Seed business reacts to water shortages


Issue Date: March 11, 2015
By Ching Lee
Ted Woods, president and general manager of California Transplants in Stanislaus County, checks on tomato seedlings in a greenhouse. He began shipping transplants to growers in the southern San Joaquin Valley in mid-February. Continued strong demand for processing tomatoes has kept his greenhouses full and busy, he said.
Photo/Ching Lee
Livier Flores of California Transplants, checks on a tray that has been seeded.
Photo/Ching Lee
Employees at the company’s greenhouse, below, move tomato transplants that are ready to be shipped to a farm for planting.
Photo/Ching Lee

With limited water supplies again this year, California farmers will be forced to leave fields idled in order to save water for their permanent crops. Those empty fields mean reduced sales and shifts in demand for companies that supply seed for crops such as rice, cotton and vegetables.

Even for crops where demand has remained strong, such as processing tomatoes, companies that produce transplants keep watch on water supplies and long-term acreage trends. Greenhouses at California Transplants in Stanislaus County, which produce seedlings for processing tomatoes, remain full and busy, said Ted Woods, the company's president and general manager.

California farmers produced a record tomato crop last year—in many cases by not planting other crops in order to marshal their available water for tomatoes. With tomato processors wanting to increase production again this year, Woods said his company—which has processing tomato transplants as 99 percent of its business—has increased production by 10 percent the last two years.

"Most of our growers have wells and supplemental water supplies, and they're able to get by. I just don't know how long they can continue to do this without some rain," he said.

Woods said his sales team wants him to expand production even more, but he's concerned about the long-term impact of the drought. His greenhouses rely on surface water from the Delta-Mendota Canal for irrigation, and for the last two years, there has been zero allocation. Woods said he's getting by with carryover water, which he noted will be enough for two more years of production. After that, he would need to supplement with groundwater.

At HM Clause, the company's seed sales have remained steady even though farmers are reducing acreage due to lack of water, said Marc Beoshanz, a technical sales representative for the San Joaquin Valley region, who said sales of some products have actually increased.

Where the company is seeing the increase, he added, is with newer products that offer traits growers desire, such as a new cantaloupe variety that increases shipping and storage capacities. Although some farmers are choosing not to grow melons at all this year, those who are growing them lean toward these new varieties, he said.

Crops that use less water, such as garbanzo beans, also are on the rise, he noted. But perhaps the biggest change he's seen in the last two to three years is the production of broccoli moving away from the San Joaquin Valley to primarily the state's coastal region.

"That's one where we have seen a reduction in sales," Beoshanz said. "It's because broccoli is a very water-intensive crop. If (farmers) have the option to not grow that crop and save some water, then that's something they look at."

Rich Hoffman, a sales representative for TS&L Seeds whose customers are largely in the central San Joaquin Valley, said his personal sales have dropped because farmers are not growing as many acres. Mostly, they are cutting back on crops such as melons, onions and fresh-market tomatoes they feel may not bring as high a return, he added.

Hoffman said he also has seen more vegetable production migrating from the central San Joaquin Valley to the southern part of the valley or to the Sacramento Valley, where there might be more water. Those vegetable plantings, he added, may be replacing crops such as cotton, "which used to be big in Kern County."

Growers are expected to plant less cotton again this year, with falling prices as an added disincentive, said Harry Peck, sales representative for Phytogen Seed Co., which produces seed for the bulk of the state's pima cotton acreage. California cotton acreage last year fell by 23 percent from 2013, according to the U.S. Department of Agriculture.

"My expectation is it will be off another 20 percent," Peck said. "Pricing plays into it, but the biggest issue right now is water."

Roger Isom, president and CEO of the California Cotton Ginners and Growers Associations, said while farmers will probably grow less cotton this year, he doesn't think the reductions will be much more than last year's. He acknowledged lower prices make the crop less attractive to farmers in drought years, but noted there is still high demand for quality cotton—both upland and pima—as there is practically no carryover.

He also noted that cotton growers have been able to cut water use with irrigation techniques such as buried drip, which allows them to water just in the plant's root zone. With good yields and quality the last three years, Isom said, "As bad as everything else is, it's not that bad of a time to be growing cotton."

As manager of Sacramento Valley Seed Co. in Colusa County, Bruce Rolen said he expects to sell less rice seed again this year, noting that his sales dropped 30 percent last year, when farmers reduced their plantings by 25 percent from 2013 acreage.

"We are anticipating very close to the same thing this year, and that's with a little bit of hope put into it," said Rolen, who grows rice himself.

The loss of sales will means layoffs, less hiring of seasonal employees and probably some reduction of permanent positions, he said.

Rolen said rice farmers are growing more early-maturing varieties that cut their season short, allowing them to use less water. Anticipating high demand for these varieties again this year, the company plans to procure about 20 percent more of those seeds, he said, but noted there is a limited quantity.

For forage crops such as alfalfa, Ron Cornish, general manager of Alforex Seeds, said he did not see a significant drop in his seed sales for what was planted this past fall.

"I think with high hay prices, the demand is strong enough from the dairies that people continued to place acres," he said.

But he acknowledged that with so many farmers facing another year of little or no surface water deliveries, and with milk prices dropping for dairy farmers, there will probably be fewer acres of alfalfa planted this spring. Farmers may turn instead to growing crops such as sorghum or sudangrass that require less water, but he said it is still early for them to make those decisions.

The drought has also affected the company's alfalfa seed production in the Central Valley, where fewer growers are able to grow the seeds, forcing the company to seek contracts in the Imperial Valley and other states, Cornish said.

For Michael Newman, owner of Corona Seeds Inc. in Ventura County, the drought has had "minimal effect" on the vegetable seed business, he said, adding that his coastal growers haven't been as heavily hit as those in the San Joaquin Valley. Also, his California clients make up only about a third of his business, with the rest outside the country.

"Our sales have been going up, regardless of the drought," he said. "But we can't tell whether they would go up even more if we all had plenty of water."

(Ching Lee is an assistant editor of Ag Alert. She may be contacted at clee@cfbf.com.)

Permission for use is granted, however, credit must be made to the California Farm Bureau Federation when reprinting this item.