<font color=blue> INDUSTRY BUZZ </font> Weather, Production Costs Boost Fall 2006 Grass Seed Prices

Unpredictable weather and increased production costs for the past two years have put a lot of pressure on the grass seed industry. In fall 2006, those factors combined to increase wholesale prices for perennial ryegrass seed by an average of 14-cents-per-pound over the same period in 2005.

Sources in the seed business say the overall yield of turf-type perennial ryegrass in the entire Oregon production area is down 20 percent from an average year, causing prices to spike as supply is not expected to meet demand.

Perennial ryegrass took three bad weather hits this crop year: fall 2005, spring 2006, and summer 2006. “Dry fall and winter conditions in 2005, with record freezing temperatures in November and February, actually killed a number of mature perennial ryegrass fields,” said Mike Hills, agronomist and sales manager for Seed Research of Oregon. “Many of these were high-yielding three and four-year-old fields.”
 
Spring gushed 45 days of rain, causing rivers and streams to overflow and flood many of the ryegrass fields. “Some fields were killed by the silt or washed away, while others were too wet for proper fertilization and herbicide programs,” Hills added.

At the start of summer, a critical period for blooming, pollinating, and filling out a seed crop, conditions were much drier and hotter than usual. The hot, dry weather caused many of the ryegrass flowers to dry up without creating seed.

While this year’s yield alone would have spurred a price increase, there are also other factors contributing to the increase.

The Price of Production

Though growers attribute erratic weather patterns to the price of ryegrass seed this season, they believe the increased price of diesel fuel, water, fertilizer, and labor costs collectively knock up the cost of production as well. “We believe there is a 20 to 25 percent increase in cost of production this season,” said Ralph Fisher, executive director of the Perennial Ryegrass Bargaining Association.

Freight costs have increased 10 to 15 percent due to the dramatic increase in the price of oil. In response to the elevated costs of diesel fuel, trucking and railroad firms have added a 23 percent fuel surcharge tacked on to the base rate for hauling.
 
An additional factor in the pricing increase is the lack of carryover seed from the 2005 harvest. “There is an extremely widespread seed usage worldwide, and demand is at an all-time high,” said Todd Bond, vice president and sales manager for Mountain View Seeds. “The demand was so great last year that the seed industry had almost zero carryover.”

Carryover is variable from year to year. On average, during a normal yielding year, 15 to 20 percent of the annual crop remains available as carryover for the following season. 

Business and finance models in the seed industry tell growers to produce just enough for fall and spring plantings, but it is hard to fortune tell—predicting exact production numbers and the demand there will be once the crop is harvested is almost impossible.   
 
Other Factors Influence Price

Oregon’s Willamette River Valley, known as the grass seed capitol of the world, spans longitudinally about 120 miles, from Portland in the north to Eugene in the south, and runs 40 miles wide. Seed Research of Oregon manages 30,000 acres of grass and seed productions—10,000 of those acres being perennial ryegrass.
 
While the climate—wet, mild winters and warm, dry summers—is ideal for seed production, the atmosphere and fertile river-bottom loam provides a comfortable niche to grow other, more profitable crops like berries, pears, wheat, and fuel crops. “There are only so many acres of good farmland,” Hills said. “Prices have to go up and yields have to increase in order to keep growers interested in producing grass seed.”

But Patrick O’Connor, regional economist for Central Willamette Valley, said the seed industry will not sell out to other crops. With Oregon having the second highest minimum wage in the country, the labor intensity required for berry crops is costly for growers.

“Strawberry growers have plummeted from not being able to get the labor needed for production due to labor being too expensive,” O’Connor added. “Grass seed growers do not require as many laborers because they use a significant number of machines to get the job done.” 

Though other crops are not an immediate threat, the Willamette River Valley has been harvesting something other than crops—housing developments. They are popping up on ex-farmland—a result of voters approving Measure 37, the property rights proposal stating that when land regulations reduce the value of property, the government must compensate the owner or dismiss the rule. As this regulation has collided with Oregon’s anti-sprawl laws, more and more prime farm acreage in the north is being flattened and turned into houses as Portland sags south bound into the Valley.
 
“Even the best farm soil with the highest income might get plowed under for houses if farmers’ families are tired of the hard farm life, and if the offering price is high enough,” Hills said.

With Oregon producing 99 percent of ryegrass seed in the United States and 60 percent of all cool season grass seed globally; a foothold of land in the river valley is essential to the life of the seed industry.

“There are some seed growers selling land to housing developers,” Fisher said. “Year to year it is minor, but over a 10-year period, it could be substantial.”

Sarah Ellis is an education outreach specialist for Ewing Irrigation.