Chinese Approval Of HB4 Soybeans Could Be A Major Catalyst For Arcadia Biosciences

Summary

• Recent events suggest that China has every incentive to increase the supply of soybeans available for it to import.
• RKDA, through a joint venture, offers a drought and herbicide resistant soybean that is awaiting Chinese import approval.
• Should China join the US and many other countries in approving the HB4 soybean, it would increase the soybean supply available for Chinese import.
• Such an approval would simultaneously be a major boon to RKDA shareholders.

I've covered Arcadia Biosciences (NASDAQ:RKDA) for several years now, and as followers know, I think the heart of the story is the company's technology platform, which has been used primarily in three crops, two of which I've spent substantial time analyzing and discussing. These three crops; hemp, wheat and soybeans are among the largest or fastest growing crops in the world.

Hemp

One source estimates that "The global industrial hemp market size is projected to grow from USD 4.6 billion in 2019 to USD 26.6 billion by 2025, recording a compound annual growth rate (CAGR) of 34.0% during the forecast period."

Another source forecasts US industrial hemp market growth as shown in the figure below:

(source)

Wheat & Soybeans

Wheat and soybeans constitute the third and fourth largest grain crops globally, surpassed only by rice and corn (data as of 2016).

(source)

Soybeans and Developments in China

I have previously written about RKDA's GoodWheat product line and its relatively new entry into hemp, but because the soybean product hadn't yet been approved in China, I have never written about it. I think that situation may soon change for reasons I outline here.

China Is Importing Soybeans at a Frantic Pace

First comes news of a spike in soybean purchases by China. As Reuters reported on July 16, 2020 (my emphasis):

China booked deals to buy 522,000 tonnes of soybeans, the U.S. Agriculture Department said on Thursday, the latest in a string of purchases by the world's top buyer of U.S. agricultural products.

Another 351,000 tonnes of soybeans were sold to buyers in unknown destinations, the USDA said. Traders and analysts said those soybeans also were likely headed to China.

In a separate report on Thursday, the USDA said that export sales of corn to China totaled 1.37 million tonnes in the

Analyst’s Disclosure:I am/we are long RKDA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

I actively trade around core positions.