FIVE POINTS, CALIFORNIA - S&W Seed Company (NASDAQ: SANW) announced that the Company has leased approximately 800 acres of farmland from Widgeon Land Company, Inc., suitable for producing S&W's proprietary alfalfa seed, wheat and other crops, including stevia.
The property, which is initially leased through September 2014, is in Kern County located in the southern Central Valley of California, approximately 65 miles from S&W's certified seed cleaning and processing facility in Five Points. The Company was particularly interested in leasing this farmland due to the fact that the acreage has a robust water supply, providing for reliable, consistent irrigation of crops even in years of water shortages. Moreover, S&W's management believes that the lease is on attractive terms, which will enable it to enhance margins and to exert greater control over its seed crop production.
S&W will continue to contract the majority of production of its proprietary alfalfa varieties from farmers in the San Joaquin Valley, most of which have grown and harvested the Company's seed for two or three generations. By vertically integrating its business plan to include its own production, S&W can leverage its existing management infrastructure, experienced agronomics team and milling capacity without expanding its current management team. The Company will utilize the new land to supplement its contracted alfalfa seed production, as well as grow other small grain seed crops to supply key export markets in the Middle East, North Africa and Latin America.
According to Mark Grewal, President and CEO of S&W, "Our strategy for growth is built on optimizing S&W's most valuable assets -- our people and agricultural expertise being among them. When this opportunity presented itself, we saw it as a way to leverage our farming skills while driving improved profit margins on our seed sales.
Because the leased acreage is limited to non-permanent crops, coupled with the strength of our personal relationships, S&W obtained highly favorable lease terms. This affords us attractive opportunities to participate in and financially benefit from the production, milling and sale of other crops related to S&W's core business, such as wheat, safflower, sorghum and stevia."
The first year of the lease anticipates a year of transition in which infrastructure will be upgraded or built at the lessor's expense and land optimized for S&W's farming objectives. Accordingly, it is not anticipated that all of the property will be planted in the first year. The second year of the lease will be the first year of full production, and the Company expects that in all subsequent years, it will plant as much of the land on the property as is farmable (approximately 800 acres). The Company will only pay for the acreage actually farmed. The lease will expire in October 2014, subject to a two-year extension that will automatically go into effect unless either party gives notice in September 2014 that it does not intend to extend the original term.
For more detailed information, please refer to the related Form 8-K to be filed with the U.S. Securities and Exchange Commission later today.
SOURCE: S&W Seed Company