve heard me say it before, give me yield not herbicide tolerance.

In 2015 this world may be unraveling.  In many ways it is the road to $450 a bag seed corn.  The problem is the agricultural economy is not cooperating.  We have sub $9 soybeans in the United States and $3 corn on the new crop side effectively reducing demand for all the new “biotech traits” which big ag might have for us.  Of course in the meantime big ag companies sue each other or try to buy each other.  In the balance is control that they exert on farmers ability to choose what they grow.  With incomes dropping across the corn belt, this is not sustainable anymore.

Of course the testosterone within the agricultural economy continues to be low interest rates, which gives us the ability to buy many of these super hyped traits at premium prices.  Meanwhile, our competitors in South America don’t pay them.  It is what it is and it’s never been right.

Those of you who’ve read this column over the last 30 years know that I look at biotech traits as simply a way to segment the farm input market to raise prices.  It has to do with oligopolistic competition, few firms competing with each other effectively controlling the game.  It works great for them and even to some extent for farmers as long as there is value at the end of the day.  However, in 2015 farm incomes are shrinking and giving me traits to control problems, which were created from previous “traits” isn’t going to work.

You might call it the great rationalization.  When there are big profits to be made in farming, you can market just about anything.  However, when there is not, especially when an industry is reaching maturation, it becomes much more difficult to charge premium prices for biotech traits which have no traction.  Big ag might find they have to circle the wagons and cannibalize each other or reduce prices significantly.

There is a lot to this.  The water has become very muddy through the years.  Needless to say, it still needs to be about yield and not herbicide tolerance or some other trait, which simply helps big companies segment markets.  In 2015 farmers can see this clearly.  Its an agricultural economics issue, you just have to follow the money.