- The stock price of Origin Agritech Limited (NASDAQ: SEED) increased by over 13% during intraday trading today. This is why.
The stock price of Origin Agritech Limited (NASDAQ: SEED) increased by over 13% during intraday trading today. Investors are responding positively to Origin Agritech announcing it has signed purchase agreements to sell two feedstock companies a total of 50,000 metric tons of its nutritionally enhanced corn.
The company’s new nutritionally enhanced corn reduces the need for expensive additives like soybean meal for feedstock companies, and thus doubles their margins. Origin has been giving samples of the corn to potential feedstock customers so that they can validate the nutritional content of the corn. And the corn has passed these tests and companies now are placing orders.
Since Origin’s corn has such a positive impact on feedstock companies and since the company has no competition for this product, the company decided rather than just selling the seed, it would also contract grow the corn to capture a much higher share of the profitability of the finished product. And the company is contract growing 50,000 metric tons of the corn in Xinjiang.
The feedstock companies have agreed to buy the corn at market prices at the time of delivery, plus a mark-up to reward the company for the added value of the corn. And based on current market prices for corn, the sale price could be around 3,000 RMB per metric ton or 150 million RMB in total. The company is currently evaluating the impact of this purchase agreement on the company’s financials and may soon update its guidance to reflect this new business.
“We are excited by the positive reception by customers to our new corn variety. In these unprecedented times of disruption in food supply chains and food inflation, I am particularly happy that we are having a positive impact on food security for China. “
— Dr. Gengchen Han, Origin Agritech’s Chairman
Disclaimer: This content is intended for informational purposes. Before making any investment, you should do your own analysis.