By Larry Dreiling Feb 4, 2019
To call commodity markets a roller coaster ride would be an understatement. Take the near month corn market, with a slow climb last winter and a dizzying drop last May, the market has been rattling along in a tight 20-cent range for most of fall and early winter.
It has led some farmers, who have endured four years of low prices, to consider making changes in their operations. Many corn producers are thinking about a switch from the more sophisticated genetics of genetically modified varieties to conventional hybrids.
There’s plenty of advice for producers out there, particularly as final seed selection time looms nearer.
Matt Meisner, head of data science at San Carlos, California-based Farmer’s Business Network, LLC, has been analyzing return on investment for 3,000 of his organization’s producer members, covering 15 million acres in 28 states.
“You first of all have to separate emotion from fact as you look as the numbers from an economic perspective. Remove the externalities of emotion as you examine the costs of GMO versus non-GMO seed,” Meisner said. “It’s laudable to perform due diligence to weigh in on the amounts of money a person would be paying for genetic traits in the seed versus the work you’d have to do to replace them.
“Take insect control. You have to weigh the cost of technology within the seed against the price of insecticide as well as equipment costs. Labor and time of application would be a part of that, too. The same applies for herbicide costs.
“You have to weigh things toward what costs less, gives you the same kind of crop protection and gives you a better return. What would you spend in terms of time, labor and money for one variety over another to accomplish the best return?”
Findings in FBN report
FBN has released a new report measuring the performance and payback of corn and soybean traits, which showed the following:
On average, the corn and soybean traits included in their analysis experienced only a small yield advantage over conventional varieties.
Farmers with known pest pressures, such as rootworm, who are planting corn-on-corn, may see a greater yield advantage from traited hybrids that offer control for these pests.
It’s important for farmers to understand the difference between seed genetics and traits in order to realize the best return from each. While genetics create yield, traits are incorporated to protect that yield potential. But, the most expensive traits, and the addition of multiple traits to seed, do not necessarily mean the best genetics, or the greatest net revenue to the farmer.
“It’s important for farmers to understand the difference between seed genetics and traits in order to realize the best return from each. While the genetics create yield, traits are incorporated to protect that yield potential,” Meisner said.
Some other points from the FBN report
When planted following a crop other than corn, the estimated average yield advantage from the corn traits analyzed ranged from 1.5 to 3.6 bushels per acre over conventional corn hybrids.
On corn-on-corn rotations, average yield benefits ranging between 5.3 and 9.5 bushels per acre were observed. “This indicates the real importance of considering crop rotation as part of your seed selection,” Meisner said.
Seed prices have risen as new trait technology has entered the market. Make sure you are paying a fair price for seed in your market by shopping around.
“Farmers should consider net revenue to their operations, taking into consideration not only yield, but also seed cost net of discounts alongside commodity prices. You should also consider premiums that might be available for non-GMO production.”
Companies look to help
Ryan Myers, United States corn lead for Pioneer, said his company helps growers in searching for options to make their farms more profitable.
“We offer what fits the farmer’s needs,” Myers said. “Sure, we offer double-stacked traits for above-ground protection and triple-stacked for corn-on-corn acres or for where they might have concerns about extended diapause, for where they may be able to use those traits appropriately.”
Myers said trying to predict insect populations and outguess the weather could be tricky, so any way to reduce those issues of guesswork could be an influencing factor in seed selection.
“So far, we’ve had a pretty mild winter,” Myers said. “Typically, that would lead to increased insect populations the following growing season. You have to keep in mind those things as we make decisions. The up-front costs are one thing to take into account, but it could be a cost hindrance on the backside if things don’t go according to plan.”
Myers said producers need to look at what he calls a “complete acre” of seed, crop protection, and “digital experience” to be of benefit to their bottom line. Conventional seed has its place in the toolbox in terms of best management practices, in terms of keeping traits viable.
“These traits are costly to develop, so anything we can do to preserve their longevity by BMPs like rotations, is key to keeping costs in line long-term,” Myers said. “If we abuse a specific trait, the shorter the lifespan of that trait is and the more costly it will become.
“This applies to all facets, weed control, to things like rootworm control. It takes a holistic effort to keep these traits viable. We have a robust program of conventional product, perhaps the best on the planet, to give farmers every option. It’s one of many types of varieties we have, from traits that offer insect and weed control to brown midrib to waxy corn. You name it, we have a vast selection, because that’s what farmers need.”
In considering conventional versus genetically modified varieties, it’s best to have a long-term strategy in place, according to Dan O’Brien, Ph.D., agricultural economist at the Kansas State University Northwest Research-Extension Center, Colby, Kansas.
“Conventional corn still has a place in certain markets,” O’Brien said. “If you can capture sales into a niche market, make sure you have a structure in place to deliver the product to capture your highest price possible.”
You can’t plan for weather or outside forces that affect the price of a commodity as it moves through the cycle to harvest, O’Brien said, so make sure you are confortable with your decision. One way to do that is to do some financial analysis prior to making that final decision.
“Do some realistic analysis of the return on investment you can get between corn varieties on your farm,” O’Brien said. “There are not only higher returns for some niche varieties, but also seasonal discounts at the beginning of the season. You should take into consideration not only yield potential, but also price of the seed cost net of discounts alongside commodity prices.”
Just remember the old axiom of the grain trader, which can apply, too, in this case of seed selection: Past performance is no guarantee of future results.
Larry Dreiling can be reached at 785-628-1117 or firstname.lastname@example.org.