One of the more interesting stocks making a jump today is Origin Agritech (NASDAQ:SEED). Currently up 15%, SEED stock has been a big mover on an otherwise red day. This move has come on notable volume, with approximately 35 times the average daily volume of shares already changing hands right now.
With this type of volume-driven move, investors may anticipate some big news is responsible. Those investors would be right.
Today, Origin Agritech announced that feedstock companies have signed purchase agreements for 50,000 metric tons of its nutritionally enhanced corn. This contract, which could be worth 150 million RMB ($23.6 million), may provide a meaningful boost to Origin Agritech’s financials.
Given that SEED stock trades at a market capitalization of only $50 million even after today’s rise, investors are taking note of the growth potential this deal implies. So, let’s dive into what the agreement means for investors.
SEED Stock Soars on Massive Purchase Agreements
An agricultural technology company, Origin Agritech has traditionally focused on selling seeds to farmers. The company’s nutritionally enhanced corn seeds have seen a significant amount of demand build. This is due in part to rising corn prices as well as the nutritionally enhanced nature of its product. The company’s proprietary corn “reduces the need for expensive additives such as soybean meal for feedstock companies,” helping improve customers’ margins even at higher prices.
Origin Agritech has transitioned into contract farming for its corn in a play to boost its own margins. In the Chinese market specifically, 50,000 metric tons of corn production has been contracted out. According to various purchase agreements, feedstock customers have agreed to buy this corn at the market price, plus a premium for the value-added product.
For investors looking to play rising commodity prices, SEED stock is now on the radar. This announcement is a potential game-changer for the company as it looks for growth. Investors excited about the Chinese agricultural market may have a new stock to watch from here on out.
On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.