With seed companies set to release next year’s contract offers, Federated Farmers is encouraging herbaceous seed growers to use its input cost calculator.
The spreadsheet, available through the Feds News website, provides a valuable tool for comparing the relative merit of competing companies’ seed production contracts. Growers can evaluate both price and conditions in relation to their production costs.
John McCaw, president of the Federated Farmers Herbage Seed Subsection (FFHSS), said he worked with a group of growers to create the spreadsheet in response to concerns about a lack of profitability in the herb seed industry. Rampant inflation and static prices in the wake of a poor harvest have seen growers abandon herbaceous seed production, while others question its long-term viability.
Rather than charge a certain price for seed, the feds were eager to work with industry to understand the true cost of seed production and quantify the extent of the problem. In this, they have been very successful, says McCaw.
The group organized a roadshow, meeting 11 seed companies individually to present and discuss the spreadsheet. In any case they have been well received and the call for better prices and profitability has been widely supported.
McCaw is cautiously optimistic. “The industry has never been more united. We have had a number of similar conversations with all the major seed companies and we are all on the same page.
“The stage is set for real change, but we face headwinds in international markets.”
Strong supply, particularly from Denmark, combined with reduced demand due to Russian sanctions and drought in China, has seen international prices correct, while high transport costs and shipping delays continue to erode the competitiveness of growers New Zealanders. Of particular concern are high-volume international seed traders who dictate the price of commodity seeds, trading on volume and margin regardless of the cost of production. Put simply, international buyers won’t be paying for what New Zealand growers need at this point, McCaw says.
“New Zealand seed companies are now faced with the difficult balance of raising grower price in line with industry expectations, while not excluding New Zealand Inc. from international seed markets.”
Meanwhile, the homeowner market remains stable, returning relatively high returns to seed companies and providing more opportunities for growers to cope with low returns. However, an excessive increase in domestic property prices will incentivize the “grey” market of the non-certified seed trade to the detriment of the whole sector.
The message to growers is that there won’t be a quick fix. McCaw says the market will correct, but it will correct in a series of steps rather than one leap.
“We expect significant price increases for next season, but not in line with what the spreadsheet calls for. Consecutive price increases and reduced production costs are needed to return strong profits.”
He believes seed traders understand that profitable growers are the key to the success of their businesses.
“The current situation is unsustainable. The growers are suffering and our determination is strong. We have to keep up the pressure, but continue to work in partnership with the seed companies. Unfortunately, things are so out of place that it will take some time to to chill out .”
Growers should expect a considerable range in prices and terms between farms and between cultivars for the 2024 crop. The Cost of Production Calculator is a powerful tool for uniting growers and giving them the information they need to answer these price signals and optimize their crop rotation.
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