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Mikkel Pates, Forum News Service, Published December 25 2013

Harwood seed company finds success in corn, soybeans

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, where he met Julie Lichty, a from Waterloo, Iowa, majoring in marketing.

Carl graduated from Iowa State 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.

“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 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.

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