While the world is often fueled by the laws of supply and demand, the ever-present need for quality turf seed in the green industry seems to outweigh what’s readily available. Worse, there may not be a quick end or an easy solution at hand.
Is the industry facing a seed drought? Bruce Jump, product and training manager of turf seed and athletic products at Winfield Solutions, says it depends on how one defines the term “drought.”
“If you mean will the industry be facing a shortage of certain varieties/species of seed, the answer is certainly ‘yes,'” Jump says. “Specifically, high-quality Perennial Ryegrasses will be challenging to find in 2014, as well as high-quality fine fescues with hard and chewings fescue especially difficult to find.”
Tall fescue is in better shape, he expanded, but the newest varieties will have inventory and availability challenges. Conversely, higher quality varieties of Kentucky Bluegrass are good from an availability standpoint, but prices are firming and should continue to firm up with new crops late this summer.
“In general, we are in much better shape than 2013,” Jump says. “Although, specific varieties may have short supply.”
Murray Wingate, turfgrass marketing and sales manager at Lebanon Turf Products, says it’s more of a shift of focus by growers in the production areas than a drought.
“After the housing crash, demand went from artificially high – driven by lots of home building, fueled by cheap money and bad loans – and there was an oversupply of seed, and resulting low prices,” Wingate says. “We may be now finding a ‘new normal’ for overall seed demand.”
The fickle dynamics of the seed market play a large role in availability as well, according to Jump. Unlike grain commodities such as corn, soybeans and wheat that are traded on open exchanges, turf seed production and pricing is more opportunistic, he says.
Given the flux in the turf seed industry, consolidation of companies has been an ongoing process – and not always to the betterment of the whole. Whether looking to access new clients and geographies, or to share technology and finances, bigger isn’t always better.
Murray Wingate, turfgrass marketing and sales manager at Lebanon Turf Products, has seen the bad side of this business model.
“The seed industry went through a major consolidation in the early 2000s when Agri Biotech rolled up 35 companies and then went bankrupt,” Wingate says. “That really hurt the industry for several years.”
Bruce Jump, product and training manager of turf seed and athletic products at Winfield Solutions, isn’t ready to make assumptions based upon recent activity.
“Scotts exited the professional business a couple of years ago, selling most of their inventory and varieties to other seed companies,” Jump says. “We just saw the DLF acquisition of Pickseed/Seed Research of Oregon deal this past summer. It’s hard to tell if this will continue or if this is even a trend.
“Seed companies must find valid reasons to acquire like buying companies with underperforming assets, getting better negotiating power with turf seed producers, access to new geographies or customers, or acquiring new technologies like proprietary varieties with unique traits.
“Although individual cases could be made for acquisition, I’m not sure if enough of those factors are present in the current state of our industry to see any kind of major consolidation in the next year or two like we saw back in the late 1990s.”
Kevin Morris, executive director of the National Turfgrass Evaluation Program, says the seed industry is difficult to consolidate.
“Since the seed industry is a business based on contacts, personal relationships, etc., it is fairly common for a few employees to leave one of the larger companies and start a new company,” he says. “I don’t see that changing anytime soon.”
“Growers of turf seed have choices and options,” Jump says. “For a grower, turf seed production can very easily be converted to other crops like wheat, vegetable and flower seed production, other small grains, and so on. Turf seed growers use these crops in a rotation as part of their regular crop–management plans. A grower’s decision to produce a crop is therefore based on the opportunity or spread between the cost and return on investment of producing an acre of one crop or another.”
Jump gave wheat as an example. When wheat was trading for $2/BU, the ROI spread between an acre of wheat and an acre of turf seed was in favor of turf seed and many growers chose to plant turf seed. Today, however, wheat prices are well above $6.00/BU. When a grower can sell wheat at that price, the ROI for an acre of wheat becomes very attractive compared to turf seed.
“What makes this situation difficult is that many growers sell future contracts, locking them into wheat and other crop positions for up to 12 months,” Jump says. “If/when wheat prices begin to decline, there will be a lag time before turf seed acre production begins to rise in response.”
Glenn Jacklin, production manager at J.R. Simplot Company – Jacklin Seed Division, saw the shift firsthand.
“After the housing collapse of 2008, demand dropped 50-70 percent overnight for all turf grass species. The result being the trade was caught with a crop in the barn and another one in the ground coming our way,” Jacklin says.
“Acres of production were throttled back in 2009-2010 as fast as was realistically possible. As the trade worked through the inventories and began to get supply in line with consumption, new plantings were difficult to find as growers had switched to other crops during the down turn. Those other competing crops have held their value, resulting in profitable alternatives for growers, making it difficult to compete and get new acres.”
Kevin Morris, executive director of the National Turfgrass Evaluation Program, says government regulations on fuel has also played a large role in the turf seed dilemma.
Ethanol, and the federal government requirement that a certain percentage of fuel contain ethanol, has significantly impacted turf seed production, in an indirect fashion, he says.
“Since corn is the preferred ethanol crop, its price has risen, thus moving farmers and ranchers to use more wheat for feeding,” Morris says. “Wheat is a crop that can be grown very well in the Pacific Northwest and with prices high, more farmers are opting to grow wheat, an annual crop, over grass seed, which is a perennial crop that has a minimum of three crop years in the field requested by seed companies. Having the crop in for three or more years limits the flexibility of a farmer, hence it makes grass seed less attractive compared to wheat, if wheat prices are high.”
Another crop that is starting to impact grass seed productions is filberts (hazelnuts).
“With the popularity of Nutella, a hazelnut/chocolate spread, the demand for hazelnuts is increasing,” Morris says. “Hazelnuts are also a great source of protein in the developing world. However, there simply are not enough hazelnuts trees worldwide, therefore farmers are looking to plant them, which take several years to develop and harvest. Obviously, these trees take away from grass seed acres, especially since the trees will be in place for many years.”
Spring sticker shock.
Because of light production out of the 2013 crop, Wingate says seed prices, in general, are higher than they were last year, and he expects them to stay about the same, or increase slightly on some species – like perennial ryegrass.
Prices for perennial ryegrass are the highest Jump has ever seen.
“Selling prices have increased over 40 percent since 2009,” he says. “Pricing for 2014 is increasing and will probably increase until new crops in August. Yields, along with demand at that time, will help determine pricing. Hard and chewings fescue pricing will continue to be high to higher with limited availability,” Jump added. “Bentgrass pricing will continue to be strong. Tall Fescues and Kentucky Bluegrass – especially elite varieties – are currently somewhat stable, but could firm and get stronger as inventories begin to run low in spring.”
Morris believes the seed industry is adapting and there’s a turnaround to low seed production coming.
“It may mean producing seed in new areas or more seed acres in other existing production areas like Minnesota,” Morris says. “However, if there is demand, the seed industry will figure a way to supply that demand. There is a significant amount of seed produced in other countries – Europe (Denmark) and other places like New Zealand – however, they generally cannot produce the quality of product we need, or the quantity.”
Jump looks to Oregon’s Willamette Valley – the world’s largest production area for cool-season turf seed species – for a possible industry forecast.
“The number of production acres are not unlimited,” he says. “There will always be competition for acres. Also, higher-quality production acres tend to be in the central and northern part of the valley where bents, perennial ryegrasses and tall fescues are located. In the southern valley, more annual ryegrass is produced ... meaning all production acres are not equal.”
Jump circles back to growers having a choice to plant other crops. Citing a report from Oregon State University, Jump pointed out wheat and grass acres mirror each other.
“Turf seed acres decline during periods of recession – housing/construction demand falls, grass seed prices fall, wheat is the crop of choice,” he says. “As the economy recovers and building continues to improve, grass seed acres are expected to recover. Look at the 1980s and 1990s ... excellent years for turf seed production.”
Like Morris, Jump isn’t keen on European turf seed as a substitute, specifically perennial ryegrass, which tends to be lighter in genetic color and has different disease traits than its American counterpart, he says.
“There will always be seed available to support the industry,” Jump says. “What may not be available – or be short in supply – is high-quality seed, along with high-quality varieties. Anytime there is a shortage, available quality begins to decline. Buyers take the high-purity, Poa free, certified seed first. Then the substitutions begin."
If all goes according to plan, Jacklin says supplies will be much improved by summer.
“I believe we are in good shape coming into spring 2014 ... the crops in most of the production areas went into the winter in good shape and appear to be coming out of winter in good shape,” Jacklin says. “We experienced some winter damage to baby fields, but for the most part, I think we are set up for good crops to come off in 2014. That can all change in 90 days if we miss out on rains or have poor pollination conditions, but at the time ... things look fine.
“(The) next five months will be tight, but new crops will begin to hit the shelf by mid-July to early August and, if crop predictions are accurate and yields come off normal, this fall we will be in good shape to meet the consumption.”
Those seeking positive thoughts to make it through can look to author Norman Vincent Peale, who wrote “Every problem has in it the seeds of its own solution. If you don’t have any problems, you don’t get any seeds."
The author is a freelance writer based in Cleveland.