Delta and Pine Land Co. is moving to a fixed-count seed package beginning next year to simplify the cost-per-acre calculation of its cotton seed. The change comes as varying quantities of seed in a DPL variety led to cost-per-acre issues for some northeast Louisiana cotton producers this spring.
The cotton industry has long sold seed in 50-pound bags with the general understanding that there were differences in seed counts per bag. Variation in seed size can result in an actual seed count of plus or minus 10 percent to 15 percent from the estimated seed count, which can then affect per acre seed costs by the same amount.
If the variation is distributed equitably among regions and growers, however, the law of averages should prevail, with everybody getting some of the large seed and some of the small seed.
Imperfections with this traditional system of pricing seed came to the forefront several years ago after the industry moved to a technology fee pricing structure based on regional seed drop rates. The cotton industry has since been looking to address the issue.
D&PL plans to make the switch to fixed-count seed packages in 2004, with each bag or bulk box containing a specific number of seeds. In May, Stoneville Pedigreed Seed Co. announced similar intentions.
“What growers are saying is they want total equality — that the seed and technology costs per acre be exactly the same for one farmer as it is for his neighbor. And we understand that,” said Randy Dismuke, D&PL senior vice president and head of U.S. operations. “However, the only way we see of getting closer to that goal is a fixed-count seed package, which we should have in 2004.”
Northeast Louisiana crop consultant Roger Carter agreed that a fixed-count seed package would go a long way to minimizing inequities in cotton seed pricing. But he'd like for D&PL to revisit inequities which occurred to growers who planted DP 555 BG/RR in 2003.
D&PL announced a price increase on the new high-yielding, high-quality cotton variety this winter. D&PL said the variety's value comes from high-yield potential combined with small seed size and consequently more seeds per bag, which resulted in the premium.
Carter says he understood that the average seed size in the variety would be 6,400 seeds per pound and vary between 6,000 seeds per pound and 6,800 seeds per pound — which is plus or minus 6 percent from the average. In 2003, however, seed size in DP 555 BG/RR varied from 5,400 seeds per pound to 7,200 seeds per pound, an almost 15 percent variation.
In addition, Carter said, his growers received mostly large-seeded lots of the variety. “I talked with several consultants from other states and the situation varies,” Carter noted. “In some areas, evidently they got primarily all small seed. In other areas, it was a mixture. In our area, all bulk seed was large seed and only a very small percentage of bagged seed had more than 6,400 seeds per pound. D&PL assured us it was shipped randomly, but we have not seen any figures to substantiate that.”
Carter said that when farmers began calculating the variability, they began requesting the smallest possible seed from their dealers. “In fact, some actually canceled orders at one dealer to buy from another who had smaller seed.”
But only a handful of growers were able to do that, according to Carter. “About 75 percent of our cotton growers who wanted to plant 555 couldn't get average-sized seed or smaller. As far as we can determine, all of the bulk boxes sent to our area contained seed sizes of 5,500 and 5,400 seeds per pound. There were no batches of smaller seed in bulk in our area.”
That meant his clientele spent more money than they intended for seed, according to Carter. One large operation estimated that large seed cost them $20,000 in additional seed and technology costs.
“The price of seed and technology for DP 555 BG/RR is approximately $7.35 a pound,” Carter said. “The range of seed size ran from 5,400 seeds per pound to 7,200 seeds per pound. Farmers unfortunate enough to only get the larger seed would have to plant 30 percent more seed and spend $12 more per acre than those fortunate enough to procure the smaller seed (7,200 seeds per pound),”
Carter asked for relief from D&PL for those who got the large seed. “Not every farmer should receive a rebate. It should only be given back pro-rated based on size above a 6,400 seed per pound count. Most dealers kept up with lot numbers so that farmers would know what seed size they bought.”
Carter said a recent meeting with D&PL produced “an excellent exchange of ideas and information, but we could sense that D&PL would make no changes.”
Carter hasn't officially contacted Monsanto about adjustments the company could make in technology fees for growers who received only the larger seed. Monsanto does apply a cap to its technology fees by region.
Dismuke noted that variability of between 5,400 seeds per pound and 7,200 seeds per pound for DP 555 BG/RR “is not something we consider out of the ordinary. There are a number of factors that we can't control that lead to this range in counts within a variety, including plant physiology and the environment during production.
“In 2003, we sold seed in 50-pound bags and 2,000-pound Boll Boxes containing the appropriate weights. As a management tool for the grower, each container included an approximate number of seed per pound for each lot,” Dismuke adds.
As to whether or not northeast Louisiana received a larger share of large seed than other regions, Dismuke noted, “We looked at the DP 555 BG/RR that we shipped across the United States, in both bags and Boll Boxes, and northeast Louisiana was treated no differently than any other area. DP 555 BG/RR was no different in seed size variation than any other variety or in previous years.”
Dismuke added that as growers raised some concern, he looked at data comparing seed sizes packaged in bags and boxes. “After looking at that in detail, the data indicates that northeast Louisiana got very similar range of sizes of DP 555 BG/RR as other parts of the country.”
“In 2003, we handled packaging as the cotton seed industry has for years, selling seed by the number of pounds in a bag or box,” Dismuke explains. “The question we've been pondering is, ‘How do we get to something more equitable than that?’
“We accept that the system can be improved going forward. We think that because of the changes in technology and advances in agronomic management, the whole cotton industry is ready for fixed-count seed packaging, much like that used in the seed corn industry. That's our way to make the price of seed per acre equitable.”
Carter said Louisiana cotton producers probably wouldn't have complained about large-seeded lots of DP 555 BG/RR had D&PL not raised the price of the variety, saying it was doing so because its small seed brought more value to farmers.
The price hike — to $119.95 per bag — made the variety $30 to $40 higher than most varieties, noted Carter.
Nonetheless, a higher-than-expected percentage of DP 555 BG/RR was planted in northeast Louisiana this year “because of what we had seen last year in product performance and our understanding that the average seed size would be 6,400 seeds per pound,” Carter said.
Carter noted that if several other new, high-yield cotton varieties perform as well as or better than DP 555 BG/RR this year, “growers will remember this and run to those varieties. The bottom line occurs, however, on profit per pound of production,” Carter said. “And thus far, we have a lot less money in the other varieties. I hope for cotton farmers' sake that DP 555 BG/RR does perform. Otherwise, we will get hit with not only higher costs, but less income.”
Dismuke says D&PL is aware that the bottom line is the driving force in grower decisions and says the company works within that framework as well. “We are always looking for new ways to bring value to our producers. That value comes in different forms. It can be a new variety like DP 555 BG/RR that offers increased yield potential or a new packaging concept like Boll Boxes or fixed-count seed.”
Fixed-count seed packaging should be available in 2004 for all D&PL cotton varieties sold in the Delta, according to Dismuke. Several different bag sizes will be used and fixed-count seed will also be available in bulk boxes.
“Fixed-count seed packaging should address the issues raised in northeast Louisiana in 2003,” Dismuke says.