Seeds of profit: the business of pedigree grain seeds.
One of the major suppliers of pedigree seed in western Canada is Farmers Co-op Seed Plant Ltd. in Rivers, Manitoba. The company takes orders from private seed companies to contract growers for as much as 10,000 acres of seed for the vast western Canadian grain market. That in itself is a major responsibility. Grains are the backbone of the western economy, and their quality has created its own set of difficulties by protectionist governments. However, that is far from the minds of people like Donald Kostesky.
The 47-year-old CEO and general manager for Farmers Co-op Seed Plant Ltd. says the company has chiselled a place for itself in the crop seed supply business by capitalizing on changes in agriculture to do with the patenting of seed varieties. The company reported earnings of nearly $5 million last year, employs 14 to 27 -- depending on the workload -- and has plans for further expansion. In fact, the crunch of expansion is so strong that a full-time consultant has been on the job for a year.
Says Kostesky, "Three years ago plant breeders legislation was introduced giving patents to creators of new crop varieties. As a result, money is being invested into research and development of new varieties by private companies and plant breeders, instead of being left to funding by the public treasury. This has resulted in a number of new seed varieties coming to the Canadian farmer."
Kostesky says that his co-op saw a market opportunity to use its expertise in growing, cleaning and treating seeds for private seed suppliers. "Many seed companies don't have the facilities to condition seeds from the field, so we do it for them. It's a win-win situation for everyone involved."
The business adds fungicide and insecticide treatments to canola seeds for clients, which has become a large part of its business. Since canola oil has taken off as a major money-making crop in Canada, the co-op's fortunes have increased.
The co-op was started in 1958 by local farmers who wanted to secure their source of clean pedigree seed to maintain the high quality of their crops. Until that time, seeds grown by farmers themselves were cleaned on the farm or at the local elevator.
Seed product and quality is now a matter for Agriculture Canada to certify, to ensure that Canadian crops are among the best in the world. Farmers Co-op has expanded its business by offering large Canadian seed companies such as Manitoba Pool Elevtors and Pride Seeds seed production, processing and treating services. The co-op Farmers Co-op contracts seed production to armers who grow pedigree varieties under conditions so stringent that slight variations can have the crop certification cancelled by government inspectors. The co-op also operates the largest laboratory in western Canada for testing the germination and vigor of seeds. This frontline and ongoing testing is the quality assurance that breeders and patent holders need to ensure that the end users -- the farm community -- will have a head start against soil and weather conditions.
Says Kostesky, "We have to be very careful as to what has been grown in the seed field previously so that there won't be any other seeds in the crop to ruin its pedigree."
An Agriculture Canada inspector goes into the field to assess the degree of undesirable plant species in the seed crop. If he finds undesirable plants, he will hand pull them out of the field -- a process called "roguing." If he does not remove undesirables the crop may be declined certification, reducing its value as seed.
"There are many steps in this process. Too many, in fact, and we're in discussions with Agriculture Canada to reduce the paperwork which is costly to everyone. We all have the same vested interest in seed quality, so I believe that we will come to an agreement," Says Kostesky.
According to Kostesky, the co-op's success is rooted in two factors. The first is the foresight of farmers to come together and start the company. "Farmers have a lot of power when they act as a group. The trouble is that most don't know that," he says.
In addition, the company has responded well to changes in the marketplace. "We position ourselves properly by assessing the business opportunities brought about by the changes in plant breeders legislation and planning ahead to meet change in seed supply and treatment that it brought to the market."
As part of intelligent planning strategies, the co-op has spent more than $2 million on new seed treatment equipment to increase its capacity to serve the growing volume of business. Such moves, based on careful observation of the market, are why the company has created a successful niche business for itself in western Canada.