Does It Pay to Cut Corn Seed Costs?

August 5, 2004  11(21):137-139

Joe Lauer, Corn Agronomist

Since the arrival of transgenic hybrid corn, seed costs have risen dramatically. Between 1987 and 2003, average corn seed costs in the UW Agronomy PEPS program have risen from $19.60 to $40.62 per acre. Many farmers are considering ways to reduce seed costs. This can be done either 1) by purchasing lower cost seed, 2) by reducing planting rates, or 3) by purchasing hybrids without transgenic traits. I have also seen low cost, "brown-bag" hybrid corn seed at retail chain stores, off-brands offered via the internet and secondary brands offered from established seed companies.

Are these appropriate methods for reducing seed cost? How much of a yield increase is needed to pay for more expensive hybrids? This article examines some of the economics associated with the above methods for reducing seed cost.

Purchasing lower cost seed

Reducing seed costs might be accomplished by purchasing less expensive three-way or four-way (double) crosses. Most seed sold today is produced from single crosses which make up nearly all of the corn seed market. But, farmers should realize that the yield potential of hybrids produced with three-way or four-way (double) cross methods may be below expectations. Often double-cross hybrids yield only half the yield potential of single-cross hybrids. Some well-tested and top-performing three-way crosses may have a place, but the reduced yield of four-way crosses will cost the farmer more than the seed cost savings.

Table 1 can be used to evaluate the relationship between seed cost and grain yield needed to pay for seed at various corn prices. As seed cost increases, more harvested grain is needed to pay for the seed at a similar corn price. Conversely, as corn price increases, less harvested grain is needed to pay for the seed at a similar seed cost per bag.

For the example in Table 1, the desired plant density at harvest was 30 000 plants/A, so seed was planted at 33 300 seeds/A with the expectation that 10% of the seed would not survive. When the corn price is $2.50 per bushel, hybrid seed corn at $80 per bag (80 000 kernels) requires 13.3 bu/A to pay for the seed. At the same corn price, costs for a more expensive hybrid at $120 per 80 000 kernel bag would need 20.0 bu/A to pay for the seed. The difference between the hybrids in yield needed to pay for seed costs (20.0 – 13.3) is 6.7 bu/A. So the more expensive hybrid would need to yield 6.7 bu/A more than the less expensive hybrid to "pay its way." For the corn prices listed in Table 1, the economic swing between the least and most expensive bag of seed is $33/A.

Table 1. Grain yield (bu/A) needed to pay for seed at various seed and corn prices
  Seed Cost per bag (80 000 kernels)
  $60.00 $80.00 $100.00 $120.00 $140.00
Corn Seed Cost per Acre at 30 000 plants/A  + 10% potential plant death
price $25.00 $33.33 $41.67 $50.00 $58.33
$1.50 16.7 22.2 27.8 33.3 38.9
$2.00 12.5 16.7 20.8 25.0 29.2
$2.50 10.0 13.3 16.7 20.0 23.3
$3.00 8.3 11.1 13.9 16.7 19.4
$3.50 7.1 9.5 11.9 14.3 16.7

Reducing planting rate

A second way to reduce seed costs is by reducing planting rates. Important factors to consider are plant population, seed cost, expected corn price and expected yield. In the example shown in Table 2, a full optimum stand (30 000 plants/A) is compared to a 90% stand (27 000 plants/A) and assumes a 2% yield reduction due to lower plant population. Average production costs = $256/A without seed costs (derived from PEPS).

As seed cost increases for a yield level, grower return is reduced and favors the full stand when yields ranged from 120 to 200 bu/A (Table 2). As yield level increases, grower return increases and except for low yield levels (40-80 bu/A) usually favors the full stand. When yield level was 40 bu/A, the reduced stand always resulted in greatest grower return. When yield level was 80 bu/A, full stands were favored when corn seed prices were below $100 per bag, while reduced stands were favored when corn seed prices were $100 per bag or greater. The entire range in this example was ($3.83) to $7.50, an economic swing of $11/A.

Table 2. Grower return above additional  seed cost for 100% stand compared with 90% stand for various yield levels and seed corn prices (corn selling price = $2.50/bu).
  Seed Cost per bag (80 000 kernels)
  $60.00 $80.00 $100.00 $120.00 $140.00
  Seed Cost per Acre at 30 000 plants/A + 10% potential plant death
Yield $25.00 $33.33 $41.67 $50.00 $58.33
40 -$0.50 -$1.33 -$2.17 -$3.00 -$3.83
80 $1.50 $0.67 -$0.17 -$1.00 -$1.83
120 $3.50 $2.67 $1.83 $1.00 $0.17
160 $5.50 $4.67 $3.83 $3.00 $2.17
200 $7.50 $6.67 $5.83 $5.00 $4.17

Transgenic hybrids

Finally, more corn hybrid products are available from seed companies today than ever before. Many of these hybrids have transgenic traits which increase seed costs. Savings to the farmer occur because pesticide application costs are either reduced to zero or some lower amount. Table 3 evaluates the relationship between seed cost and expected yield potential at various pesticide cost savings. For example, at a corn price of $2.50 per bushel, hybrid seed corn at $80 per bag (80 000 kernels) requires 13.3 bu/A to pay for the seed. At the same corn price, costs for a more expensive hybrid at $120 per 80 000 kernel bag with $10/A of pesticide cost savings would need 16.0 bu/A to pay for the seed. The difference between the hybrids in yield needed to pay for seed costs (16.0– 13.3) is 2.7 bu/A. So the more expensive hybrid would need 2.7 bu/A more yield than the less expensive hybrid to "pay its way." If the pesticide cost savings was $20/A the difference between hybrids (12.0-13.3) is -1.3 bu/A indicating that the more expensive hybrid more than pays its way.

Table 3. Grain yield (bu/A) needed to pay for seed at various seed cost and pesticide savings (corn selling price = $2.50/bu).
  Seed Cost per bag (80 000 kernels)
  $60.00 $80.00 $100.00 $120.00 $140.00
Pesticide Seed Cost per Acre at 30 000 plants/A + 10% potential plant death
cost savings $25.00 $33.33 $41.67 $50.00 $58.33
$0.00 10.0 13.3 16.7 20.0 23.3
$10.00 6.0 9.3 12.7 16.0 19.3
$20.00 2.0 5.3 8.7 12.0 15.3
$30.00 -2.0 1.3 4.7 8.0 11.3
$40.00 -6.0 -2.7 0.7 4.0 7.3

Other considerations

It may be possible to make limited savings in seed costs by carefully purchasing hybrids. Some hybrids with similar performance may vary in price from company to company. Volume discounts or early payment may reduce seed costs. Small or "plateless" seed of high quality will perform equal to other slightly more expensive sizes or shapes.

In the final analysis, hybrid performance is much more important than seed cost when purchasing corn seed and should be the first priority for hybrid selection decisions. Top- and bottom-performing hybrids in UW yield trials often vary by 30 to 90 bu/A (average = 78 bu/A) depending upon the trial. At a corn price of $2.50 per bushel, this is an economic swing of $75 to $225 per acre (average = $195/A). The substantial difference in value per acre between hybrids in yield potential makes the difference in seed cost per bag seem relatively insignificant.

For a spreadsheet to calculate these and other "what-if" seed cost scenarios click here.


University of Wisconsin, 1575 Linden Drive - Agronomy, Madison WI  53706    (608) 262-1390
If you would like to subscribe (or unsubscribe) to updates during the growing season, click here.
For a list of website updates, click here. Send comments about this website to Joe Lauer.
©  1994-2017 Board of Regents of the University of Wisconsin, Division of Cooperative Extension of UWEX.