Seedless

While the world is often fueled by the laws of supply and demand, the ever-present need for quality turf seed in the golf industry seems to outweigh what’s readily available.

Worse, there may not be a quick end or an easy solution in sight.

Is the golf industry facing a seed drought? It all depends on how you define “drought,” says Bruce Jump, product and training manager of turf seed and athletic products at Winfield Solutions.

“If you mean will the industry be facing a shortage of certain varieties/species of seed, the answer is certainly ‘yes,” Jump says. “Specifically, high-quality perennial ryegrasses will be challenging to find in 2014, as well as high-quality fine fescues with hard and chewings fescue especially difficult to find.”

Tall Fescue is in better shape, he adds, but the newest varieties will have inventory and availability challenges. Conversely, higher-quality varieties of Kentucky Bluegrass are good from an availability standpoint, but prices are firming and should continue to firm up with new crops late this summer.

“In general, we are in much better shape than 2013,” Jump says. “Although specific varieties may have short supply.”
 

Market driven

The current scenario is less of a drought, and more a focus shift by turf seed growers.

“After the housing crash, demand went from artificially high – driven by lots of home building, fueled by cheap money and bad loans – and there was an oversupply of seed, and resulting low prices,” says Murray Wingate, turfgrass marketing and sales manager at Lebanon Turf Products. “We may be now finding a ‘new normal’ for overall seed demand.”

The seed market’s fickle dynamics play a large role in availability, as well. Unlike grain commodities such as corn, soybeans and wheat that are traded on open exchanges, Jump says turf seed production and pricing is more opportunistic.

“Growers of turf seed have choices and options,” Jump says. “For a grower, turf seed production can very easily be converted to other crops like wheat, vegetable and flower seed production, other small grains, and so on. Turf seed growers use these crops in a rotation as part of their regular crop-management plans. A grower’s decision to produce a crop is therefore based on the opportunity or spread between the cost and return on investment of producing an acre of one crop or another.”

Take wheat as an example. When wheat was trading for $2/BU, the return on investment (ROI) spread between an acre of wheat and an acre of turf seed was in favor of turf seed and many growers chose to plant turf seed. Today, however, wheat prices are well above $6/BU. When a grower can sell wheat at that price, the ROI for an acre of wheat becomes very attractive compared to turf seed.

“What makes this situation difficult is many growers sell future contracts, locking them into wheat and other crop positions for up to 12 months,” Jump says. “If/when wheat prices begin to decline, there will be a lag time before turf seed acre production begins to rise in response.”

Because fewer acres are being dedicated to turf seed, growers are in the enviable position to negotiate favorable deals – driving up the price of turf seed.

“After the housing collapse of 2008, demand dropped 50-70 percent over night for all turf grass species, the result being the [seed] trade was caught with a crop in the barn and another one in the ground coming our way,” says Jacklin, production manager at J.R. Simplot Co. – Jacklin Seed Division. “Acres of production were throttled back in 2009-10 as fast as was realistically possible. As the trade worked through the inventories and began to get supply in line with consumption, new plantings were difficult to find as growers had switched to other crops during the down turn. Those other competing crops have held their value, resulting in profitable alternatives for growers, making it difficult to compete and get new acres.”

Government regulations on fuel – specifically alternative fuels – has also played a large role in the turf seed dilemma. Ethanol, and the federal government requirement that a certain percentage of fuel contain ethanol, has significantly impacted turf seed production, in an indirect fashion.

“Since corn is the preferred ethanol crop, its price has risen, thus moving farmers and ranchers to use more wheat for feeding,” says Kevin Morris, executive director of the National Turfgrass Evaluation Program. “Wheat is a crop that can be grown very well in the Pacific Northwest and with prices high, more farmers are opting to grow wheat, an annual crop, over grass seed, which is a perennial crop that has a minimum of three crop years in the field requested by seed companies. Having the crop in for three or more years limits the flexibility of a farmer, hence it makes grass seed less attractive compared to wheat if wheat prices are high.”
 

Sticker shock

Because of light production out of the 2013 crop, seed prices, in general, are higher than they were last year, and Wingate expects them to stay about the same, or increase slightly on some species – like perennial ryegrass.

Perennial ryegrass prices are the highest Jump has ever seen.

“Selling prices have increased over 40 percent since 2009,” he says. “Pricing for 2014 is increasing and will probably increase until new crops in August. Yields, along with demand at that time, will help determine pricing.”

Hard and chewings fescue pricing will continue to be high to higher with limited availability, Jump says. “Bentgrass pricing will continue to be strong,” he says. “Tall fescues and Kentucky Bluegrass – especially elite varieties – are currently somewhat stable, but could firm and get stronger as inventories begin to run low in spring.”

Morris believes the seed industry is adapting and there’s a turnaround to low seed production coming.
 

“It may mean producing seed in new areas or more seed acres in other existing production areas like Minnesota,” he says. “However, if there is demand, the seed industry will figure a way to supply that demand. There is a significant amount of seed produced in other countries – Europe (Denmark) and other places like New Zealand – however, they generally cannot produce the quality of product we need, or the quantity.”

Jump looks to Oregon’s Willamette Valley – the world’s largest production area for cool-season turf seed species – for a possible industry forecast.

“The number of production acres are not unlimited,” he said. “There will always be competition for acres. Also, higher-quality production acres tend to be in the central and northern part of the valley where bents, perennial ryegrasses and tall fescues are located. In the southern valley, more annual ryegrass is produced ... meaning all production acres are not equal.”

Jump circles back to growers having a choice to plant other crops. What will they choose and why? Citing a report from Oregon State University, Jump points out that wheat and grass acres mirror each other (see Chart 1 above).

“Turf seed acres decline during periods of recession – housing/construction demand falls; grass seed prices fall; wheat is the crop of choice,” he says. “As the economy recovers and building continues to improve, grass seed acres are expected to recover. Look at the 1980s and 1990s ... excellent years for turf seed production.”

Like Morris, Jump isn’t keen on European turf seed as a substitute, specifically perennial ryegrass, which tends to be lighter in genetic color and has different disease traits than its American counterpart.

“There will always be seed available to support the industry,” Jump says. “What may not be available – or be short in supply – is high-quality seed, along with high-quality varieties. Anytime there is a shortage, available quality begins to decline. Buyers take the high-purity, Poa free, certified seed first. Then the substitutions begin. Uncertified for certified. A ‘trace of Poa’ for Poa free. And so on.

Morris adds he’s not seeing this in the perennial ryegrass market. “I’m buying all the elite varieties, certified, Poa free perennial ryegrass I can get my hands on. It is not easy as suppliers and inventories are extremely tight,” he says.

If all goes according to plan, Jacklin believes supplies will be much improved by summer. “We are in good shape coming into spring 2014 ... the crops in most of the production areas went in to the winter in good shape and appear to be coming out of winter in good shape,” he says. “We experienced some winter damage to baby fields, but for the most part, we are set up for good crops to come off in 2014. That can all change in 90 days if we miss out on rains or have poor pollination conditions, but at the time ... things look fine.”

The next five months will be tight, though, but new crops will begin to hit the shelf by mid-July to early August, Jacklin says. “If crop predictions are accurate and yields come off normal, this fall we will be in good shape to meet the consumption.”