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Simple? Economics
Drives Seed Prices
© 1997, 1998 Streamline Publications
No one can say with any authority
since the seed market, like other commodities is "futures" driven.
"My brother-in-law, Louie, invited me to participate in a killing in the commodities market. He failed to mention that it was me getting killed.
Commodity prices
are affected by speculation of what the demand will be, the actual demand, and
unforeseen pressures such as drought or a poor crop. Since seed production is
tied to weather, level of demand for a particular species or cultivar, acreage
available for harvest and the clairvoyance of the growers, it is a risky
business. Success in the seed market depends on
how well growers and production seed companies anticipate and respond to
cyclical market fluctuations. In the case of Tall Fescue seed the cycles for any
given production field fluctuate during the 10-year field certification period.
Lousy Economy
When the economy dropped off, so did
construction and the demand for turf seed. Growers found that they had
overproduced, ending up with a huge stockpile of seed that they couldn't sell at
a profit. The seed was offered on the open market at depressed prices and still
there were no buyers. Even with seed available at a low price there was no
significant increase in sales because the areas to be planted weren't increasing
in number or size.
Producers cut back production. New construction landscape contractors,
anxious to win contracts just to survive, bid low counting on having seed
available at depressed prices. Prime building contractors who see an
opportunity to perhaps secure landscaping at an even lower price hold off
contract awards. When the prime finally comes through after a months-long delay,
the bid price may not be met. Now that the market demand is
returning, prices rise. Seed price quotes can rarely be locked in for more than
a month and often for only a few weeks. Now that the economy is showing signs
of growth and construction increases, there is little Turf Type Tall Fescue or
Perennial Ryegrass seed available. High demand and low supply puts upward
pressure on prices for the seed stock that is available. Good news when supplies
are marginally down but bad news when there is nothing to sell. And when the
landscape contractor is caught in the squeeze profit margins are eroded or
eliminated.
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