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Iowa | Farmers prepay for tax reasons, and because seed companies give a discount. Why do seed companies give a discount? Because they want to know what products to condition - yes they won’t get it 100% correct, but if they can reduce excess inventory by 20%, that’s a big deal to bean counters, especially on soybeans where they do not save seed. Also if they know something is short it gives them a small window of time to attempt to grow it in South America . Other reason is to operate on your money: this is bigger as interest rates rise. Remember they’re taking in the margin for your seed too, so their margin gets to earn 5% interest for 6 months (extra 2.5%), and many companies are going to a commission based program for their dealers (they don’t get paid till July/august) so if the commission is 5-10% they get to keep it too and make/save 5% apr on it. Squeeze an extra $2 out of a bag x 1-2 million bags (for small companies) and that’s easy money, think what that is for pioneer/dekalb. | |
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Seed pre pay
