What to Consider With Early Seed Discounts

Encyclopedia Article

As one growing season ends, plans are already being made for the next season. One key management decision for producers is hybrid selection. During the fall, seed companies encourage producers to purchase hybrids by providing cash discounts. Most companies offer the greatest discount (8 to 10%) if hybrids are selected by approximately mid-November. Producers can lock in early seed discounts without locking into purchasing a particular hybrid. While this discount is a substantial amount of money, especially with increasing seed costs, you do not want to move too hastily when selecting hybrids.

In the ICM News article, Choosing corn hybrids, we discussed the huge variation in yield levels of today's hybrids (see Figure 2). Every location showed a significant separation between hybrids in the trial. For example, in 2005, the yield differential between the top yielding hybrids and the lower yielding hybrids ranged from 30 to 54 bushels per acre based on location.

Producers and agronomists must spend time studying hybrid research trial data to see which hybrids perform consistently well across numerous locations. Just because a hybrid performs well on a producer's field one year does not mean it will produce high yields the next year. That may seem illogical. Consider, though, that no matter what is done, the dynamics of a particular growing season can never be reproduced. The environment that the seed is placed into next year will certainly be different than the previous year. This is why using regional data is better compared to single-location data when making selection decisions. Single-location information is a good measure of performance for the current growing season but is much more reliable as a predictive component after data from several locations are combined into regional analyses. If a hybrid performs consistently among the top hybrids at all testing locations, then it will likely do well the following year. If hybrid performance is not consistent across numerous locations, we would not necessarily expect it to do well the next year even if it did well in one field, in one county, etc. of the current year.

To manage risk, it is best to select hybrids by using performance data. Iowa State University posts yield results at http://www.croptesting.iastate.edu within a few days of the harvest date. Data from corn, soybean, alfalfa, and small grains variety tests can be accessed, free of charge, by anyone. Selecting hybrids using these data will give you a much greater probability of having good hybrids the next year.

So how much money does purchasing seed early save? Let's look at a calculation example:

If we are purchasing a bag of $200 seed and receive an early seed discount of 10 percent, this bag of seed now costs $180 (savings of $20 per bag). If that bag of seed has 80,000 seeds it will plant approximately 2.3 acres (at a 35,000 seeding rate) at a cost of $78 per acre.

Without the early seed discount, planting an acre would have cost $87. The discount reduces the cost by $9 per acre.

Yet, if the producer receives $3.00 per bushel of corn at the end of the season, this initial $9 savings only equates to a 3 bushel difference. Therefore, if producer A received a discount but producer B did not; producer B would need to have a final yield that is 3 bushels greater to have an equal return. (see Figure 1)

Diagram of yield calculations

Figure 1: Calculation example.

As mentioned earlier, top yielding hybrids can easily out yield other hybrids by 30 bushels or more per acre. An early seed discount will only help to 'pay for' a difference of a few bushels; it will not make up for a poorer hybrid.

The monetary disadvantage from purchasing poor-performing hybrids is significant. It is far better to use current yield trial data to select consistently high performing hybrids than to select one based on hearsay or company promotions.

Portions of this text, written by Lori Abendroth, Roger Elmore, and Jim Rouse, originally appeared in two issues of the Integrated Crop Management extension newsletter on pages 241-242 of the IC-496(25) - October 9, 2006 issue and on page 249 of the IC-496(26) - November 13, 2006 issue.

Iowa State University Agronomy Extension Corn Production