One can easily prove by induction that $n$ seeds arranged in the diagonal span the whole square.
The only remaining thing to prove is that $n-1$ seeds cannot span $n^2$ squares.
One can see using the definition of neighbouring squares that any number of seeds arranged in an $r\times c$ rectangle cannot span any square outside of that rectangle.
Suppose we place $n-1$ seeds in the $n\times n$ grid.
Let $r_1$ be the minimum row index in which one the $n-1$ seeds is placed, and $r_2$ the maximum row index in which one of the $n-1$ seeds is placed.
If $r_2-r_1<n-1$ then obviously the number of squares spanned by the seeds is $\leq (r_2-r_1)n<n^2$.
If $r_1=0$ and $r_2=n-1$ then by the pigeon hole principle there is at least a row with no seeds. Put $r_i$ for such a row. The only squares that can be spanned by the seeds are those with one seed in their column in the rows $r_{i-1}$ and $r_{i+1}$. There are at most $\lfloor\frac{n-1}{2}\rfloor$ squares such as these in which case the number of squares spanned is $3\lfloor \frac{n-1}{2}\rfloor<n^2$. So in all cases, there will be at least a square where no grass grows, so in any case $n-1$ seeds cannot span $n^2$ squares.
Neighbouring squares do not include diagonals. I.e Side by side, side or up, up and down – Thomas Jan 22 '17 at 10:06