S&W Seed Profile
S&W Seed Company (S&W) operates as a global multi-crop, middle-market agricultural company.
The company is a market leader in the breeding, production and sale of alfalfa and sorghum seeds. It also has a commercial market presence in pasture and sunflower seeds. The company operates seed cleaning and processing facilities, which are located in Texas, New South Wales, and South Australia. The company's seed products are primarily grown under contract by farmers.
The company's seed platform develops and supplies high quality germplasm designed to produce higher yields for farmers worldwide. The company sells over 600 seed products in more than 40 countries. The company maintains an active product pipeline and expect to introduce more than 20 new products during the fiscal year 2024.
The company has built a diversified, global agricultural platform through a combination of organic growth and strategic acquisitions and strategic collaborations, which most recently included:
The company's fiscal 2023 (year ended June 30, 2023) partnership with Trigall Genetics S.A., or Trigall, for the development and marketing of wheat varieties in Australia. Under the terms of the partnership agreement, the company's wholly owned subsidiary, S&W Seed Company Australia Pty Ltd, or S&W Australia, transferred certain intellectual property license rights and equipment into a wholly owned subsidiary and subsequently sold an 80% interest in the subsidiary to Trigall. The subsidiary was renamed Trigall Australia Pty Ltd, or Trigall Australia; and
The company's fiscal 2023 partnership with Equilon Enterprises LLC (doing business as Shell Oil Products US, or Shell), for the development and production of sustainable biofuel feedstocks through Vision Bioenergy Oilseeds LLC, or Vision Bioenergy. Under the terms of the partnership agreement, S&W contributed production and research facilities, along with certain personal property, including vehicles and other similar equipment, into its Vision Bioenergy subsidiary and subsequently sold a 66% interest in the subsidiary to Shell.
Strategy
The key elements of the company's strategy are to focus on key products that address unmet market needs; build its multi-channel distribution network and execute on international cross-selling opportunities; exploit production capability for best-in class cost structure; and develop camelina market through vision bioenergy.
Crops
Sorghum
The Sorghum Market: Sorghum comes in two types, forage and grain. Forage sorghum utilizes the whole plant fed to livestock through grazing, dried hay or sileage. Grain sorghum is bred and managed to maximize production of the seed or grain. While grain from sorghum has been traditionally used for livestock feed and in ethanol production, sorghum is gaining popularity as a substitute for wheat and other grains in food products due to its gluten-free characteristics, as well as its antioxidant, high protein, low fat, high fiber and non-GMO properties. Additionally, the pet food industry has been increasing its use of grain sorghum due to its nutritional benefits and enhanced digestibility. Sorghum requires less water to grow than many other crops and is generally used as a replacement for corn and other grains in areas where water is scarce. With the persistence and concern of drought conditions, the company expects sorghum to become more prominent in the coming years. S&W's primary markets are in the Americas, Europe, and Australia where sorghum is grown commercially and requires high quality hybrid seed.
S&W's Sorghum Portfolio: The company's portfolio of over 300 commercialized sorghum seed products includes both forage and grain sorghum. Many of the company's sorghum hybrids are unmatched and consistently out-yield competitor products in select markets.
The company plans to launch two new conventional grain sorghum hybrids in fiscal 2024 to replace aging products in its portfolio. For its technology trait product lines, the company plans to pilot launch in fiscal 2024 at least one new prussic acid free hybrid in collaboration with The Agricultural Alumni Seed Improvement Association, Inc., an affiliate of Purdue University in West Lafayette, Indiana. The company plans to offer four Double Team grain sorghum hybrids with sufficient supply to address the potential significant growth in the herbicide trait sector. The company also plans to launch its first Double Team forage sorghum into the U.S. market in fiscal 2024 (year ended June 30, 2024). The company continues to reduce the conventional sorghum product portfolio to ease inventory management and to devote more resources to its trait ladened products.
Alfalfa
The Alfalfa Market: Alfalfa seed is primarily used for growing alfalfa hay, which is grown throughout the world as 'forage' for livestock, including dairy and beef cattle, horses and sheep. The alfalfa industry (and therefore the alfalfa seed industry) is highly dependent on the dairy industry, which is the largest consumer of alfalfa hay. The company expects worldwide demand for alfalfa production to remain stable overall.
S&W's Alfalfa Seed Portfolio: The company's portfolio of over 150 commercialized alfalfa seed products spans both non-dormant varieties, which grow year-round, and dormant varieties, which have adapted to cold climates by going dormant during periods when frost or snow conditions would otherwise kill them. The company's specialty is high-yield alfalfa varieties with a wide range of adaptation across many growing environments. The company's alfalfa seed products include varieties that exhibit the traits that farmers most value, such as high yield, root rot resistance, lodging resistance, salt tolerance, drought tolerance, leafhopper resistance and stem nematode resistance.
Over the past several years, dormant alfalfa replant acreage in North America has trended downward, resulting in lower market size and corresponding seed sales for all companies in the sector. As a result, the company has reduced its research and development (R&D) expenditures in the support of the dormant alfalfa market and have diverted those R&D assets towards bioenergy/cover crop development.
Pasture Seeds
The Pasture Seed Market in Australia: In addition to alfalfa, the pasture seed market in Australia includes medic, clovers, vetch, forage cereals, and certain grasses. Key customers include beef cattle, sheep and dairy farmers, silage, hay and chaff producers.
S&W's Pasture Seed Portfolio: The company offers over 200 pasture seed products in the Australian market.
Sunflower
The Sunflower Market: Sunflowers have multiple uses, including oil, birdseed and human consumption. The company's sunflower seed focus is on hybrids best suited for the oil market. Sunflower oil is light in taste and appearance and supplies more Vitamin E than any other vegetable oil. It is a combination of monounsaturated and polyunsaturated fats with low saturated fat levels. The versatility of this healthy oil is recognized by cooks internationally, valued for its frying performance and health benefits. With multiple types of sunflower oils available, it meets the needs of consumer and food manufacturers alike for a healthy and high performance non-transgenic vegetable oil. Additionally, sunflower is being sought after as a source of non-GMO oils.
S&W's Sunflower Portfolio: The company has approximately 15 sunflower seed products in the market. In fiscal 2023, the majority of sunflower sales were to Asia and Australia. During fiscal year 2022, the company ceased its sunflower research and development program in Europe and scaled back its program in Australia.
Australian Wheat
Trigall Australia Partnership: Effective December 23, 2022, S&W Australia entered into a partnership with Trigall Genetics S.A. (Trigall) for the development and marketing of wheat varieties in Australia. Under the terms of the partnership agreement, S&W Australia transferred certain intellectual property license rights and equipment into a wholly owned subsidiary and subsequently sold an 80% interest in the subsidiary to Trigall. The subsidiary was renamed Trigall Australia Pty Ltd, or Trigall Australia. S&W Australia transferred all seven of its wheat varieties to the partnership at its inception.
Stevia
S&W's Stevia Program: The company's stevia research and development program has focused on developing stevia into a U.S.-grown crop since 2009. In 2019, the company opened a dedicated stevia field breeding station in Tifton, Georgia. In 2021, the company entered into a Pilot Program Supply Agreement with Ingredion Incorporated to develop a U.S.-based production and supply chain for stevia leaf using S&W's propriety stevia genetics, with the first plantings occurring in October 2021. The company also houses and maintains under a services agreement the stevia genetics program of Heartland Food Products Group at its Tifton field breeding station.
S&W's stevia program has been paused indefinitely, as management has elected to focus its attention on its primary crops, specifically Double Team sorghum, that are expected to generate positive cash flows. The company is actively looking for a buyer for its viable stevia germplasm.
Product Development
The company develops the first product type, which is based on good agronomic performance, in its breeding programs at multiple locations in the United States and Australia and through collaborations in South America and Europe. These programs utilize state of the art equipment and experimental design and data analysis for field evaluation and track important agronomic traits using molecular genetic markers. Developing improved genetics for agronomic performance can take 5 to 15 years, depending on the species and specific genetic improvement targets. By maintaining a full R&D pipeline of genotypes in all stages of development, the company can deliver new varieties each year with incremental improvements over previous varieties.
The company develops the second product type, which emphasizes valuable and unique traits, both in-house and through exclusive collaborations. The recently launched Double Team product was developed entirely in-house through its DNA and Tissue Culture Lab in Texas. The company also developed an improved forage quality alfalfa product through its exclusive arrangement with Calyxt. The company's prussic acid free trait, expected to have a pilot launch in fiscal 2024, was developed through an exclusive arrangement with The Agricultural Alumni Seed Improvement Association, Inc., an affiliate of Purdue University in West Lafayette, Indiana. The company's lab and technology personnel are focused on maintaining a continuous pipeline of traits that can be used to build value by increasing market share in both company and private label seed brands and by out-licensing to other seed companies on a royalty basis. For example, the company completed its first out-license of Double Team technology to Mojo Seed in June 2022.
Sales, Marketing and Distribution
The company sells over 600 seed products in more than 40 countries. Its principal markets for alfalfa sales are the United States, Canada, Mexico, South America, the Middle East, North Africa, and Australia. The company's sorghum sales are focused in the United States, Mexico, Australia, Europe and South Africa. The company's sunflower sales are primarily in the Middle East, Africa and Australia. The company's pasture seed sales are focused in Australia. Before the partnership with Trigall in December 2022, the company's wheat sales were in Australia.
The company's organization is structured along geographic lines, as opposed to product lines, which allows the company to make the best use of distribution assets (like the company's U.S. dealer and distributor network and its Australian sales force) and unlock potential sales synergies through international cross-selling of products.
The company primarily sells its seed products under the S&W brand or other brands it owns, such as Alfalfa Partners and Sorghum Partners. Private-label and licensing is an important part of its distribution strategy going forward.
The company's customers are primarily distributors and dealers. Its distributors and dealers, in turn, sell to farmers. Selling through dealers and distributors enables the company's products to reach growers in areas where there are geographic or other constraints on direct sales efforts. The company selects dealers and distributors based on shared vision, technical expertise, local market knowledge and financial stability. Over the years, the company has built dealer/distributor loyalty through an emphasis on service, access to breeders, ongoing training and promotional material support. The company limits the number of dealers and distributors with whom it has relationships in any particular area in order to provide adequate support and opportunity to those with whom it chooses to do business.
Both farmers and dealers use pest-control advisors who recommend the varieties or hybrids that will produce the best results in a particular location. Therefore, a key part of the company's marketing strategy is to educate the consultants, as well as the farmers, as to benefits of its seed varieties and hybrids.
The company continues to place advertisements in trade journals, agriculture publications, social media and participate in seed industry conferences and trade shows and engage in various other educational and outreach programs as it deems appropriate.
Seed Production
The company produces seed in the United States, Canada, Australia and South Africa under contract with select third-party contract growers. The company maintains approximately 140 grower relationships. The company's network of growers has the expertise needed to successfully grow high quality seed products. The company has worked with many of the same growers on a long-term basis, and it has strong relationships with them. The company allocates its seed production among its growers so that it can purchase the proper mix of seed each year. The company's contracts with growers have terms ranging from one to seven years, depending on the crop and the production area. The company's global, but localized, production capabilities allow it to produce close to the customer to ensure the seed product is developed specifically for the conditions and requirements of that region and is produced at the lowest cost.
The company conditions and packages seed primarily in its own facilities located in Texas and Australia; although in some markets (for example, California) it uses third-party processing services. Direct ownership of production facility assets gives the company more flexibility to respond to demand changes unique to each geography, greater control over product quality and a lower cost structure.
Seasonality
The company contracts with growers based upon its anticipated market demand. The company mills, cleans, and stocks the seed during the harvest season and ships from inventory throughout the year (year ended June 2023). However, the company's seed business is seasonal. In the Northern hemisphere, production and harvest occurs from March through September and processing and shipping finished goods primarily occurs from October through May. In the Southern hemisphere, production and harvest occurs from October through March and processing and shipping primarily occurs from March through August.
Competition
The company's principal competitors include:
Alfalfa: In the U.S. market, the company's principal competitors in its alfalfa seed business are Forage Genetics International (a subsidiary of Land O' Lakes, Inc.), and Pioneer and Alforex Seeds (subsidiaries of Corteva). In the Australian market, competitors in the proprietary alfalfa seed market include the Barenbrug Group and DLF Australia.
Sorghum: The company's principal competitors in sorghum are Pioneer, DeKalb (a subsidiary of Bayer) and Alta (division of Advanta) in the U.S., Pacific Seeds (a division of Advanta) and Pioneer in Australia, Nuseed, Brevant (a division of Pioneer), Dekalb (a subsidiary of Bayer), and Advanta in Latin America.
Sunflower: The company's principal competitors in sunflower are Pioneer, Nuseed, Dyna-Gro Seed (a subsidiary of Nutrien Ag Solutions), Syngenta AG, Advanta and Limagrain.
Australian Wheat: The company's principal competitors in the Australian wheat market are AGT, LongReach Plant Breeders Pty Ltd., and InterGrain.
Pasture Seed: The company's principal competitors in the Australian pasture seed market are the Barenbrug Group, DLF Australia and Seedforce, a subsidiary of RAGT.
Environmental and Regulatory Matters
Internationally, the company is subject to various government laws and regulations (including the U.S. Foreign Corrupt Practices Act and similar non-U.S. laws and regulations) and local government regulations. To help ensure compliance with these laws and regulations, the company has adopted specific risk management and compliance practices and policies, including a specific policy addressing the U.S. Foreign Corrupt Practices Act.
Research and Development
For the year ended June 30, 2023, the company's research and development expenses were $5.2 million.
History
S&W Seed Company was founded in 1980. It was incorporated in Delaware in 2009. The company was reincorporated in Nevada in 2011.
