By Don Hijar

The U.S. has been shaken by the recent financial crisis, but grain commodities have taken an even deeper dive. Corn and wheat prices have fallen roughly 50% or more from the historic highs of earlier this year. Corn prices peaked June 27, 2008 at $7.99 per bushel and in December was trading at $3.19 per bushel. Wheat peaked at $10.22 per bushel on June 26, 2008, and was trading at $5.10 per bushel in December. Soybeans, millet, sorghums and other grains have followed similar trends.

The carnage can be linked to several events. Grain prices have become more closely tied to oil prices. The dramatic plunge in oil prices has reduced the demand for corn-based ethanol production. In addition, record high grain prices lured non-traditional speculators to invest, further driving up the prices. As the prices started to fall, the speculators quickly pulled out of the market adding to the decline of an overleveraged market. A 5% increase of world wide grain production and better than expected yields in the U.S. has also contributed to the rapid decline of grain prices.

The competition for grass seed production acres has become fierce. In the last several years thousands of acres used for grass seed production have been plowed up due to the escalating costs of the grower's inputs such as fuel, fertilizer and chemicals, exceeding their returns. Record high grain prices in the last 12 months have encouraged farmers to convert acres previously used for the production of grass seed to corn or wheat. This caused a shortage of acres used for seed production and impacted the supply of grass seed on the market today.  

PASTURES AND FORAGE REPORT

Prices for items like orchardgrass, bromegrass, forage fescues and perennial ryegrass have skyrocketed. Though demand for pasture grasses has been lower in recent years, the supply has been depleted and prices have increased dramatically. Alfalfa and sorghum seed prices have also significantly increased due to the decrease in seed production caused by the high market prices for grain crops.

With investors fleeing from the commodity markets, we are seeing a more realistic market that is no longer infused with speculation. This will help grass seed growers be more competitive for production acres.

RECLAMATION AND CONSERVATION REPORT

Grass, forb and shrub seed used in reclamation, re-vegetation and restoration has also fallen victim to the intense competition for production acres. In several cases, so many acres have been plowed out that hard to grow, low-yielding species have little or no production left, resulting in higher prices. The effect on supply is also compounded by species that are wildland collections which can be casualties of natural disasters - flood, drought and fire. This can also cause shortages in the market.

The two major markets that drive the demand for reclamation seed in the western U.S. are natural disasters and government funded conservation programs. Forest and range fires in the western U.S. can place a large strain on the supply of native seed. Many experts predicted that 2008 was a prime year for forest fires. This prediction was based on several years of drought followed by heavy winter snows that provided moisture for prolific plant growth. This, in turn, increases the fuel load that provides ideal conditions for fires to burn thousands of acres. The number of acres in the U.S. that burned in 2008 was down 40% from 2007 and is 2 million acres less than the 10 year average (National Interagency Fire Center Nov. 28, 2008). This reduced the demand for these native species.

Government funded conservation programs for the Great Plains and the Midwest and Bureau of Land Management projects in the Great Basin combined are the nation's largest buyers of native seed. Funding for these programs has been very low on the priority list considering the historic economic crisis at hand, and the lack of support from the outgoing administration.

Two conclusions can be drawn: supply of seed used for reclamation has been hampered by competition for production acres, and demand is low due to lack of funding for government backed conservation programs. The low supply and low demand have combined to keep pricing for reclamation seed slightly lower than average.

TURF REPORT

The war for production acres is also being fought to secure turf grass seed production. The majority of the nation's Kentucky bluegrasses, turf type tall fescues, bentgrasses and fine fescues come from the Willamette Valley in Oregon and the region around Spokane, Washington. In 2007 and 2008 the Willamette Valley alone lost 100,000 acres of grass seed production to wheat and corn crops.

Kentucky Bluegrass -Pricing for Kentucky bluegrass seed is based on the common Kentucky bluegrass crop. Prices for bigger seeded, higher yielding varieties are based on the common prices. The elite, proprietary varieties are typically poor seed producers that yield a small return on the grower's investment. Growers demanding higher prices for their seed, paired with commodity markets has produced the most dramatic increase in pricing seen in 24 years.

Perennial Ryegrass - Prices generally higher due to decrease in production acres and the Perennial Ryegrass Bargaining Association (PRBA) demanding higher prices for the 2008 crop.

Tall Fescue - Prices slightly higher. Inventory carry-over from the previous year's crop kept prices from dramatically increasing.

Fine Fescues - Not a major crop so competition for production acres is even greater. Prices are dramatically higher.

Bentgrass - Several new varieties with a lot of money tied up in research make them relatively expensive in comparison to other turf grasses. Are typically hard to grow and yield poorly, however supply and demand are fairly consistent, keeping prices stable.