EDEN PRAIRIE, Minn. (DTN) -- Many seed companies report higher sales and quicker pay by farmers during the past four to eight weeks, as growers vie to lock in early discounts on a tighter supply of premium corn genetics and traits.

Numerous seed-production areas across the Corn Belt faced a variety of weather challenges, from early rains that delayed planting, gale-force winds that downed corn and buildings, extreme day/night heat during corn pollination, and early frost in the north, which added up to a corn-seed supply that experts estimate at 35% below projections.

"We all had a challenging production year across the entire seed industry. But what growers will find is that there's going to be plenty of corn to plant 93 to 95 million acres, but it may not be in the exact trait packages growers want," said Ben Kaehler, U.S. Seed Affiliates commercial leader for Dow AgroSciences.

"After a diverse and challenging year, we believe it's wise for growers to plant multiple hybrids to manage risk, and at least get some of the hybrids they want," Kaehler said.

CORN ACRES DOUBLE IN SOUTH AMERICA

To supplement the summer production shortfall, seed corn acres will double this winter in South America. While it's common for the major seed companies and larger regional brands to grow from 2% to 5% of their seed corn there, this year companies have pushed that total to 10% to 15%.

"We'll have a good supply of new products we launched a year ago," said Brian Humphries, national sales manager for Wyffels Hybrids. "We lined up additional acres in South America in late July to replace what we lost to high heat and high winds."

While the large companies wouldn't divulge production shortage specifics, Stine Seed Vice President of Sales Myron Stine was candid in his assessment of the overall production plight. "Some hybrids we achieved 100% to 120% of our production goals, and some were only 10% of what we wanted. That said, we do have enough corn to have a nice increase in sales for 2012."

To insure they are reliable suppliers, the major companies all plant more than they need for a given season. "Most companies plant 1.3 to 1.5 times their sales volume to help cover for unusual production years like this year," said Chuck Lee, head of North America corn for Syngenta Seeds. "We also plant across four or five states to spread our summer risk, then for winter production we supplement shortfalls or add more acres of products needed for a launch year."

Of course, with winter production comes higher costs, uncertain quantities and delivery times that can cut close to central Corn Belt planting dates -- but usually too late for most corn acres south of Interstate 70. Growers buying seed coming from winter production frequently hedge against the delivery unknown.

"If I want 100 units of hybrid X from winter production, it may be wise for growers to take hybrid Y that's in the warehouse now in case X doesn't make it," said Blake Sieker, who heads up seed industry strategy and research for Context Network.

"No doubt farmers sense a tighter supply, as they are ordering pretty heavy right now," Lee said. "Our orders are six to eight weeks ahead of last year. With growers who have already sold a portion of their 2012 corn at, say, $5.80, they're using cash to lock down prices. And they are buying the best traited hybrids they can get to not only protect their capability of risk reduction, but to stabilize their income as well," he added.

PRICES AND COSTS HIGHER

Higher commodity prices also increase seed company production costs, which are getting passed along in the form of higher 2012 seed costs. Monsanto announced in early September that corn seed price was going up 5% to 10%, because of higher production costs and improved performance.

"Most of us in the industry raised prices, but no one went up a sufficient enough level to cover our cost increases, driven by the Chicago Board of Trade prices," Lee said. "Most companies are looking at this like a grower -- long term. Though we may not pick up all our costs, we also realize that the price of corn probably isn't going to sustain at $6.50 to $7 levels. We can't recoup costs all in a single year."

If growers shop around, for now there are good early-pay incentives. "We've always had an aggressive early-pay program, such as our 9% discount for November that isn't tied to volume order," said Wyffels' Humphries. Ben Kaehler said their modest price increase reflects the value of the traits being offered. "We have some hybrids across all our brands that did not go up in price, as well as our top new performing hybrids that are up $10 to $20 per unit over last year."

Best strategy, if you haven't done it already, is to order early. "We always recommend customers sit down early with sales reps in order to get the right product on every acre," said Ryan White, production manager for Pioneer's Heartland business unit. "This year, the earlier you can do this, the better, due to so many choices -- from seed treatments to traits."

SOYBEANS ARE BRIGHT SPOT

This oilseed is the bright spot regarding top yields this year, as well as optimum seed production in most areas of the Midwest. "Performance did vary across the geography, and there were disease pockets like charcoal rot in Illinois, but overall soybean production looks phenomenal," Stine said.

The one production challenge most companies are dealing with is that earlier varieties for the northern Corn Belt were hit with frost. "The mid-September frost that occurred had a big impact on many later-planted, later-maturing varieties in northern Iowa, northern Nebraska, the Dakotas and parts of Minnesota," said Mark Kidnie, soybean systems lead for Monsanto.

ASK ABOUT SEED QUALITY

Finally, don't forget to ask about seed quality. For corn, due to pollination challenges, look for more variation in seed shape and size. "You may see more round kernels this year, but the overall quality of the seed is very good, due to rigorous testing and quality standards," White said.

Kaehler said that corn seed size would vary from larger rounds to smaller flats and everything in between. "This doesn't mean the seed is bad, as it must meet strict specifications for germination, purity, trait expression, etc. And it's been proven that there are no performance differences from small seed to large seed," he added.

White said germination might be more variable by maturity zone this year, which has been found especially in drier harvest areas of the South this year. "We do extensive testing on every lot of seed in order to exceed the level printed on the bag tag, so focus on tag germination levels."

Regarding soybeans, Kidnie said the variable weather across the Midwest affected seed size. "My gut feel is that soybean seed size may be a little bit smaller and we could see greater size variability from different production areas. Overall, there are no red-flag concerns among our seed production folks."

Kurt Lawton can be reached at kurt.lawton@telventdtn.com

(ES/SK)

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