NOTE: There's a great graph with this important article showing soybean seed prices steadily climbing over the past decade while yields have hardly budged.

EXTRACTS: Seed prices for central Illinois farmers have nearly tripled since 2000...

Seed companies such as Monsanto Co. say the increase in price is due to advances in seed biotechnology that help farmers achieve higher yields.

Yet soybean yields have hardly risen. In fact, over the past decades yields have grown less than 1 percent, according to research by the University of Illinois at Urbana-Champaign.

...studies done by the University of Illinois show Roundup Ready 2 Yield has not delivered on its promise of higher yields.

"We did not observe any kind of additional step-wise increase in yield for the extra money that was spent on that technology."
---
---
For Illinois farmers, seeds prices soar
Savannah Ziegelbauer
Medill Reports, March 10 2010
http://news.medill.northwestern.edu/chicago/news.aspx?id=161289

Illinois farmers have been enjoying higher profit margins in recent years because of a steady climb in commodity prices. But their costs have been rising too, particularly when it comes to buying seeds.

Seed prices for central Illinois farmers have nearly tripled since 2000, while the U.S. inflation rate over the same period rose just 28 percent.

Seed companies such as Monsanto Co. say the increase in price is due to advances in seed biotechnology that help farmers achieve higher yields.

"The seed of 10 years ago is not the seed of today," said Mimi Ricketts, a public affairs representative for Monsanto. "Over that amount of time, we've invested millions and billions of dollars into creating new seed technology for farmers that enable them to basically get a greater profit off their farm."

Yet soybean yields have hardly risen. In fact, over the past decades yields have grown less than 1 percent, according to research by the University of Illinois at Urbana-Champaign.

There doesn't seem to be a lack in seed innovations. DuPont has its Drought I and Drought II initiative, a seed designed to grow in areas with little water. It also is trying to launch an insect-control product in 2012 known as Cyazypyr. Asgrow, which was acquired by Monsanto in the late 1990s, has launched higher-yielding DeKalb seed brands for 2010.

According to Dennis Thompson, CEO of Illinois Crop Improvement Association Inc., Monsanto pioneered the biotechnology movement in seed development back in 1996 with its release of Roundup Ready.

"It was the first technology that would allow the soybeans to be sprayed with a relatively safe weed control material that would kill the weed, but would not harm the beans," Thompson said.  

The U.S. has smoothly adopted this technology, Thompson said. In fact, 95 percent of the soybeans grown in the U.S. are now grown from genetically modified seeds.

In 2009, Monsanto released a seed called Roundup Ready 2 Yield, designed to replace the original Roundup Ready. The new seed is expected to do the same job as the original Roundup Ready but produce a 7 percent to 11 percent increase in yields.

The research and development investment into creating this enhancement is the reason why Monsanto raises its prices, Ricketts said.

"In 10 years we have gone from introducing single products to double-stacked products to triple-stacked products. So as we have introduced more products to the market, the value of those products has changed," Ricketts said.

Yet studies done by the University of Illinois show Roundup Ready 2 Yield has not delivered on its promise of higher yields.

"The Roundup Ready 2 Yield, yielded basically the equivalent to the better Roundup Ready variety," said Vince Davis, University of Illinois soybean specialist. "We did not observe any kind of additional step-wise increase in yield for the extra money that was spent on that technology."

Davis is citing the results of a seed-testing program run by the crop sciences department at the University of Illinois at Urbana-Champaign. The program tests over 650 seed varieties at 13 locations across the state.

Seed choice is the most important business decision a farmer can make, Davis said.

"On any given year you can influence your yield by 10 to 30 percent just on seed selection," Davis said. He explained that in order to increase yields on the higher end of the spectrum, the weather must cooperate. Certain seeds are modified to interact better with certain types of weather.

And lately commodity prices have been on the rise. In fact, soybean prices nearly doubled over 10 years to a projected $9.25 per bushel in 2010 from $4.70 per bushel in 2000, which translates into a higher profit margin for farmers.

Similar to the way the airline and hotel industries price their products based on seasonal demand, seed companies are able to price seeds based on demand and the going rate for the end commodity grown.

"We consistently review our products," Ricketts said, "so we assess the ongoing value and we adjust those prices based on the farmer experience and the local performance that those products deliver."

In other words, seed prices can change at any point in time throughout the year, leaving the farmer to guess how much he is going to face in seed costs.

And since soybean seeds don't hold and store well, farmers are not able to purchase seeds in bulk if prices are low. Each fall they must buy new seeds for the upcoming spring when prices might be potentially higher.

But ultimately, Thompson said, seed purchasing decisions are up to the farmer.

"People still need to be good consumers," he said.

[Medill Reports is written and produced by graduate journalism students at Northwestern University’s Medill school.]