Is it just me or am I getting that feeling of déjà vu? Higher grass seed prices are with us again, and when I say 'us' I mean the whole of the industry, from the seed producers to seed consumers.
It was only back in 2006/2007 that we saw huge increases in grass seed prices as a direct response to farmers receiving high cereal prices. Are things different this time, and are there greater forces at work that may affect the price you pay for your seed?
2012 is set to see some of the highest grass seed prices I have ever known in twenty years, and here are some of the reasons why.
For farmers to be interested in growing grass seed, the price needs to be equal to, or higher than the return from cereals. The fact remains that the risks are far greater growing grass seed than cereal seed, and unpredictable weather conditions at harvest in recent years has further deterred growers.
Growing grass seed is a complicated business and there are many market and environmental factors influencing the crop. Grass seed contract managers are fighting an uphill battle just to keep farmer growers interested in grass seed production. Grass seed production areas across Europe have declined by 30% for 2011 and 2012 harvests; taking the UK as an isolated case, areas have fallen by 60% since the mid 90s.
So, where do bio-fuels come into all this? In 2010, Russia stopped all its wheat exports worldwide due to widespread fires they had in their country. Wheat supply decreased and strengthened the price and gave all the grass growers a hard time.
In the same year, the world economy recovered from the investment crash of 2008/2009, which resulted in the need for more energy. The price of oil jumped from 35 USD to over 100 USD a barrel. Energy out of agricultural was becoming interesting again and, as a result, the price of wheat increased. On the back of this, various political programmes were developed to support an alternative way of energy production.
The UK has a Renewable Transport Fuel Obligation (RTFO), which is a requirement on transport fuel suppliers to ensure that five percent of all road vehicle fuel supplied is from sustainable renewable sources. The Government intends to set variable targets for the level of carbon and sustainability performance expected from all transport fuel suppliers.
In practice, the RTFO will mostly be achieved by blending bioethanol, biomethanol, biodiesel and biogas (derived from sources such as palm oil, oilseed rape, cereals, sugar cane, sugar beet, and reprocessed vegetable oil) with fossil fuels. The USA currently allocates 28% of its wheat harvest to bioethanol production. To put it into perspective, that is seventeen million tonnes!
The requirement that bio-fuel sources should be sustainable is apparently important. In South America and Asia, the production of bio-fuels for export has, in some cases, resulted in significant ecological damage, including the clearing of rainforest. There's also a question of ethics about growing crops to fuel cars. Wheat is the single most important source of protein for the global population. Anyway, enough of that, so I'll get off my soap box now.
In the future, the Department for Transport estimates that up to one third of the fuel in the UK transport sector could be produced from home-grown bio-fuels. It is, therefore, no surprise that there is huge competition for land to grow these renewable energy crops, and grass seed becomes low priority.
Surely, this can't be the whole of the story? Grass seed prices are influenced by the commodities market. The production of staple ingredients, such as creeping red fescues, tall fescues and perennial ryegrasses have, traditionally, been produced in large volumes in the United States and Canada. The combination of bumper harvests and large stock inventories can drive prices down but, currently, neither of these factors exist.
Even the European stock holdings and harvest expectations are very low. The dry conditions we've experienced across Northern Europe, from early this year, have not been good for grass seed production and, as sods law would have it, unsettled harvesting conditions are creating further challenges.
The usual scenario in a shortage is for the seed industry to have a knee jerk reaction by placing larger areas of production. 2011 crop is currently being harvested and expectations are low; 2012 areas are already contracted, and well below normal consumption requirements. The earliest possibility to rectify the shortages is the 2013 harvest. This seed will only be available for consumption in 2014.
Competition from other crops is here to stay, and the continuing thirst for energy will further drive up commodity prices. Grass seed companies will only be able to contract production by paying higher prices to the growers. More often than not, the better performing turf varieties tend to be lower seed yielders, which is an additional consideration for seed growers. They would prefer to produce high yielding forage type grasses, but these are of no use for us amenity boys. The concerning trend is that once a grower drops out of grass seed production, there are no new ones coming through with the expertise to grow the crop.
What does all this mean for the end user? Well, you will certainly be paying more for seed mixtures from all suppliers. The important point for grounds managers is that they review the supplied mixture components. Last season's mixture may not be the same this time round. If components are in short supply, you may not be supplied with what you were expecting. Euro Grass is concentrating on producing varieties from its portfolio that are needed by the market - not just producing bag filler items, but the better quality varieties to sustain its mixture programme.
Amenity grass seed varieties and mixtures, even at higher prices, still represent great value for money when you consider the long term investment and activities involved to supply the final product. The expectation for high quality natural grass surfaces has never been greater. Let's keep it that way!