Origin Agritech Ltd. (NASDAQ: SEED) (the "Company" or "Origin"), an agriculture technology company, announced that it has signed a collaborative agreement with BaoDao Feed Ltd. ("BaoDao"), a Chinese feed producer with 500 million RMB in annual sales.
Under the terms of the agreement, the two companies will collaborate to produce and sell specialized corn crops to feed producers. The corn variety that Origin brings to the collaboration is very desirable for feedstock as it contains 160% higher crude fat content than conventional corn as well as higher amino acid content, eliminating the need for costly additives. The companies estimate a resulting cost savings of 200-300 RMB per metric ton which would effectively double the gross margins compared to BaoDao's sale of conventional corn as feedstock.
The total market for corn feedstock in China is 50 million metric tons per year, which equates to potential net profits of 150 billion RMB. Given the disruptive competitive advantages of Origin's corn, BaoDao estimates that the companies will reach 10 million metric tons in sales within 3-5 years. Origin anticipates the collaboration will positively impact the company's sales and earnings for 2022 and anticipates issuing guidance that reflects this impact soon.
"We are very excited to be opening up this new line of business," said Dr. Gengchen Han, Origin Agritech's Chairman. "We have gotten to know our customers and listened to their needs and let that drive our development of innovative new corn varieties. This partnership validates our customer-centric approach."
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