(Bloomberg) -- Argentine biotechnology firm Bioceres Crop Solutions Corp. scored a big win Friday after China approved imports of the company's drought-resistant soybean strain. The stock had its biggest jump in more than a year.
China's Agriculture Ministry approved the HB4 strain of soy developed by Bioceres, according to a document posted on its website. HB4 is the first drought-resistant soy available to farmers and the endorsement from China -- the world's largest consumer of soybeans -- could bring broader acceptance for the genetically modified seeds around the world.
Bioceres is pushing the technology for farmers who have been suffering from harsher weather, and China's decision paves the way for its entry into a key market. The technology has already been approved in the U.S., Brazil, Paraguay and Canada -- nations responsible for more than 85% of the global production and export of soybeans. Argentina authorized the HB4 strain in 2015, pending import approval from China.
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“China has historically been the most complex market in terms for regulations for big players,” said chief executive officer Federico Trucco in a telephone interview. “Independently of the economic success of this project, for a company of our size, this milestone already allows us to enter a small and select club.”
Bioceres's U.S. shares jumped as much as 27% and closed 22% higher at $14.60 in New York, its biggest gain since March 2021. Shares of Marrone Bio, which Bioceres announced last month that it's in process of acquiring pending final authorizations, soared 31%.
Bioceres sees a total potential market for HB4 of 20 million to 25 million hectares (49 million to 62 million acres) in the U.S., Brazil and Argentina, mostly in areas more affected by weather extremes, such as La Nina in Argentina and Brazil's south. The technology promises higher yields for farmers, with gains of more than 13% compared to standard technology, according to a company presentation earlier this month.
“As drought becomes an ever-increasing threat, we believe broad farmer adoption across all major soy producing regions will occur,” Ben Klieve, an analyst at Lake Street Capital Markets Inc., said by email. “This is definitely a big deal for Bioceres.”
The decision allows the company's technology licensees to escalate the commercialization of the seeds through conventional circuits that sell to farmers, such as companies like Grupo Mario in Argentina or TMG in Brazil, Trucco said.
“The jump will happen with the licensees,” he said. “Before, there was a commercial risk that maybe the product would be rejected in China. Now, the approval allows the sale process to escalate, and we expect that to happen more through third-party channels than directly through us.”
The company had 23,000 hectares of soy planted for its own, according to an April presentation, which will allow a “soft launch” of the product at a small scale in the upcoming soy planting season. Trucco said he expects a stronger, unrestricted launch in the 2023-2024 campaign, where the only limiting factor would be farmer demand, rather than regulatory restrictions.
Read More: Genetically Modified Wheat Gets a Boost With Brazil Approval (2)
After this milestone, which adds to the key approval by Brazil of the company's HB4 wheat strain last year, Bioceres will continue to focus on moving toward reducing the impacts of farming, Trucco said. The purchase of Marrone earlier this year marks a move to promote the substitution away from chemical products.
“Our next great objective is to move towards carbon neutrality and curbing ecotoxicity, reducing the environmental impact of agriculture, without losing efficiency,” he said.
The company will discuss more details on its upcoming earnings call, scheduled for May 12.
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