By Ian Gilson, PhD, CFA
On Jan. 19, 2017 S&W Seed (NASDAQ:SANW) announced that it has started to scale up its sorghum operations to make hybrid seeds available for commercial sale.
The company expects to mirror its sorghum (and, presumably its sunflower operations at a later date) to how it runs its alfalfa business.
Based on its royalty-based licensing agreements with its 12 partners, in 9 countries, the partners are currently increasing production of both hybrid grain and hybrid forage seed production in order to satisfy a significant level of demand.
We would anticipate revenue from the agreements in fiscal 2018.
The recent rains in California have had a significant impact on the drought conditions, with the areas considered to be under a drought dropping to half of what they were. This, and the passing of the Water Infrastructure Improvements for the Nation bill which was passed by the US Senate in late 2016, should encourage farmers to plant more crops in California. Although S&W Seed ability to grow and acquire seeds is not impacted by the water bill the improving climatic conditions should have a positive impact on demand for seeds.
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