LIKE ALL OF AGRICULTURE, the turf and forage sector has long faced ups and downs. However, the forage business eems to have a unique flare for combustion – taking off like a rocket and crashing in flames. Grass seed prices are about half what they were a year ago. As prices have tumbled and credit has “crunched”, there is speculation that some companies are short cash and may need to break contracts with growers. If true, growers are naturally disgruntled.

Growers are exploring other crops in Oregon and it is estimated 5-10% of grass acreage could go into wheat. Given the low prices for turf and escalating costs, it is a tough time for growers. “And grass seed farmers face higher production costs with the phased-in ban on field burning,” says Roger Beyer, Executive Director of the Oregon Seed Council.

While no one from the Oregon Hay and Forage Association would comment, there is talk that some individuals are thinking about the merits of forming a marketing co-operative or pool. Certainly if left with no payment, some growers could be in the position of marketing their seed, which may create further price turmoil.

It comes at a time when the market is very slow. With construction quiet and purchasers loathe to hold inventory, forward buying has dried up. Gary Whiteaker of Verdant Partners notes some of the less obvious reasons for the decline in turf sales:

• Seed coating (encrusting) of turf grass seed has reduced the number of seeds per pound, and therefore the quantity needed to fill a container that is filled by weight. This practice of coating grass seed is currently limited to one major supplier. A larger conversion to this practice would have a further reduction in the quantities needed to meet the demand.

• Golf courses in the desert Southwest have reduced water usage by not irrigating the rough and therefore no cool season grass is being used for over seeding in those areas that have now been returned to desert.

• Golf courses and other turf managers have tightened their budgets, therefore grass seed purchases are being reduced.

• Water restrictions have also impacted grass usage and over seeding by homeowners and commercial landscapers. Some cities may even pay homeowners to take out their lawns to reduce water consumption.

“Another factor that seems to be playing out has been the lack of speculative buyers, who in the past would see that the price of grass seed was approaching or going below the cost of production, and step in and purchase seed with the anticipation of holding for many months until the prices return to normal. Historically, these spectators would effectively have established a price floor (or a stabilizing force) for the grass prices. Without this stabilizing force, the seller’s only choice to regain order is to beat the lowest price, and therefore the ‘race to the bottom’ begins,” Whiteaker continues.

However, some of the industry find the cycle familiar. “It’s happened before – it happens every seven years,” says Dennis Combs, an Ag Consultant in Oregon and long-time industry veteran. He also notes that in his lifetime, he has seen five attempts to consolidate the business into a single large entity and expects it will happen at least once more. “Some great people have tried,” he says, “but it won’t work out.” He is more concerned about the cash crunch and its effect on the business: “The real problem with this one is that it is coupling seed cyclical pricing with the economic crisis. If the economy crash it is a true one, we won’t come out of it.”

 

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