Not so long ago, Chinese agricultural interests were frantically buying commodities like there was no tomorrow. There turned out to be a tomorrow after all, but China’s commodity frenzy only mildly abated. Just ask Origin Agritech (NASDAQ:SEED), who set up a new deal via its majority-owned joint venture. The move was sufficiently exciting for investors to send shares up nearly 13.75% in Monday’s trading.
The move called for Origin Agritech and its joint venture to land a grant of around 33,000 acres of farmland to grow its line of NEC corn. Origin will not only provide the seed but will also offer planting support. Its joint venture company, meanwhile, will handle purchasing arrangements and other agreements along with the financing involved. Once complete, the deal will add $8 million in earnings this year, but in 2024, that number should soar to over $55 million. The recent Chinese lockdown measures, referred to as Zero COVID, got in the way of the expansion effort. However, with those measures out of the way, the Chinese could proceed, and the deal could be established.
China’s interest in maintaining its own supplies of food are well known. Back in 2022, China was on track to own 69% of the world’s corn reserves. It also had nearly 60% of the rice and 51% of the world’s wheat. China itself believed those levels were higher than at any other time in history and actually had a hand in raising food prices worldwide. A China better equipped to grow its own food is less likely to destabilize world food supplies through rampant buying, as well as being less dependent on imports for food.
Interestingly, based on the last five days of trading for Origin Agritech, it was already on something of an upward slant, to begin with. While it was a much more gradual affair, it was still climbing. As a result, investors gained 22.59% during this timeframe.