Description of S And W Seed Co's Business Segments
Fall Dormancy Ratings of Our Varieties
Fall dormancy is a key characteristic that can vary among alfalfa varieties.
Fall Dormancy (FD) ratings are assigned to varieties based on their performance
in standardized tests for the onset of dormancy in the fall. Standard check
varieties span an FD rating continuum from FD 1 to FD 11, where the onset of
dormancy is measured as fall height relative to standard check varieties. FD1
represents the earliest onset of fall dormancy, whereas FD 11 represents a completely
non-dormant growth habit. Early FD ratings are generally most suited to cold
winter climates where plants must cease fall growth early allowing individual
plants to survive cold winters and frozen soils conditions for lengthy periods.
FD 2 and FD 3 ratings are typically associated with early onset fall dormancy,
when grown in the upper Midwest for example. FD 9 and FD 10 ratings are typically
non-dormant, are characterized as having relatively little slowdown in fall
growth and are more suited for continuing forage yield production and improved
yield potential in warm winter climates where soils do not freeze.
Our current commercial product line-up includes alfalfa seed varieties that
span from FD 3 (our earliest onset of fall-dormancy) to FD 10 (our most non-dormant,
most winter active). The legacy S&W product development efforts were focused
on FD 8, FD 9 and FD 10, with some breeding effort devoted to FD 4, FD 6 and
FD7.
S&W Varieties
S&W varieties are all bred and developed to meet the guidelines for certification
by the National Alfalfa Variety Review Board and/or the Association of Official
Seed Certifying Agencies.
In February 2012, we announced the certification of our first proprietary dormant
alfalfa seed variety, which was specifically bred to thrive in high altitude
and cooler climates. In August 2012, we purchased the rights to a portfolio
of alfalfa varieties suited for higher elevations and colder climate conditions,
marking our commitment to expand more aggressively into the dormant variety
market. The colder climate or higher elevation varieties that we acquired are
in the range of FD 3, FD 4 and FD 5. In December 2014, we acquired from DuPont
Pioneer one of the alfalfa industrys largest portfolios of dormant alfalfa
germplasm, along with their active breeding program. The Pioneer breeding program
amassed a significant germplasm base that spans from FD 3 through FD 9. The
primary focus of the Pioneer breeding program was FD 4 and FD 5 for the North
America market. These acquisitions of dormant germplasm significantly expand
the range of geographic and climatic growing regions where we can offer adapted
varieties.
Our non-dormant varieties (FD 8, FD 9 and FD 10) still represent a large proportion
of our business and are best suited to hot, arid climates. Our salt tolerant
non-dormant varieties do well in salty irrigation waters and salty soils. Our
leading non-dormant varieties include SW 10, SW 9720, SW 9215, SW 9628, and
SW 8421S.
Of these varieties, SW 9720, SW 9215 and SW 8421S are bred to perform very
well in highly saline conditions that would stunt or kill ordinary alfalfa.
Our FD 3, FD 4 and FD 5 S&W varieties are adapted to the winter-hardy intermountain
west and the northern half of the United States and Canada. These include Rhino,
SW4328, and SW5909. Some of these varieties are derived from the DuPont Pioneer
germplasm base for commercial introduction as S&W brand varieties. Other
dormant varieties from the DuPont Pioneer germplasm have been selected as potential
varieties for licensing to third party brands. Our breeding and genetics experts
continue the multi-year process of developing improved varieties over much of
the dormancy spectrum, but concentrating primarily on high salt- and heat-tolerant,
non-dormant alfalfa seed, where we have established ourselves as a leading provider.
We also create blends of seed varieties.
IVS Varieties
IVS markets both common and certified alfalfa seeds, sourced from growers located
in the Imperial Valley of Southeast California. Portions of the alfalfa seed
sold by IVS in fiscal 2016 and 2015 were common varieties (i.e., uncertified
seed) while the balance consisted of certified CUF (a public variety) and proprietary
varieties. The primary proprietary varieties we acquired in the IVS acquisition
are LaJolla, Catalina and Saltana. Because GMO alfalfa is not permitted in the
Imperial Valley, we are able to rely upon the seed grown in the Imperial Valley,
along with seed grown in Australia, to supply customers in regions such as the
Middle East and Europe, where GMO products are strictly prohibited.
SGI Varieties
SGI has developed well-known proprietary varieties of alfalfa, such as SuperSonic,
SuperNova, SuperStar, SuperCharge, SuperAurora, SuperSequel and SuperSiriver.
Since 2002, the varieties developed by SGI have attracted an expanding grower
base, and in 2016, SGI accounted for more than 60% of the total Australian certified
proprietary alfalfa seed production. SGIs alfalfa seed varieties are bred to
resist disease, exhibit persistence in the field and produce higher yields of
both the alfalfa hay forage and alfalfa seed production for our seed growers.
SGIs proprietary varieties exhibit superior seed yield capability compared
to traditional non-proprietary alfalfa varieties in Australia, with the most
recent varieties showing the highest seed yields. Forage yields of the older
SGI proprietary varieties are at least equivalent to traditional non-proprietary
varieties, and the forage yields of the more recent SGI varieties are even better.
All of SGIs proprietary alfalfa varieties, excluding SuperAurora, have FD ratings
of 8-9 and therefore achieve optimum growth and forage production in Mediterranean
to desert climates.
SGIs breeding program includes a number of initiatives addressing semi-dormant
and highly non-dormant alfalfa varieties and tropical alfalfa seed varieties.
Additionally, SGI has a breeding and production platform of proprietary white
clover varieties, including SuperHuia, SuperLadino, SuperHaifa and SuperHaifa
II. In fiscal 2016, clover sales represented approximately 6% of SGIs total
seed sales and a nominal amount of our total consolidated sales. SGIs white
clover varieties are used for forage and ornamentation.
Genetically Modified Organism Alfalfa
Currently, Europe, the Middle East and certain other parts of the world prohibit
the sale of genetically modified organism (GMO) alfalfa. Therefore, historically,
we have not employed genetic engineering in the breeding of our current commercial
seed varieties for these markets, and consequently, we have products that can
be sold throughout the world. As a result of the January 2011 deregulation by
the USDA of Roundup Ready® alfalfa, a GMO product, Roundup Ready® alfalfa
is currently being grown in the United States without any federal or state regulations
governing field isolation and other protections.
Collaborative stewardship programs have been developed to facilitate the coexistence
of GMO and non-GMO seed. For example, in 2010, the AOSCA launched its Alfalfa
Seed Stewardship Program (the "ASSP"). The ASSP is a voluntary, fee-based
certification program for the production of alfalfa seed to be sold into markets
that prohibit the sale of GMO alfalfa. ASSP certification of seed fields includes
testing for GMO material and observance of a minimum stated isolation distance
of five miles from any GMO alfalfa seed production field. Also in 2010, the
California Crop Improvement Association (the "CCIA") developed a web-based
alfalfa seed field isolation "pinning" map for alfalfa seed production
in the Western U.S. This map is intended to pin both GMO and non-GMO seed fields.
Although beneficial to growers and customers alike, these stewardship programs
do not afford legal protection to non-GMO growers.
We continue to evaluate our options with respect to incorporating biotechnology
into our alfalfa seed traits and the resulting impact on our business strategy
and operations. In April 2013, we entered into a license agreement with FGI
to develop and commercialize seed varieties that incorporate proprietary traits,
including the Roundup Ready® trait. This agreement further documented and
formalized our previously announced collaboration with FGI and Monsanto to develop
genetically modified versions of certain of our proprietary alfalfa varieties.
This development of biotech seed varieties consists of several phases including
lab work and field trials to confirm agronomic performance and trait efficiency
of each developed variety. Upon completion of the field trials and demonstration
of minimum performance standards, we may elect to commercialize the variety
and enter into a variety-specific license agreement with FGI pursuant to which
we would pay certain royalties and access fees.
In connection with the DuPont Pioneer acquisition, we only acquired conventional
alfalfa varieties. However, the parties agreed to the terms of a second asset
purchase agreement relating to the purchase of DuPont Pioneers GMO alfalfa
assets, to be entered into under certain circumstances: Assuming FGI provides
its required consent to this transaction prior to November 30, 2017, and subject
to the satisfaction of certain other specified conditions, either we or DuPont
Pioneer have the right to enter into (and require the other party to enter into)
the second asset purchase agreement on or before December 29, 2017, pursuant
to which we would acquire DuPont Pioneers GMO germplasm varieties and other
related assets for a purchase price of $7,000,000. There is no assurance that
we will purchase the DuPont Pioneer GMO assets, however, we are actively working
to satisfy the requisite conditions and are hopeful that the purchase will be
consummated.
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