Grass seed is harvested in Oregon’s Willamette Valley. An Oregon farmer faces a federal wire fraud charge for allegedly paying kickbacks to a grass seed buyer.

A major buyer backed out of negotiations over Oregon’s grass seed crop this year but that didn’t stop farmers from reaching a price agreement with other companies.

Pennington Seed announced last week that it wouldn’t participate in 2023 price discussions with the Oregon Grass Seed Bargaining Association, which represents growers.

Though the company didn’t explain the decision, it set its own preliminary prices at $1.20 per pound for tall fescue and $1.25 per pound for perennial ryegrass, which are common varieties grown in the state.

“Hopefully, the industry seed supply and consumer demand for seed products will become more balanced and make our industry more profitable,” said Terri Burr, Pennington’s field department production manager, in the notice to farmers. Burr didn’t respond to requests for comment as of press time.

The bargaining association nonetheless struck a deal with 16 other seed buyers earlier this week, agreeing to initial prices marginally lower than those set by Pennington, said Mark Simmons, its executive director.

Simmons said he did not want to disclose the specific amounts to avoid undermining seed dealers during price discussions with downstream customers.

However, another industry source said other buyers agreed to pay nearly 2% less for tall fescue and 4% less for perennial ryegrass than Pennington.

Though most farmers will be only slightly profitable under the deal’s terms, the discussions were still successful given the huge amount of grass seed left in inventory, Simmons said.

Big surpluses of commodity crops, such as wheat, usually cause prices to drop far below levels at which growers break even financially, he said.

Simmons said Pennington Seed likely abandoned the negotiations because it was afraid a steep price decline would reduce the value of its own grass seed inventory, negatively affecting its balance sheet.

Pennington Seed is a subsidiary of the Central Garden & Pet Co., a publicly traded firm whose profits have fallen by roughly 50% during the first half of its 2023 fiscal year, to $39.7 million.

“It seemed to be an effort to influence price negotiations,” Simmons said. “That has happened in the past, where a dealer tries to set the market.”

Last year, the parties were deadlocked when the negotiations were called off by the Oregon Department of Agriculture, which supervises the talks under a state regulatory program that shields them from breaching antitrust law.

The agency terminated the bargaining session because someone violated the rule against allowing outside parties from viewing or learning about the teleconference discussion as it was happening, according to ODA.

“Ultimately, ODA could no longer provide oversight to ensure that state action immunity would apply to the bargaining process and ensure that participants were protected from federal and state antitrust violations, such as collusion or price-fixing,” according to the agency.

Because the amount of grass seed sold each year is relatively small, that precludes a futures market that would make price discovery for the crop more transparent, Simmons said.

“The grass seed industry runs on rumor and innuendo,” he said.

Years ago, the negotiations were open to “anybody and everybody” but restrictions have mounted over time, with talks limited to 20 farmer representatives who must sign non-disclosure agreements, said Simmons.

While the state’s Office of the Attorney General likely instructed ODA to cancel the talks, the bargaining association believes the agency was legally required to ensure a price deal, he said.

With no industry-wide price agreement for the 2022 crop, unstable prices discouraged companies from buying grass seed — ultimately reducing sales by about $60 million, Simmons said.

“We think the ODA violated the law and then abdicated that responsibility,” he said. “That left the industry hanging.”

Earlier this year, a bill introduced at the industry’s behest would have required ODA to hire a designated employee to oversee the negotiations, paid for with industry fees.

Though House Bill 3319 died in committee, it allowed the bargaining association to consult with attorneys from the Office of Legislative Counsel about the ODA’s authority over the process, Simmons said.

The agency can hire a mediator to resolve an impasse such as last year’s, among other options, but that didn’t prove necessary in 2023 because the parties struck a deal without such help, he said.