The grass seed industry is calling on its customers to place grass seed orders this year in good time. International developments are severely affecting the industry. The fear is that there is no other option than to pass on price increases.
Like any other industry, the grass seed industry is hit hard by the shortage of wood (for pallets), paper and plastic, as well as the availability of shipping containers. However, a significant change in demand internationally is applying more pressure on the market than usual.
One of the issues is the unexpectedly high demand for grass seeds in the United States. As a result, the world’s largest grass seed exporter has become an importer of large quantities of grass. The pressure this puts on the international market is exacerbated by the growing demand for grass seed from China.
In addition to a poorer harvest in the US, the large discrepancy in supply and demand must mainly be attributed to the rapidly increasing recognition of the need for a sustainable society. Working from home, agreements following the Climate Summit in Glasgow, as well as the European Green Deal for a sustainable society, have fast-tracked governments and citizens to take action immediately. Many have already increased their spending on a green environment. The subsequent unexpectedly high demand for grass seed means that countries such as China and the US are now willing to pay hefty prices to meet their national demand for the product.
Rising demand for food
The ever-growing demand for grains and natural products also affects the production and price of grass seeds. The price for the product is linked to the price for grains. For example, the tensions between Russia and Ukraine, which, together, are the breadbasket for Europe, are pushing the price of wheat to a new record. These tensions, combined with drought in South America, are also the reason why the price for maize is currently significantly higher. Add to that the current drought in the Horn of Africa, political instability elsewhere on the continent, the need for massive food aid in Afghanistan and large parts of the Middle East, and the picture is complete. All these developments together make it more lucrative for many grass seed-producing farmers to consider switching to food grains or less demanding grass seeds.
Most farmers have a more or less continuous supply agreement with the grass seed suppliers. Many agreements are currently being lifted in order to guarantee the future production of grass seeds. However, as supply for the 2023 season depends on what is in the ground at present, it remains difficult to predict what that means for the upcoming harvest, sales and delivery of the product.
Limited leeway
In recent years, grass seed suppliers have managed to compensate for the discrepancy between supply and demand. Several good harvests allowed them to build up extra stock for years. However, this stock has now been depleted, making many fear that the harvest of this year, will be brought to the market much faster than usual. That would mean that pressure on the market could continue until well into 2023.