Where Does My Cover Crop Come From? Part 1.

As harvest picks up on many parts of the country in the fall and cover crop seeding begins, bags of cover crop seed are quickly moving to dealer warehouses and farm shops. While that bag of seed is seemingly just another farm input it's a part of an incredibly complex supply chain and is subject to massive shifts in supply and market demand. Let's investigate this system and see the forces that shift the cover crop market as well as the factors that our cover crop suppliers must consider when bringing that bag of seed to your door.

"The number one challenge is forecasting…Whether it's cover crops, forages or wildlife, people make decisions very late. They don't necessarily think about their crop rotation" says Chris McCracken of Local Seed Company. Chris has spent his life in the seed business, beginning at age 8 when he started detasseling corn for Doebler's Hybrids, which was then the family business. He moved to TA Seeds when Doebler's was purchased in 2002 and then spent time working for Barenbrug and LaCrosse Seeds. Chris later returned to TA Seeds, now Local Seed Company, to manage the development and distribution of small seeds, which includes cover crops and forage products.

A Worldwide Production System

While many of our cover crops have proved to be adaptable to wide geographic and climatic conditions, that ability does not necessarily translate into producing large quantities of quality, harvestable seed. Therefore, seed production is often limited to specific regions, where the local climate offers the best environment for a crop to properly mature and produce high volumes of seed.

Here in the United States, the Willamette Valley in Western Oregon accounts for over three quarters of the world's turf and agricultural grass seed, as well as many of our cool season cover crop species, including clovers, radishes and annual ryegrass. In 2018 over 700 growers in the region grew over 230,000 acres for seed production. The 150-mile long valley sits with the Cascade Range to the east and to its west lies the Oregon Coast Range and the Pacific Ocean and is underlain by productive soils derived from glacial till and deposits of volcanic ash. But what makes the Willamette ideal for seed production is the climate. "They have the perfect growing conditions for best seed production anywhere. It rains 9 months of the year and for 3 months it's almost arid conditions." says McCracken. This climate allows for good, consistent growing conditions throughout the winter and a wide harvest window in the summer. 

Outside of Oregon, cover crop seed production is extremely regional and is often specific to a species or category of cover crops. Cool season peas and beans are grown in North Dakota, and most of the domestic production of warm season grasses such as sorghums and millets occur in west Texas. However, our suite of cover crops is not limited to what is solely produced in the U.S.; sun hemp is primarily cultivated in India, phacelia production has been limited to Europe and some late-maturing orchardgrass varieties are grown in Europe or New Zealand. 

Our cover crop species with the widest production range are the small grains such as cereal rye, wheat and triticale, and their seed production reflects their adaptability as cash crops grown across the country. In terms of cover crop use, the winter cereals are some of the most sensitive to transportation costs as they're a bulky, low profit-margin crop, therefore production is often closer to final markets, with a large portion of the seed coming from Oklahoma, Kansas, and Ontario, Canada.

Overseeing Production and Quality

The production of 'blue tag' certified seed is regulated by processes intended to maintain the genetic purity of a given variety. In the United States, this is typically performed by state universities or departments of agriculture. The process starts with foundation seed that is produced from breeder seed stocks, has a high level of genetic purity and is nearly identical to breeder seed. Foundation seed is controlled by the owner of the originating plant or the licensee of a registered variety. Foundation seed is typically used to produce registered seed, which is of a suitable level of purity for production of certified seed. Certified seed, which come to the hands of the end user is often two generations removed from foundation seed and usually cannot be used to produce additional certified seed. At each point in the production system multiple steps are taken to ensure seed purity and quality. Of particular concern is cross pollination of varieties and windblown drift of seed from one species into the field of another. Therefore, field locations are carefully planned to ensure that one does not contaminate another.

Since most cover crops are annuals, production is similar cash grain production, with harvest occurring from late June through August. For many species, crops are swathed into windrows and dried in the field prior to harvest with a combine using a pick-up header. Seed production for small-seeded crops such as clovers and radishes can vary from as little as 500 lbs. of seed per acre to over 4,000 lbs., depending on the species. 

Once seed is harvested, it then moves to a network of wholesale distributors that sell to retail companies across the country. These distributors work with farmers in their area to develop a supply and they perform the final cleaning and bagging processes. This system of wholesalers-retailers contrasts with corn and soybean production systems, where seed brands have more oversight of the production process. 

Because seed brands have less oversight of the seed production process, ensuring a quality product largely relies on having a good relationship between suppliers and brands. "It's still the wild, wild west out there and there are still companies out there that will feed you a bad seed analysis to sell a lot [of seed]. So, the biggest challenge is finding suppliers you can trust." says McCracken. In addition, Local Seed Company works with a production manager in the Willamette Valley. The production manager oversees production in the region, working with farmers and wholesales, and tests seed lots on behalf of Local Seed Company to ensure product quality on behalf of end retailers. Chris notes "A lot of it is paying attention to what the growing conditions are in each of the regions where seed production is happening…and having the relationships with growers and production people in the field that you can trust." 

A Logistical Nightmare

Getting a bag of cover crop seed to the end user is a challenge with many pitfalls along the way. The first is the 'squeeze' between seed harvest and cover crop planting. For some seeds, only a few weeks exist between seed harvest and planting in the field and in that time the seed must be cleaned, bagged and shipped to distributor warehouses. Annual ryegrass and cereals often have enough time to make it to end users while clovers may not and thus need to be stored for sale the following season.

When seed needs to be carried over, storage can quickly add to production costs. Direct costs come from the square footage of storage but also the opportunity costs of not storing higher value crop. Notes Corey Chelko of Local Seed Company "That small square of warehouse costs the same whether you're storing a $15 bag of rye or a $400 bag of cotton." Additionally, some crops like peas and cereal grains require cold storage in many regions of the county, which for bulky, low-value crops like cereal rye may mean the difference between making a profit or a loss on the seed. 

In a market where products are sourced globally and in large quantities, controlling shipping costs is critical. "Shipping is a large portion of things…We fight with [trucking issues] every day." notes McCracken.  Much of his time is spent on determining how to best ship seed from one part of the world to another. Trucks trips across the country are still common, but an increase in trucking demand and the implementation of e-logs over the past four to five years have nearly doubled the cost of shipping a truck load of seed from Oregon to Pennsylvania and increased the length of a trip from three days to seven. At current trucking rates, it costs about 14 cents per pound of seed to ship a truck from the Willamette to their Pennsylvania location. Intermodal shipping (where a portion of a container's trip is over rail) reduces the price to less than 10 cents but increases shipping times to a few weeks. One way of avoiding these higher shipping costs is promoting different species, as McCracken is doing, "We're moving to smaller seeds so we can keep our seeding rates down…so even with higher priced seeds you're still getting value."

Sourcing products from overseas adds an additional layer of complexity. Products coming to Pennsylvania from New Zealand will travel the Pacific to ports in Oregon or Washington while those crossing the Atlantic may head to Philadelphia or to ports in Houston or Miami before making their way north. However, it typically takes two to three months to get a product from overseas to the east coast, and geopolitical issues are much more salient when dealing with foreign suppliers. For instance, the 2019 government shutdown closed all U.S. ports and kept products from entering the country, including a portion of Chris' cover crop supply.

The cover crop seed blender helps Local Seed Company add value to their product line. However, a backlog orders can quickly pile up if they're waiting for one species to arrive at their warehouse (Photo credit: Zach Larson)

Mixes Add Additional Value, Challenges

The increase of popularity of pre-packaged cover crop mixes adds an additional layer of complexity. Depending on the seed retailer, mixing may be performed at the wholesale supplier or with the end marketer. Mixing at the supplier sticks the end marketer with a fixed product that is essentially another stock item that is subject to changes in demand each season. Therefore, retail companies are moving towards mixing in house. This gives companies more flexibility when managing their seed inventory as products can be mixed on demand and it allows them to create custom mixes based on the needs of the consumer and at rates that work for a specific region, bringing additional value to a brand.

However, in-house mixing brings its own challenges including managing the inflow of cover crop species into a company's seed inventory. For instance, tens of thousands of pounds of mixes may be held up until one seed species is shipped in. Therefore, a lot of consideration is placed in staging mixes to match the supply on-hand to create a final product. If mixes aren't staged and planned well, too much time is wasted on cleaning out mixing equipment every time a new mix is ordered.

In Where Does My Cover Crop Come From? Part 2. we  look at how a company brings a cover crop species to the market as well as the challenges in dealing with rapid changes of supply and demand in the cover crop seed industry.