BOONE, Iowa—Major seed companies don’t plan to cut prices for the next growing season despite sliding corn and soybean prices, which are expected to dent U.S. farmers’ incomes.
Monsanto Co. MON +0.25% and DuPont Co. DD -0.17% aim to raise prices for their newest and best-performing varieties of seeds next year, though in some cases the increases may be smaller than in past years, senior executives said.
“We’ll take a hard look at prices, but I don’t see a price decline,” said Paul Schickler, president of DuPont’s Pioneer PXD -0.24% seed unit, in an interview at the Farm Progress Show, an industry event.
Farmers in the U.S. and elsewhere are confronting a second-straight year of declining crop prices thanks to anticipated back-to-back bumper crops in 2013 and 2014 that have bolstered stockpiles of corn and oilseeds. Corn futures have dropped 14% this year and are trading near four-year lows. Soybean futures have fallen 18% and are also near four-year lows.
The enlarged supplies prompted the U.S. Department of Agriculture this week to project a 13.8% decline in domestic farm incomes this year, to $113.2 billion, which would mark the lowest level since 2010. The department also predicted a 4% rise in production expenses for farmers, with increased costs for seeds, fertilizer and pesticides. That marks the fifth consecutive year of increased costs, to the highest level on record.
Farmers in South America, whose output has come to rival U.S. production, will also have to contend with lower prices for global commodities as they plant crops over the next several months. They are likely to trim some corn planting in the coming year, said Susquehanna International Group analyst Don Carson. Some U.S. farmers in areas with fewer pest threats will likely reduce spending on “less essential” seed genetics, he added.
Pinched profits for farmers have raised concerns among analysts that seed, pesticide, fertilizer and tractor makers could face weaker sales.
But Robert Fraley, chief technology officer for Monsanto, said that while farmers may try to skimp on some fertilizers and coax another year out of older equipment, they are unlikely to dial back spending on genetically engineered seeds.
Monsanto, DuPont and rival seed makers each year invest in breeding heartier seeds that produce more corn and soybeans per plant, alongside genetic enhancements that help crops ward off pests and withstand herbicides.
“The last thing they’ll do is back away from good seeds,” Mr. Fraley said. “The worst thing you can have is both low prices and low yields.”
Typically Monsanto increases overall prices for its seeds world-wide 5% to 10% from year to year, Mr. Fraley said. The St. Louis company, the world’s largest seed maker by sales, monitors seed supply, commodity prices and other factors in determining how much to charge for its seeds.
Mr. Fraley said Monsanto typically charges a premium for the newest seeds. Existing products are often priced similarly year to year, and the oldest seeds are discounted. “What changes is how much we discount the lower end of the portfolio,” Mr. Fraley said.
Wilmington, Del.-based DuPont’s agricultural division sells about 300 corn-seed products in North America, and while the company typically may discount some, DuPont doesn’t plan an overall decrease.
Despite the projected downdraft in U.S. farm incomes, DuPont’s Mr. Schickler said the nation’s farm sector remains in good financial health. Land prices haven’t fallen dramatically, interest rates remain at historic lows, and farmers generally carry little debt. “That is much different than other cycles,” he said.