All segments of the California alfalfa seed industry — producer, conditioner, marketer, or breeder — must seek higher-value traits for their product, focus on improving yields, and perhaps lobby for crop supports.
That was the message of Paul Frey, president of Cal/West Seeds, Woodland, at the recent California Alfalfa Seed Production Symposium held in San Joaquin.
Key to all segments is realization of the need for higher value genetics. The stock-laden industry has many “look-alikes,” so margins are down as seed companies make deals without capturing true value, which presently is not perceived by buyers.
Frey urged breeders to bring in innovative and desired traits for greater value to producers of both alfalfa hay and seed. Heavy inventories suggest a reduction in California alfalfa seed acreage this year.
Seed producers can't afford to relax the quest for higher yields, he warned. “You hear it over and over again, but you still cannot make up for poor seed yields with higher prices, so we need the cultural practices and breeding programs. Without attention to peak yields, we don't have a very good future.”
And from Canada to Mexico, he reminded, the American industry still has to figure out how to deal more effectively with its perennial nemesis, the lygus bug.
The California crop for 2000 averaged 483 pounds per acre from 75,200 acres for a production of 36.3 million pounds of clean seed worth nearly $49.4 million.
The crop is down materially from 1999, when 527 pounds per acre from 100,000 acres gave a crop of 52.7 million pounds valued at $82.3 million. However, the 2000 production was greater than the 1992 through 1998 crops, which averaged about 25 million pounds.
California remains the nation's top producer state, with most of the production non-dormant varieties and exported.
“Realizing the percentage of our business that is exported, we have to be competitive on prices, or we may be beat out by Australia, South Africa, or maybe even Turkey,” he said.
Turkey, he explained is developing large alfalfa seed production projects which mimic California's, right down to irrigation districts.
“We could definitely use some government support for our seed producers,” he said, adding that alfalfa seed producers in the European Union receive a subsidy of 10 to 12 cents per pound, but no forage seed production subsidies exist in the United States.
“Perhaps we haven't lobbied enough; perhaps supports have been traded off in GATT negotiations.”
“If you want to be heard in Washington, D.C., this would be a great time. Perhaps we haven't lobbied enough; perhaps supports have been traded off in GATT negotiations. These things are fairly complicated, but if we don't ask, who will?”
Turning to the U.S. alfalfa seed market, Frey said the three million acres of 2000 is 18 percent less than that of 1997, with more than half the decrease occurring in the Midwest. This, he explained, is because of greater competition from corn silage, plus extended stand-life due to mild winters and producers' economic needs to get the utmost from their stands.
On average, U.S. producers have expanded stand-life from 6.7 years in 1998 to 7.7 years in 2000, while national harvested acreage that year represents a decline of only 3 percent from the 23.6 million acres of 1998.
Trade is out of balance with Canada, which sends to the U.S. eight million pounds of alfalfa seed yearly, and companies can buy seed in Canada for 60 cents a pound. By blending it with U.S. high-quality seed they buy for $1.50 a pound, they have good margins to work with, he said.
At one time, Canadian seed could be distinguished from U.S. product by staining, but the U.S. removed the staining requirement.
“Not everyone supports legislation that would put up a little wall between us and Canada, but perhaps we should treat Canada the way they treat us,” Frey said.
Canada allows U.S. imports, but the seed must be of registered varieties and certified. “If we had that sort of reciprocal agreement, the balance of trade would shift,” he said.
Hay stocks down
Frey's talk wasn't all bad news, and a bright prospect is hay stocks are down from a year ago by 5 percent in the Western U.S. and down by 15 percent in California.
Given cattle prices higher and dairy prices flat, that suggests more alfalfa acreage going in and a rise in seed consumption in the months ahead. California hay prices in early March were in the range of $120 to $160 per ton, depending on quality.
However, the economic situation in South America, specifically Argentina, underscores the close link it has to the California segment of the industry. South American has typically taken about 35 percent of U.S. exports of alfalfa seed.
Argentina expanded alfalfa acreage to support its developing exports of milk to Brazil for several years.
But in 1998-99 a monetary crisis occurred in Brazil, and demand for milk from Argentina slumped. Farmers planted less alfalfa, or bought seed elsewhere.
Allowing the numbers were unofficial estimates, Frey said the U.S. carryover of alfalfa seed appears to be a significant 58 million pounds. Added to the 2000 estimate of 115 million pounds, it makes an estimated total supply of more than 173 million pounds for 2001.
“That's a pretty good supply of seed for the current market, the domestic market being about 50 million pounds and the export being about 35 million pounds,” he said.
Noting that seed companies are left with a two- to three-year supply of seed on hand, he said, “Clearly, a further reduction in acreage for the 2001 production year is in order.”
He added that high carrying costs of the inventory are eating away at already slim margins for most companies who depend heavily on their alfalfa seed breeding and production.