Ag retail companies fear losing millions in sales as they start to hang on to inventory after farmers struggle to plant crops or take prevented planting options this growing season.
Farmers across the Corn Belt have had a rough planting season thus far, and many have either returned or switched seed maturities to account for fewer growing days. LG Seeds is one of many seed companies directly affected by how many acres of corn get planted across the U.S.
“Many brands in the industry would be too, so if acres are down 35%, that means sales are roughly impacted the same amount,” LG Seeds Brand Manager Andy Montgomery told Agri-Pulse.
The company provides corn, soybeans, sorghum and alfalfa seed for approximately 3 million acres across the country.
Montgomery said since some farmers switched corn maturities in the middle of planting, his dealers are backlogged on the seed return process. During a normal year, he said dealers would be 75-80% complete with the return process but said dealers are only about 40% done with returns this year.
He also expects fertilizer and chemical sales to be down and said there is going to be a “compressed revenue opportunity for many in the seed industry” coming off this year.
The Agricultural Retailers Association pushed USDA to extend prevented planted dates to no avail.
Richard Gupton, vice president of public policy and counsel for the Agricultural Retailers Association, thinks moving the dates back would not affect yields because of new seed technology and the development of stronger corn hybrids.
“When you look at a state like Indiana, the growing seasons for northern Indiana and southern Indiana are different but the prevented planting date is [the same],” Gupton says. “It doesn’t make a lot of sense.”
Prevented planting dates for corn have all passed. The latest was June 5 for parts of Illinois, Indiana, Ohio, and Michigan. The dates have also passed for soybeans with the only upcoming deadline being June 30 for various parts of Missouri and Kansas.
Millions of acres will likely go unplanted this growing season.
“I would guess 10 million acres of corn and 3 to 4 million acres of soybeans,” professor of farm management, at the University of Illinois, Gary Schnitkey told Agri-Pulse.
He added these are not widespread but very concentrated in areas of Ohio, South Dakota, and northern parts of Illinois and Indiana.
“Retailers (in those areas) are going to have very low revenues this year,” Schnitkey said. “(Companies) probably have not been able to cut down on labor forces or anything of that matter, so those retailers are going to face losses.”
In Ohio, some northwestern and western counties could see 30 to 40% of acres go unplanted, said Ben Brown, assistant professor of agricultural economics, at The Ohio State University.
Counties in western Ohio are the state’s breadbasket for corn and soybean production, according to last year’s USDA National Agricultural Statistics Service county estimates report.
“We’re looking at millions of dollars within the Ag sector just in northwest Ohio in lost economic activity,” Brown noted.
He also has received several calls recently from farmers thinking about planting soybeans as cover crops, since the seed cannot be returned.
“There’s interest in planting soybeans as a cover crop on prevented-plant corn acres,” Brown said. “(But) one of the challenges is, does that need to be planted in a certain way or mixed with some other forage?”
He said more clarification is needed from USDA. Brown anticipates a 10-15% increase in cover crop usage this year for Ohio.
Wet weather also caused planting headaches for Indiana farmers too. This has left crop input companies there wondering what to do with products.
Harold Cooper operates Premier Companies in southeast Indiana. The company sells seed, fertilizer, chemicals and other products.
“When a farmer takes prevented planting even earlier than he wanted to, then all of a sudden we’re left with that inventory,” Cooper tells Agri-Pulse. “There is a tremendous cost to us for that.”
Cooper says this includes costs of fertilizer shipments. The problem with fertilizer is when companies begin to run out of storage space, products being shipped upriver from New Orleans must go elsewhere.
“Price has to start encouraging that product to turn around to find a different buyer,” Cooper says. “So, you have start offering the product at a lower and lower price to get the barge to turn around and find a different market.”
Premier Companies also sold about 35,000 50-pound bags of corn seed this year, a 5,000-bag boost over last year. However, Cooper said his dealers tell him they will probably be taking back one-third of that seed.
He expects roughly a 30% loss in total sales this growing season and, compared to last year, anticipates 85% of dry fertilizer sold, 60% of nitrogen, 70% of seed corn, 70% of soybean seed and 70% of normal crop protection products.
Farmers Business Network, an independent farmer-member company, estimates 5% of U.S. farm acres will experience some sort of prevent plant this year. FBN polled 2,261 farmers May 23 by asking them how spring rains affected their crop plan. On a national level, 20% who responded, said they were thinking about switching acres to prevented plant.
FBN estimates farmers roughly spent $175 per acre on seed, fertilizer, and chemical costs in 2018. Out of a combined 180 million acres of corn and soybeans in the U.S., they anticipate nearly $1.5 billion of input costs potentially being left on the table this year.
FBN acknowledges the number of prevented plant acres are still unknown and knowing what farmers will return is critical to accurately measure the impact on input companies.
Schnitkey said the last time the Corn Belt saw these sorts of problems was back in 1995, but cautioned crop insurance programs were different then. However, he thinks this year’s growing season might be worse.
“It’s been an unusual year and I hope we don’t see too many of these,” Schnitkey said.
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