Purchasing Decisions

Save Money by Spending a Little More – Why price shouldn’t be your only focus when purchasing

By: Alex Foeller

Strange as it may sound, the season to purchase your seed corn for 2016 is already here. Stranger yet, you may want to consider factors other than price when making the final call on which seed to purchase.

Many consumers in a variety of industries make decisions based on price alone, but growers should not be among them. This is particularly true in an agriculture market that is currently experiencing roller coaster commodity prices that aren’t nearly as strong as they once were, even on their best days. It’s tempting to use these slim margins as a reason to buy bottom-dollar seed, but let’s look at this logic a little bit closer.

We tend to overlook the long-term decisions in our business, especially when crunch time hits and we’re making big spending decisions with a lot of pressure from salesmen. The most common tradeoff we tend to miss is a simple “cost-vs.-yield” analysis. If a bag of seed corn costs me $125, that seems like a good deal, especially compared to a bag that doesn’t seem too different that costs $175. $50 in savings sounds pretty good to me today! But what am I giving up to get that $50 today? Assuming that those bags plant 2.5 acres apiece, all I need to gain from that top-end hybrid is an extra $20 per acre. At $4.00 per bushel, that’s just 5 extra bushels per acre. Do you think a top-end hybrid placed on the right ground could beat a cheap hybrid by more than 5 bushels? Absolutely! Suddenly giving up that $50 today sounds pretty good in the long run.

Producers who grow for livestock also need to consider the quality in their yields, and not just the quantity. Even if yields are equal among hybrids, quality is usually the driving factor of profits for livestock operations. Is the starch readily available to livestock? Do you have a narrow or wide harvest window? How long is the optimum ensiling time? These factors are much harder to translate into dollars and cents, but each one of them can have a profound impact on the bottom line – both for good, or for bad. The hybrids that are backed by research to promote feed efficiency and give you flexibility for harvesting and feeding likely come with a higher cost up front. But that cost can pale in comparison to the difference those hybrids make on your farm.

Beyond the money that we see in direct costs and revenues, we also need to think about the other factors that go into seed selection. It may not seem like it, but they also have a monetary value. For example, replant policies serve as a great insurance policy down the road. But on low-cost seed, many companies decline to offer replant because they are making less money on each bag. Likewise, consulting services provided by your seed dealer offer a tremendous amount of knowledge that can save you thousands of dollars when applied correctly. These experts know your area and even your fields as well as anybody but you. But again, low-cost seed sellers likely can’t offer this valuable resource because the margins on each unit are so low for them.

We all know that every season is different, and all purchases aren’t the same. But the principals we use to make business decisions shouldn’t change: don’t let price be the only thing you use when determining what seed to buy – there’s so much more that needs to be considered!