Five Points, California, USA
February 3, 2014
S&W Seed Company (Nasdaq: SANW), is the world’s largest producer of non-dormant, alfalfa seed varieties. S&W produces alfalfa seed in the San Joaquin and Imperial Valley’s of California, as well as in South Australia. As of today, it does not appear to S&W that drought conditions in California will have a material negative impact on the Company’s calendar 2014 seed production.
Mark Grewal, chief executive officer of S&W Seed Company commented, “I do not believe that our alfalfa seed production will be curtailed in any significant way by the drought. Our California production comes from the Imperial Valley, which is watered from the Colorado River, and from the San Joaquin Valley, where our seed farmers have access to well water for irrigation. None of our domestic farming is ‘dry land farming’ that relies on rain. Obviously, the California drought is totally irrelevant to Australia, where a majority of our seed tonnage is produced.”
Mr. Grewal added, “Achieving good alfalfa seed yields in irrigated fields requires less water compared to other crops. Rain anytime during the cropping season can be a detriment to high yields in alfalfa seed production. We are confident that even if there were many more weeks or months of no rainfall, that our yields for the upcoming season would not be materially affected by the current lack of rain.”
Mr. Grewal continued, “As has been reported in various press articles, we would anticipate that the drought conditions will have a negative effect on ‘alfalfa hay’ production in California as well as wheat, corn silage and other forages. This will likely drive the price of alfalfa hay up. Fortunately for S&W, the vast majority of our seed customers are based outside of California; in fact only a small percent of our seed sold last year was to California customers. Higher domestic hay prices often leads to more Imperial Valley farmers growing hay, instead of shifting to grow non-certified common seed in July and August, making the supply of seed we have to compete against just that much smaller.”
Mr. Grewal concluded, “All of us at S&W are deeply saddened by the punishing effect that this drought is having on many California farm families, amongst whom we share many close friendships. Our deep-felt prayers go out to all of those affected. Despite this tragedy, however, S&W does not anticipate that the drought will have a material adverse impact on either the farmers with whom we contract for alfalfa seed or on our own in-house production.”
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