The 10-K regarding worldwide crop conditions:
In addition, in 1998, total sales were negatively impacted because international
and wholesale turfgrass seed sales were below expectations due to weak demand
from the "Pacific Rim" countries, weak demand in Europe and large inventory
positions with U.S. dealers. The countries of the Pacific Rim continue to be
affected by weak economies, the strong U.S. dollar and tightening credit. This
situation has resulted in a significant reduction in sales to customers in these
countries. The demand in Europe was negatively impacted by higher than normal
fall moisture patterns, which resulted in higher than normal seed production
yields. Because of this situation, European companies have become net exporters
of turfgrass seed products instead of importers. They have also begun to ship
less expensive seed into the U.S. market, which is having a negative impact on
prices. The excess European inventories have reduced both the amount of product
sold into the European market, and the price for which it was sold. The U.S.
wholesale dealers carried large inventories from the 1998 spring selling season
into the fall 1998 selling season. This situation was the result of the "El
Nino" induced wet 1998 spring, which caused substantially reduced spring sales
to the consumer. The reduced sales left wholesale dealers with large inventories
that they carried over to fulfill the fall selling season demand. Forage seed
sales were impacted by the continuing industry wide shortage of non-dormant
alfalfa, which constitutes the vast majority of alfalfa sold during the fall
season, an industry wide shortage of annual rye grass and high European forage
inventories. The alfalfa and annual ryegrass seed shortages have resulted in
lost customer sales because the seed was not available to sell and the seed that
was available was at a price that was, for some customers, prohibitive.
The worldwide supply of turfgrass and forage seed, except for non-dormant
alfalfa and annual ryegrass, is in excess of demand. This oversupply situation
was caused by the "El Nino" wet spring weather pattern which allowed U.S.,
Canadian and European seed growers to experience unusually large harvests during
the last crop year. The industry is following a trend towards consolidation in
the U.S. and in Europe. Smaller independent companies facing this trend have
responded with aggressive pricing programs to move their excess inventories and
retain their market share. These conditions are expected to continue to cause
downward pressure on prices and margins through the current crop year. |
