Apr. 25, 2019
Major seed companies have a transparency problem. Farmers can't look up and compare prices for some seeds. Some have turned to co-ops and others to Silicon Valley to try to disrupt the practice.
AUDIE CORNISH, HOST:
When it comes to online shopping, it's common practice to compare prices. But what if that information wasn't available and you were being charged more simply because of where you live? That's what one Silicon Valley company argues is happening to U.S. farmers when they buy seed and fertilizer. Harvest Public Media's Madelyn Beck reports on ways that the company is trying to disrupt that practice.
MADELYN BECK, BYLINE: Aaron Phipps grows 2,100 acres of corn and soybeans on a farm in eastern Illinois near the Indiana border. He buys a lot of seed and fertilizer, but finding out if he's getting the best price is a challenge.
AARON PHIPPS: We've got no point of reference when we go into negotiate with suppliers to say, hey, this is where the markets at. We had no clue.
BECK: So Phipps joined Farmers Business Network, a Silicon Valley startup now with nearly 8,000 farmers who pay around $500 a year to join. They then share information on things like invoices for seed and fertilizer and crop performance. In return, they get to see an aggregation of everyone else's data, and that can show who's being overcharged.
FBN found that entire regions of the country are paying more for the exact same seeds. For example, farmers in Illinois paid about $23 more per acre for corn seeds than Nebraska farmers. FBN estimates that cost them an extra $260 million just last year. Receipts showed that farmers in central Illinois and northern Indiana, where farms are extremely productive, are paying the most. FBN's Matt Meisner says that's a problem for neighboring farms there that aren't as productive.
MATT MEISNER: You know, we expected there'd differences. I think we were surprised at the magnitude and the impact that it has on growers.
BECK: The startup blames practices by big seed companies like Syngenta, Corteva and Bayer, which merged with Monsanto last year. While none responded directly when asked to explain about the price disparities, Bayer did highlight its high-performing seed traits and technical services it offers beyond seeds and chemicals. It stated, quote, "Farmers understand not only the bottom line but also the return on investment they get when purchasing a bag of seed."
Chad Hart teaches ag economics at Iowa State University. He says there are a lot of reasons the seed companies charge more in certain areas.
CHAD HART: One of the biggest ones has to do with the - just call it basic supply and demand.
BECK: A high demand can fetch a higher price especially when farmers don't know what other people are being charged. Hart says it's unlikely that seed price transparency will immediately change how farmers buy their seed in part because of brand loyalty and shipping costs. But he says as more farmers have incentive to shop around, seed companies will probably begin to change how they price the product.
HART: So I think you'll see adjustment on both ends.
BECK: Meanwhile, some farmers are challenging seed markets by joining farm co-ops. They help them pool their buying power. But the purchasing power of a few hundred farms is easily dwarfed by multinational seed companies' vast distribution of power. Add to that the many headwinds that farmers are facing, like trade uncertainty and labor shortages.
Increasingly, some are just buying cheaper seeds with fewer special traits that keep pests away and help keep plants healthy. The Farmers Business Network is now selling those cheaper seeds even as it collects data on the prices of more specialized ones. Illinois farmer Aaron Phipps says he trusts the Silicon Valley startup to give him good price data and thinks transparency will lead to changes.
PHIPPS: Now that we've seen what can be done, I think the genie is out of the bottle, and you can't stuff this toothpaste back in the tube.
BECK: Once you show someone there's a better deal out there, it can change the way they buy what they need.