BEIJING, CHINA — Origin Agritech Ltd., a Chinese agriculture technology company, announced on April 17 that its majority-owned joint venture has signed a deal with the city of Shihezi in Xinjiang Province, in which it will be granted 13,300 hectares of farmland for growing Nutritionally Enhanced Corn (NEC).
Shehezi government officials cited the superior nutritional yield of Origin’s NEC corn, allowing hogs to thrive without the expensive soybean meal supplementation needed with every other corn variety, as a major reason for wanting to work with Origin.
Origin said its minority partner in the joint venture, a regional farming and feedstock company, is responsible for financing, both with its own funds and with bank financing, the contract growing of NEC corn and for the construction of a grain processing facility that will dry and silo the corn. Origin Agritech will sell the NEC corn seed to the joint venture and will provide planting support services.
The joint venture has planted 2,000 hectares for this season and plans to expand planting to the whole 13,300 hectares in 2024. An engineering firm that builds grain processing facilities has been retained and is designing the facility and preparing the project plan for construction, Origin Agritech said.
Origin expects that this deal will add $8 million to revenue in 2023 increasing to $55 million in 2024 as the growing area is expanded to the full 13,300 hectares. Since Origin is not responsible for any of the capital costs of the project, neither financing the contract growing, nor funding the construction of the grain processing facility, the company said it will not need to raise capital to fund this growth.
“We are thrilled to help ensure food security for Xinjiang by expanding production of our revolutionary NEC corn in the region,” said Gangchen Han, chairman of Origin Agritech. “In 2022, extreme COVID lockdowns in the regions where we were looking to expand NEC production forced us to postpone our expansion. As is evident by this new deal, that growth was delayed but did not disappear. Every feedstock company that we have sent samples of NEC corn to has independently verified the superior nutritional content and is very interested in buying it from us. Now it is just about logistics and execution of expansion of production with deals like this one.”
Last November, Origin Agritech Ltd. announced a joint venture with Sichuan Cloudland Agricultural Science and Technology, a subsidiary of Eos Asia Investments Ltd., to expand production of NEC corn into Sichuan Province, China.An opportune region for animal feed production, Sichuan Province has the largest production of pork and is home to four of the 10 largest hog farming companies in China. Nevertheless, Sichuan is only ranked eighth in corn production, which has resulted in a 10-million-tonne per annum deficit in corn for feedstock that must be sourced from other provinces.