Seed Co to leverage on mix of seed varieties

Nelson Gahadza SEED CO LIMITED plans to spend 10 percent of its revenue on research and development of early maturing maize seed in response to climate change. Below-normal rainfall in the 2023/2024 farming season, due to El Niño weather conditions, had adverse effects on the country’s agriculture sector. Southern Africa was also hit hard by […]

Seed Co to leverage on mix of seed varieties

Nelson Gahadza

SEED CO LIMITED plans to spend 10 percent of its revenue on research and development of early maturing maize seed in response to climate change.

Below-normal rainfall in the 2023/2024 farming season, due to El Niño weather conditions, had adverse effects on the country’s agriculture sector.

Southern Africa was also hit hard by the El Niño-induced drought, exposing the region to food insecurity. The seed producer has a presence across several regions of the African continent, including East and West Africa.

In an interview after the group’s analyst briefing last week, Seed Co Limited group chief executive officer Mr Morgan Nzwere said climate change has always been a key research area for the company.

“Our target is to spend 10 percent of our revenue on research and development, but obviously, (that may) not be every year. It really depends on the projects that are at hand, and our breeders have to request expenditure, but we supply them with whatever cash they need in terms of achieving that 10 percent research coverage,” he said.

Mr Nzwere noted that climate change is a big issue regarding agriculture, considering the El Niño-induced drought this year and the expected La Niña.

In terms of the group’s research, Mr Nzwere said the firm always had climate change as a key research area, coming up with maize varieties that mature early and require less rainfall, and varieties that are drought-tolerant.

“If you have been familiar with the Seed Co product offering, we have been going downwards.

“We were always ending at the 4 series and 5 series, but now we have come up with 3 series, which are even earlier maturing.

“We are also coming up with the 2 series, which is even faster maturing. This is to do with making sure that the farmers can get products that can mature as quickly as possible.

“With little rain, the farmers can get at least something. So, that is a key research goal and most of our varieties have what we call a drought escape mechanism. If they get just a little bit of rainfall, they are able to escape the drought and be able to give the farmers some effective yield,” he said.

Climate change is making droughts more frequent and severe globally, threatening food security. In Zimbabwe, climate change has brought harsher and more frequent droughts, threatening the staple maize crop.

However, farmers have in recent years turned to climate-smart agricultural practices such as reduced tillage and using water-saving drip irrigation, with some growing drought-resistant grains such as sorghum.

In 2020, Zimbabwe launched a US$47 million seven-year project aimed at strengthening the climate resilience of vulnerable communities. It did so with the support of the Green Climate Fund and the United Nations Development Programme.

Programmes such as Pfumvudza/Intwasa have increased farmers’ resilience against climate change-induced droughts and improved yields in the rural communities of Zimbabwe where it has been implemented.

This has seen farmers fully embrace the Pfumvudza/Intwasa concept to realise high yields and improve food security.

According to Mr Nzwere, the company’s sales volume for the year under review declined by 10 percent as a result of the El Niño-induced drought. The dry spell negatively impacted maize and soya seed sales.

He believes the drought dampened cropping plans, as farmers tried to avoid the risk of crop failure because of moisture stress.

However, the group anticipates a rebound in seed demand during the 2024/2025 agricultural season, largely driven by positive rainfall forecasts, as people need to refill their granaries.

“The anticipated favourable weather conditions as El Niño transitions to La Niña in the upcoming season will drive the group to retain lost volumes.

“People will need to refill their granaries, which have been decimated because of the drought that we faced. Therefore, we are expecting a huge demand as they try to refill their granaries.

“On the supply side, we have adequate seed to supply the market,” he said.

Mr Nzwere said the group was adequately stocked, with 28 000 tonnes at the close of the year under review. This included estimated deliveries that were more than adequate for the local market and to satisfy the 8 100 tonnes of confirmed export orders.

He said 6 100 tonnes of wheat and 852 tonnes of barley have already been sold this winter and delivery of export orders is underway.

“Seed deliveries and processing are ongoing in Zimbabwe and the region. Drought impacted production adversely, and yields were expected to be a third lower than planned, but we have significant carryover stocks, mainly in Zimbabwe, to help plug shortages in the region.

“Overall, group stocks are adequate and the immediate task is ensuring timely movement of seed from surplus markets to deficit markets,” he added.

Meanwhile, Mr Nzwere said the company was largely funding its business with short-term borrowings from local banks, as lack of liquidity in the market is impacting its ability to secure long-term facilities for working capital.

He noted that the short-term borrowings from local banks comprised a combination of ZiG and US dollar facilities, but the banks are illiquid.

“The banks will sign up a facility with you for US$5 million to fund your business, but when the time comes to draw down that facility, say probably I need US$1 million out of that US$5 million facility, they don’t have the liquidity. This is what we are finding,” he said.

Research firm FBC Securities, in its review of Seed Co Limited’s financials, said the company’s reach spreads across various markets in Africa, which neutralised losses that could have been suffered if it was relying only on the local market, as increased export sales cushioned the group against depressed local demand.

“The company’s association with Seed Co International, Prime Seed Co and Quton is generating positive gains, with a circa ZWL$25,78 billion profit share having been earned by Seed Co Limited during the year under review.

“As a result, the company’s profitability firmed by 8 percent, notwithstanding the subdued volumes and increased costs of financing and other inflation-driven operating expenses,” FBC Securities said.

It noted that growing investments in research and development aimed at producing climate-responsive products and anticipated favourable weather conditions, as El Niño transitions to La Niña next season, are expected to boost demand for Seed Co’s products and improve shareholder value.

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