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Published December 23, 2013, 09:18 AM

Peterson Farms Seed capitalizes on region's move to corn and beans

Even in a burgeoning agricultural economy in the Red River Valley, Peterson Farms Seed stands out.

By: Mikkel Pates, Agweek

HARWOOD, N.D. — Even in a burgeoning agricultural economy in the Red River Valley, Peterson Farms Seed stands out.

The seed company is one of those emblematic of the Red River Valley region’s historic shift from wheat and barley into a new era of corn and soybeans.

In its 19-year history, founders Carl and Julie Peterson have grown their company from being a simple, struggling commodity farm into a regional powerhouse — the largest independent, corn and soybean seed company in the region.

PFS touts its 20,000 replicated seed testing plots — one of the largest regional programs of its type in the nation. The company’s territory is much of North Dakota, and down into north and eastern South Dakota and east to the St. Cloud, Minn., area. PFS now employs more than 40 people and has made its mark by being useful — both for farmer customers and genetics suppliers who are increasingly offering products that include multiple traits.

The company has been with farmers as they push the envelope of technology and shift into Roundup Ready soybeans and corn adapted to annual purchases of seed.

“We happened to be in the right spot at the right time. But we also did the right thing: that’s the key,” Carl Peterson says.

Outside the box

Carl grew up on a conventional crop farm that had been in his family since 1918.

He pursued an ag degree at Iowa State University in Ames.

“When I was 18, I decided I was going to graduate from college early because I didn’t want to miss a year of farming,” Peterson says. “I decided I was going to get married the fall after graduating college and have two kids by the time I was 25. By age 30, I would be worth at least $1 million.”

It wouldn’t work out that way.

At ISU, Carl met Julie Lichty, a co-ed from Waterloo, Iowa, majoring in marketing. Carl graduated from ISU in February 1981 and Julie followed in the spring. They were married that fall — after the summer farm work — just as the farm economy was heading into one of its most famous crises.

That year, the Petersons had good crops, but prices were “horrid,” Carl says.

While Carl focused on the farm, Julie started a retail career, notably at Great Plains Software retail computer store. Later, GPS would become a software developer that became part of Microsoft.

“The most important thing I learned at Great Plains was culture — that the culture of a company is important,” says Julie, who works especially with PFS human resources and culture matters today.

The impacts of scab

The Petersons persevered as a commercial grain farm into the late 1980s.

“We came to a point where we wondered if there was something else we could do — Christmas trees, raspberries, laundromats,” Carl says. They went to the extent of creating a pilot project with 0.7 acres of raspberries.

The big turning point came in 1993, when the growing season climate started turning wet in the Red River Valley. Fusarium head blight, a disease associated with the moisture, had a devastating effect on the small grains crop.

The “scab” shriveled kernels on wheat heads and devastated many farmers who were only beginning to heal from the debt crisis. The scab could produce vomitoxin, which rendered the crops unmarketable.

Some elevators stopped taking scab-infested wheat. The Petersons purchased a gravity separator and used it to clean the lightweight scab-infested kernels from their market crops — both for themselves and for neighbors.

Raw, scabby wheat would be worth about $2 a bushel. Cleaned wheat would be worth $4 a bushel as market wheat. “We cleaned wheat 24 hours a day, from late October through March — about a unit train worth of wheat,” Carl says.

By the spring of 1994, the Petersons decided to get into the seed business.

“I thought, ‘We’ve got the equipment; maybe we should be in the seed business,’” Carl remembers. Meanwhile, they added bins and dabbled in supplying food-grade soybeans to Japan and operated a receiving station for pinto beans.

And now: Roundup

In the mid-1990s, the Petersons were custom-conditioning and selling public soybean varieties. In those days, farmers would plant a new soybean variety and then save their seed for a number of years.

In 1997, PFS was producing private license soybean varieties. Initially, the company had a half-dozen varieties in its lineup. A variety then had a “lifespan” of about five or six years. Carl decided he would have a brand — eventually calling it Peterson Farms Seed.

About that time, Carl went to a plot tour in Iowa and talked to a genetics supplier who suggested that if he didn’t get a license for Roundup Ready beans, he’d be out of business in five years. Carl and Julie decided to go for it.

Monsanto — then a much smaller company than it is today — was doing “Technology of Tomorrow” tours. The Petersons convinced Monsanto that their farm at Prosper would be a good location for a plot tour.

“That led to PSF getting a Roundup Ready license,” Carl recalls. They were among the first in the region, and soon Roundup Ready beans were all people were planting.

PFS initially got 20 to 25 seed units of the new Roundup Ready beans. Carl started growing them on his own farm first.

“I had some fields on my farm that, before Roundup came, we probably would have had to quit raising soybeans on, because we couldn’t control the weeds anymore,” Carl says. “People would ask us how they were doing, and I’d say, as a farmer, that’s what I want grown on my farm.”

They came on the U.S. market nationally in 1998 and the first locally relevant maturity rates came in 1999.

Roundup Ready beans changed everything, Carl says.

Because of the tech agreements, the volume of seed purchased every year increased dramatically — a big change for people in the seed business. When volumes went up, the companies doing the breeding had stronger cash flow to increase breeding investments.

With the soybeans, there have been big improvements in herbicide- and pest-resistance, as well as conventionally bred resistance to problems such as root rots.

Marketing 101

From the beginning, PFS was up against major regional and national brands. Carl decided to use humor to “cut through the clutter” of marketing.

At the start, the Petersons — with three or four people and a seed plant — designed their first product brochure with their Apple computer, went to Office Max to print it out and stapled it themselves. Competitors had slicker materials and macho names for varieties.

Carl, who’d gone to a high school where the mascot was a squirrel, chose goofy names — “Ole” and “Sven,” for his first named varieties. And then “Lena.”

“Of course we know that girls mature faster than boys,” Carl says, with a hint of a Norske accent, studying a visitor’s face to make sure the humor sinks in.

In about 2000, the Petersons were selling more than they could produce on their own farm. They started asking neighbor-customers if they’d buy back some of their production as seed. Besides the biotech-bred Roundup resistance “trait,” PFS promoted seed with conventionally bred characteristics — phytophthora root rot resistance, iron chlorosis and brown stem rot.

Roundup Ready upheaval

Monsanto is sometimes criticized because of its “monopoly” on glyphosate resistance. Carl makes the point that internationally important potent competitors for nearly 15 years were not able to accomplish anything remotely similar.

“Monsanto had a monopoly, but they were just executing something their competitors weren’t able to execute,” Carl says. “I think in that sense they’ve taken a bad rap.”

In 2003, PFS got into the corn business. With its soybean track record established, Carl had credibility in dealing with corn genetics providers. “We did believe there was going to be a tremendous increase in corn acres in this region, so we figured let’s get in the corn business.”

He says there are many competitors in corn, but mostly companies that sell seed from New York to North Dakota. “What — especially — those huge companies are looking for is a product that will sell well across a wide geography,” he says.

Bigger companies strive for operational efficiencies, based on minimum volumes, while PFS can deal with smaller volumes.

“Our best-selling products over the past 15 years selling soybeans, particularly, are products that the bigger, national companies wouldn’t want to sell,” he says. “Some of our best-selling products might have fantastic top-end yields but some maybe don’t have much iron chlorosis resistance, for the customers who don’t need it.”

Growing together

In the mid-2000s, Carl started to think he needed more education to run his growing company. In 2008, Carl obtained a master of science in ag economics from Purdue University, linked to a master of business administration from Indiana University. Part of his study was a project that analyzed the marketing and practices of companies in Indiana and elsewhere that do what PFS was trying to do.

The headquarters now includes several associated warehouses for finished corn and soybean seed. The soybean processing facility is more extensive and includes a total of 138,000 bushels of soybean bulk storage, which gets filled and emptied four times over in a season. The soy facility includes pilot-scale small-acre increases, up to the commercial scale.

In 2011, the company completed a new office expansion, with a grain elevator motif. Carl and Julie have offices across a hallway from each other, and a short walk to their home — where Carl grew up.

Friends in the field

The Petersons have become known for hosting educational events, bringing in experts from the Corn Belt and for annual field days around the Big Iron show in September. The folksy-but-serious “Ole and Sven Crop Clinic” morphed into grand Groundbreaker Field Day.

In 2010 they instituted a program, for people who want agronomic advice on how to increase yields by 20 more bushels per acre from current levels. They boosted internet and online connections with customers, including an Ag Bites video series and various social media functions. Although they’re ISU graduates, they cheer for the region’s beloved North Dakota State University sports teams, and have gained a media profile.

Varietal traits will never be as exciting to most farmers as machinery, Carl says.

“It’s easier to fill a room if you’re talking about a new combine, versus a new agronomic trait,” he says. “But in the long run, probably the agronomic trends have had a larger impact — not to diminish the impact of mechanism, which is huge.”

The company produces one-, two- and up to 100-acre seed volume increase areas around the PFS neighborhood. Peterson farms works with more than 40 growers across the region who help increase or simply produce seeds in the lineup.

Optimistic future

Although it is not the main business, the Petersons have become a testing ground for some of the technology companies they deal with, and work with them to increase seed volume. The new soy technologies must be increased either in the U.S. or South America and are bulked so they can be of use to farmers.

Three new soybean technologies are coming to the marketplace. One is from Monsanto, allowing farmers to spray Dicamba on the beans. Another is Enlist from Dow, which is 2-4,D-based. Another is HPPD technology from Bayer.

“We’re working with all three of those, producing some of the initial increases for Dow of these technologies,” Carl says.

“I get to get up each morning and work in an industry that’s growing and exciting,” he says.

The company will change just as surely as its logo has — now a leafy green soybean branch on a blue square. Originally, the logo featured a head of wheat and Carl hints that the soybean imagery may gradually morph to look more like corn. He says the things that won’t change are the themes of “making new friends, one field at a time” and selling hybrids they’d be “proud to use on our own farm.”

Getting into corn

The economic model for corn seed is different from that of soybeans, where seed is produced with conventional equipment on the same ground.

With corn — a hybrid — Peterson Farm and Seed contracts with growing companies to increase seed to commercial scale. The breeding companies offer suggestions about varietal combinations involving inbred lines.

PFS might take 20 of the combinations and run replicated yield trials throughout PFS geography. Once they select the combinations they want to brand, they work with a seed grower.

PSF hires five growers and up to three conditioning companies to handle its seed supply needs. “There’s a lot of small branded corn companies in southern Minnesota, Iowa, Nebraska, Wisconsin and Indiana — no longer have a brand, but they still grow seed,” Carl says.

PFS’s growers are in Wisconsin and southern Minnesota. Male and female inbred lines are planted in row patterns of 4-2 or 6-2. That means they plant the female lines in 4- or 6-row patterns. Then they’ll plant a male line in another two rows — maybe half on one day and the other half a week later.

“You need to have pollen shed that matches the time that the ear is receptive,” Carl says. The inbred female lines look “kind of scrawny” but the seed produces an “awesome line of corn.”

Eventually, the female line produces a tassel — the male part of the corn — which must be physically or chemically removed. Ears are harvested with a sweet corn picker, with the husks on. This is hauled to a drying facility to be husked. The husked seed ears go on a wide belt where they are sorted, visually and by hand, during a three-week harvest period.

The ears are placed in 2,000- to 3,000-bushel bins for drying. Finally, they’re run through a sheller. The seed is sorted into four sizes, color-sorted, and treated with fungicide and herbicide. Every seed lot is taken to South America and planted to make sure they don’t include “off types” that would be a problem for growers back home.

Multiple results, locations

Yield trial data can be dizzying, but Carl Peterson says there are basic concepts that can simplify their understanding.

The big thing is that yield measurement errors are bigger than the yield differences among hybrids. The second is a definition of significance.

All products yield in a bell-curve shape. Product A and Product B may have similar yield bell curves that overlap. “If I have a 65 percent win rate in soybeans and a three-bushel advantage, that’s a big, big deal,” he says. “But that means that in 35 percent of my own plots I may lose — sometimes by a big amount.”

For true significance in yield differences, growers need to take data from multiple locations and multiple years.

“If you have five replicated locations, Variety A may have the highest yield in four locations, except one, where Variety B wins. Some growers may intuitively think that Variety B will do better in that location the second year,” Peterson says. “But the reality is that the better variety is Variety A — the one that won the multi-location data set 70 percent of the time.”

There are cynical, misleading ways to use statistics, Peterson says, and he sees it all the time. Some seed companies declare themselves the winner when they put 10 of their own varieties in the same plot with two competitors.

“It’s sheer probability,” Peterson says. “If I’ve got eight entries, and they have two, I’m almost always going to win. Promoting that is a disservice to growers.”

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