One of the most interesting stocks surging today is Origin Agritech (NASDAQ:PLANT). Currently up 15%, SEED stock was a big mover in an otherwise red day. This move was accompanied by notable volume, with around 35 times the average daily volume of stocks already changing hands at this time.
With this type of volume driven move, investors can anticipate that big news is responsible. These investors would be right.
Today, Origin Agritech announced that commodity companies have signed agreements to purchase 50,000 metric tons of its nutritionally-enriched corn. The contract, which could be worth 150 million RMB ($23.6 million), could provide a significant boost to Origin Agritech’s finances.
Given that SEED shares are trading at a market cap of just $50 million, even after today’s rise, investors are taking note of the growth potential this transaction entails. So let’s see what the deal means for investors.
SEED stock soars on massive takeover deals
An agricultural technology company, Origin Agritech has traditionally focused on selling seeds to farmers. The company’s nutritionally enhanced corn seeds have seen significant growth in demand. This is due in part to rising maize prices as well as the nutritionally enhanced nature of its product. The company’s proprietary corn “reduces the need for costly additives such as soybean meal for commodity companies”, helping to improve customer margins even at higher prices.
Origin Agritech has switched to contract farming for its maize in an effort to increase its own margins. On the Chinese market in particular, 50,000 metric tons of corn production have been outsourced. Under various purchase agreements, commodity customers have agreed to buy this corn at the market price plus a premium for the value-added product.
For investors looking to play on rising commodity prices, SEED stocks are now on the radar. This announcement could be a game-changer for the company in its search for growth. Investors excited about the Chinese agricultural market may have a new stock to watch from now on.
As of the date of publication, Chris MacDonald did not hold (either directly or indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.