Essential news and analysis for agribusiness leaders
|Shane Thomas||Apr 11||1|
Welcome back to Upstream Ag Insights!
The week following a short holiday week always has a lot of announcements and action. This week was busy!
Index for the week:
Corteva Annual Report and Carbon Announcement
Solinftec Expansion News
Deveron and A&L Labs Soil Health JV
The Ag Inputs Love Triangle
Autonomy and Robotics
The Carbon Corner
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Corteva 2020 Annual Report Highlights and Analysis - Upstream Ag Insights
Corteva is a pure play agriculture company so their annual reports tend to have much specifics, depth and ease of interpretation. This was a fun one to go through with lots of info. It worked out timing wise with their carbon announcement this week as well!
Corteva Agriscience Creates New Carbon and Ecosystems Services Portfolio Focused on Making Agriculture More Climate Positive - PR Web
This announcement isn’t surprising. In the February 7th Edition of Upstream I noted that Microsoft shared all of the companies that applied to sell them carbon credits. Corteva was listed, so it was just a matter of time before they announced. On top of this, I think we will see the other large agribusinesses like Syngenta and BASF come out with their own initiatives soon too.
Corteva Agriscience announced the creation of a new Carbon and Ecosystems Services portfolio to develop innovative products and services. The initial offering will enable the carbon sequestration process, ease access to carbon credits and create flexible solutions to help farmers increase profitability while contributing to a climate change solution.
The focus is in Iowa, Illinois and Indiana for 2021 with expansion plans in place for 2022, without publicly announcing where.
The focus is on two practices:
This seems like a smart start, specifically for the geography they are focused in, plus being a broad reach. For context, this is consistent with where Bayer Cropscience is starting too.
They even have one of the easiest to understand and concise approaches to market:
The ease of enrolment plus support from their staff is actually a differentiator. They have boots on the ground so they are well positioned to execute on this, specifically with their focused geography and practices to start.
They will start with physical soil samples, creating that baseline that is so important for the amount of carbon in the soil, and then apply modelling to it based on the practices and actions input into their Granular Insights tool
One of the encouraging things I found when having a discussion with Ben Gordon, their Global Portfolio Leader for Carbon Services, was that they are focused more on outcomes than trying to incentivize purely practices.
This is how it HAS to be in my opinion. If you focus on the practices, you get too focused on the carbon sequestration and not enough on the holistic outcome and output for the farmer. Growing less bushels or smaller crops does not sequester more carbon, so strong agronomic actions and carbon are inextricably tied together.
For example, there are going to be times where tillage is necessary in order to get the crop in the ground where excessive moisture may have been a concern.
They are partnering with EcoSystem Services Market Consortium, a non-profit that works to compensate farmers and ranchers who improve the environment through their agricultural practices. These will be the verifiers.
The focus on more partnerships and success throughout the value chain becomes apparent in reading the Corteva materials along with being reinforced by Ben Gordon. Seeing this through their distributor partners, working with market places like Nori and even cover cropping companies for example.
The business model is very simple:
Corteva takes a percentage that is not more than 20% of the total offset amount created while being focused on guaranteeing $15/mt of value for the farmer. Depending on what the sequestration amount per acre works out to, it could be $5-$20/ac for the farmer. (Payment per acre to the farmer is carbon price per metric tonne * tonnage sequestered per acre - enabler take rate)
For background on take rates, in Canada there was the Conservation Cropping Protocol which had “aggregators” taking ~33%.
This is the direct revenue, but it also creates a trojan horse, or entry point to get tighter with that customer and engage them digitally.
To access incremental revenue the farmer needs to sign up for Granular Insights, and talk with a Corteva representative so they can be supported through the process. A smart support pillar to have in place.
This enhances the relationship with the farmer and therefore increases the influence Corteva will have across all products, even though their products are not directly linked to “reduced tillage” or “cover crops”, but agronomy is a system. When you are talking with a farmer about how to integrate cover crops into their farm, you need to ask a lot of questions and better understand other practices and products used.
There is downside risk though too: Corteva has a big portfolio and a poor brand experience in dealing with Corteva on the carbon front erodes confidence in the entire product line.
One of the big contributors to GHG emissions is nitrous gases. Corteva has been in the nitrogen stabilizer space for some time with their nitrapyrin products for example. These practices and products are not as widely applicable and can skew the bigger picture with bias, but from a GHG perspective and other sustainability point of view (N use efficiency), it could be a progression at some point in the future.
I was really impressed with the thoughtfulness of approach that Corteva took; it was as simple as a company can make a carbon like scenario which is ultimately good for both the farmer and for Corteva.
Solinftec Establishes Operations in Canada, Sets Strong Local Partnerships to Fuel Growth - Solinftec
Solinftec, a leader in agricultural digitalization, today announced it has established operations in Canada and is forming key relationships with local agricultural leaders. Additionally, Solinftec is piloting its ag tech solution in Canada for the first time this spring.
Solinftec is a group that has interested me over the last 8 months. I wasn’t entirely aware of Solinftec, but found myself on a call with one of their investors last year and this individual made the comment that Solinftec has 85% market share in Brazil in their sugar cane business and has almost 100% customer retention; almost unheard of numbers in much of the agtech space.
This doesn’t just show product-market fit, this shows full on reliance and necessity within an operation.
The comment made after was that it’s not about building a technology solution for Solinftec, but talking to groups clear across the value chain to identify where they can build a service that creates value for that specific organization. Many groups are product focused first, not customer focused first. Solinftec is customer focused.
They also grabbed my attention because they are focused on operational efficiency. We don’t look at farms like factories, but I personally think we should. There are of course uncontrollables with the size of farms, but operational efficiency can manage not only equipment and hourly wage costs, but also ensure crops get seeded, sprayed before rains or harvested before frosts or rainy weather.
Tender truck and spray truck optimization is one example of a potential North American use case. Waiting for tender trucks can be inefficient. Solinftec helps alert and dispatch trucks and equipment where it needs to be when it needs to be there.
What is worth noting is that in Brazil they have primarily went direct to the farmer due to there being large farmers there, but then when they expanded into the USA they went to the ag retail space as I noted in Logistics Wars and Trojan Horses. With the ag retail service reliance of farmers in the mid-west USA, this made a lot of sense from a customer acquisition perspective and the ability to expand from that point.
How they position and focus their offering in Canada, basing off of Canada having similarities to Brazil in terms of farm size and less rolling stock at the ag retail level, there is a fit with a direct approach in Canada as well.
The announcement is one of the most refreshing press releases I have read of late. It was light on buzz words and focused on them developing an understanding of Canadian agriculture:
Now, Solinftec is expanding into Canada, establishing several key relationships in the region to best understand the specific needs and pain points of Canadian farmers, ag retailers and other key players in the industry.
This was further reinforced by the partnerships made. Ag Bio West, the University of Saskatchewan and Coutts Agro. All leaders in western Canadian agriculture.
Solinftec & The Equipment Tech Stack - Coutts Agro
Coutts Agro released a post commenting on their partnership with Solinftec.
The title itself brings up a concept I haven’t seen talked about by a farm before:
the equipment tech stack
“Tech Stack” defined:
technology stack, also called a solutions stack, technology infrastructure, or a data ecosystem, is a list of all the technology services used to build and run one single application.
The tech stack is the integration of technologies that can help a business achieve a specific outcome. I have talked about this for ag retails, but the usefulness of that concept is very applicable to farms (and other organizations).
Operational efficiency as I mentioned above is extremely important, specifically for a farm with large acerage like Coutts Agro.
In the post the stack plays out like this:
Staff (education and culture)
The largest enabler of this partnership to build Canadian ready solutions is the confidence we have in our employees to leap up the learning curve on cutting edge technology and provide feedback to aid in product development.
The combination of their (John Deere dealership Western Sales) mechanic and digital solutions team keeps us progressing towards total asset optimization.
Their (Verge Agro) path planning software, Launch Pad, helps us maximize our in-field productivity by reducing field operations’ time and increasing our equipment utilization rate. Launch Pad enables timely planning and execution of field operations which ensures smarter, faster, and more sustainable food production.
Solinftec’s role as the integrator and operational decision making layer, we believe we can create a leading equipment stack portfolio to drive long term value for all stakeholders.
This stack builds a foundational core that can be built upon with further technologies not only surrounding operations, but also agronomy and outcomes for the farm. Whether it be for soil sampling in the future or the confidence to do more non-traditional applications in the future as well, like stand alone biostimulant applications or for data acquisition purposes. The equipment stack becomes the operating systems, the agronomic and precision tech can be added right in on top, tying everything together.
This weeks edition of Upstream Ag Insights was brought to you in partnership with Agrospheres!
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For more information, visit www.agrospheres.com
Deveron* and A & L Canada Laboratories Acquire Woods End Laboratories to Create Leading Soil Health Platform in the United States - Newsfile
Deveron Corp. a leading agriculture digital services and insights provider in North America, is pleased to announce that it has formed a Joint Venture with A & L Canada Laboratories Inc. and together have acquired the assets of Woods End Laboratories a US based leader in agricultural soil health testing. Woods End had 2020 unaudited revenue of US$1.8M with EBITDA of US$900,000. Deveron and A & L have been long-standing partners in Canada, providing turn-key soil health solutions for farmers and agribusiness across the country. With this acquisition, both companies deepen their strategic initiatives in the United States.
This seems like a good move for both parties. Albeit wasn’t one I would have expected! But, it does have some logic to it.
One comment that I do not make enough, especially given my agronomic roots, is that everything starts with the soil. Traditionally, it has been primarily physical and chemical parameters of the soil - understanding soil texture, bulk density, pH, nutrient make up etc.
But biological understanding is extremely important, and the least understood.
The combination of these three things allows us to better understand what drives nutrient availability, likelihood of response to crop input products and ultimately the output and outcomes of cropping decisions. The better you can understand these 3 pillars, the better off you are as a company, farmer etc.
For A&L this augments their service offering and reach and for Deveron it enables a few things:
supports their agronomic services business
increases their understanding of the soil
carbon and ESG initiatives
Deveron was initially a drone company (data acquisition) which quickly shifted to data analytics with their Veritas acquisition, to being an integrated agronomy and analytics provider with their agronomy services acquisitions. With their recent acquisition of Farm Dog and now this acquisition they have shifted to being a data insights company. A fully integrated solution for agronomists and agribusinesses to support their farm customers.
In 2015 Trimble acquired AGRI-TREND. AGRI-TREND was an agricultural services company that empowered independent consultants with support and resources to consult for farmers on agronomy, grain marketing and more. They also had a data system, Agri-Data, one of the first cloud based digital software platforms and a soil lab offering as well.
The reason I bring this up is that Deveron, while having a different model, has began to look similar to this company over the last few months. They now have a digital platform (FarmDog), agronomists (service business acquisitions), soil lab (Woods End) and analytics/precision offerings (Veritas). The main difference is that Deveron has focused on acquiring agronomists versus supporting for a percentage of revenue.
Where this model begins to have challenges is if they continue to acquire independent agronomy focused firms, the desire to leverage their services for larger agribusinesses could decline.
Overall, Deveron continues to make interesting moves in the North American market place.
*Disclosure: I am currently a small shareholder in Deveron, having purchased ~6000 shares in March of 2021.
The Ag Inputs Love Triangle - Carl Lippert
The Farmer. The Retailer. And the guy in the white Ford truck.
This was a unique take from Carl Lippert, CEO and co-founder of FeedX.
The current wild west nature of unsecured ag credit is going to be eaten up by an incoming wave of fintech providers. Credit, insurance, hedging products will systemically change the reality of these problems. These products will be very hard to build but the trend and incentives are clear. Fintech is eating the world and the mountains of coin to be won will make sure this happens.
FinTech and InsurTech in ag have the potential to increase farmer convenience and shift relationships from traditional middle men to more direct relationships; whether its through unique bundling with crop input products, ease of access to insurance through digitally enabled insurance products or tying lending rates to agronomic actions.
There are not only companies in the market place beginning to offer these types of products, whether it be Global Ag Risk Solutions or Growers Edge, but other companies that are going to make it easier for these types of companies and fintech solutions to enter the market, like API company Leaf Agriculture.
Agtech and fintech are currently on a collision course and this is where there is opportunity for farmers to be able to better manage risk or costs, access lower cost forms of capital or for start-ups and agribusinesses to evolve their entire business model.
Related: The Bundling and Unbundling in Ag Retail - Upstream Ag Insights
John Deere Inches Toward Autonomy - Grain News
The biggest need is to follow the customer problems they’re having today and not introduce new ones…We need to make this easy for farmers.
I have never spoken to two customers that are exactly the same in terms of what they need on their operations…I do think Deere is going to ensure we can support all of our customers’ operations as they grow and change. They are going to be the ultimate feedback loop for us.
Farmers aren’t homogenous and that is a challenge in creating tools and systems, especially for John Deere.
Some of the challenges of autonomy stem from little things that make up a small percentage of total time, such as what to do when coming to a fallen tree in a field for example. These are the little challenges that are going to be some of the biggest to overcome before autonomy is mainstream.
We’re really looking at solutions first and letting our customers drive the need for autonomy. I hope our solutions will bring ease of life on the farm and allow our customers to focus on what matters, rather than on these day-to-day tasks that aren’t maybe as important as some others. That’s our goal and our mission — make life easier through technology.
This should be the goal of all technology!
Jaybridge’s unique IP portfolio includes significant and critical patents for technology directly related to path-planning, obstacle detection and avoidance, and multi-machine control systems. Raven will leverage this IP portfolio with the Company’s continued development of Driverless Ag Technology — including integration of the technology into the Company’s AutoCart® platform.
This is on top of other autonomy acquisitions like DOT and SmartAg, in what is support of improving at areas like path planning and obstacle detection that can be big challenges for optimizing autonomy, as mentioned above.
Guardian Ag raised a $10.5 million seed round, as originally reported in last weekend’s Midas Touch newsletter, led by Leaps by Bayer, a VC fund focused on innovations in health and agriculture backed by the German pharma giant, Bayer. The firm also received funding from agtech service provider Wilbur-Ellis’ venture arm, Cavallo Ventures, and FMC Corporation’s investment pool, FMC Ventures, in addition to traditional VCs including: Fall Line Capital, Pillar VC, Neoteny and MIT-affiliated E14 Fund. This brings the company’s total funding to $15.5 million. The startup will use the funds to ramp up manufacturing and help fulfill the $20 million worth of preorders it has amassed from growers in California and Florida.
Guardian Ag was previously known as Kiwi Technologies. I covered them when highlighting FMC’s technology pipeline, as FMC was an earlier investor.
They will be focused in the high value fruit crop areas of Florida and California to start.
Each device can autonomously spray up to 40 acres an hour on pre-planned routes. The eVTOL can be programmed to fertilize in specific areas, which allows farmers to only hit crops that need it and to use whichever treatment or chemical they already use. The devices also collect data which allows farmers to keep dusting records and increase their knowledge base on how their crops are doing. The company doesn’t plan to sell the tech, but lease it as a service, which aligns with the current crop-dusting market. The startup plans to price its service at $10 to $45 an acre to match the average price range for the service that they heard from surveying farmers.
The business model is focused on service based versus an up front capital expense for farmers. The other interesting part is that it sounds like they will also be acquiring imagery data, and perhaps more based on the comment that the drones can also “increase the knowledge base on how the crops are doing”. In my opinion, every agronomic pass over the field is an opportunity for data acquisition at zero marginal cost. If these drones can acquire incremental data and provide enhanced insights for the farmer, not only is the farmer better off, but Guardian may just deliver itself more service requests in the future based on what they are delivering.
The sector saw $317 million of investments in 2020, up 28% from 2019, $228 million, and up 83% from 2015, $50.8 million. Frederick adds that adoption was slow at first because it was hard to get farmers to purchase expensive experimental technology, but with many newer companies like Guardian focusing on a rental model, it may increase adoption. PitchBook predicts the market could be worth $126.5 billion by 2025.
I am bullish on this space, specifically in the higher value crops to start. Although, I do think the Pitch Book prediction of the market being worth $125 billion by 2025 is overly optimistic.
Yara 2020 Annual Report Highlights and Analysis Follow Up - Upstream Ag Insights
Last week I covered the Yara 2020 Annual report.
This week I was looking at various job postings and one that came up was the Director of Sales for Yara North America Carbon.
I highlighted some of the challenges in carbon for Yara along with potential routes to market on the carbon front. With that, part of the job description caught my eye:
Responsible for identifying and segmenting retailer, crop advisors and farmers to ensure sales team is focused on maximizing the high value opportunities for Agoro.
In the report I highlighted that they have various routes to go whether it be traditional retail, consultants, direct to farms, other retail type businesses (insurance, seed etc) or some combination. It appears they are focusing on, at least to start, a combination.
There were some other statements in the posting that have me curious as to how Yara structures and staffs their core fertilizer business, digital business and carbon business. Poor integration, misaligned incentives and inconsistent messaging will hurt not only their premium products business, but hinder success on the digital and carbon fronts.
Koch Agronomic Services Acquires Compass Minerals' North American Micronutrient Assets - PR newswire
Koch Agronomic Services, LLC reached agreement with Compass Minerals to purchase Compass Minerals' North American micronutrient assets, the global intellectual property rights, with trademarks and patents, and certain other assets associated with the Wolf Trax®, Rocket Seeds® and Hydro Bullet™ product platforms.
Koch has done well with nitrogen and nitrogen stabilizers for decades. However, they have not really moved beyond that space, ever. They have had iterations on their stabilizer business as their primary evolution.
They have also acquired biological based companies in the past and done little commercially with them.
They haven’t sold micronutrients to my knowledge, but this is a natural fit for them to move into being that they are a fertilizer company. With that said, they have acquired brands and assets that aren’t necessarily at the top of their market.
For example, the WolfTrax product line is primarily a dry dispersable powder (DDP) when the industry has moved to liquid micronutrient coating products for impregnating bulk fertilizers for better consistency and handleability of the fertilizer.
Selling micronutrients is more of a challenge than Nitrogen or nitrogen stabilizers; nitrogen has a consistent demand and reasonably known outcomes from application and stabilizers are backed by decades of scientific research. Micronutrients do not have that kind of built in demand and are a bigger challenge to sell and obtain a consistent response.
One thing that is of interest is what the potential for a combined micronutrient + stabilizer product formulation looks like.
AgVend announced the addition of the Grain Business Unit to its Grower Portals. This expansion of the Grower Portal product gives cooperatives and grain elevators the ability to provide customers with easy digital access to their grain accounts and current market information. Growers can eSign contracts, review scale tickets in real time, and monitor cash bids through their local elevator’s AgVend-built mobile app.
This is a natural progression for AgVend. I’ve talked about it before in Upstream in regards to the white labeled online store fronts. Once you have one specific focus built out for an offering (crop input ag retail), the evolution to other areas is natural. This can make it seamless for customers to find their information regardless of grain, crop inputs or feed needs.
Social audio is the name for a new type of social platform, one that focuses primarily on live streamed audio conversations. In a time when we’re all tired of our own faces on video conferencing, apps like Clubhouse provide a welcome reprieve. You only have to listen, or maybe answer a question or two, if you’re “on stage” (one of the people actually speaking).
I have been using Clubhouse since January and it has been an overall great experience, getting to learn from industry experts and farmers alike.
The most important thing you can do right now on Clulbhouse is listen. Listen to the conversations that are happening. Take notes. Follow other people in the audience who share interest in agriculture and farming. Pay attention to what is being said. Use these insights to help further inform your strategies, but be realistic about how influential these insights are. The sample size is small, made up of early adopters. They may not provide a perfect picture of your farm customer, but they may help you refine some of your customer persona features.
If you are on Clubhouse, check out the AgTech and Agriculture Club where many industry leaders are participating in the space.
A few weeks ago I highlighted Pinduoduo and their foray into agriculture. This week I listened to Tim Hammerich talk to Pinduoduo on The Future of Agriculture.
For those interested in agricultural commerce, this is well worth the listen!
I’ve talked with industry contacts about this before and this podcast brought up the curiosity more:
They talk about live streaming and the rise of influencers in China. North America is very distant from China, but what we haven’t seen much of in North America is influencer agronomists. There are likely a number of reasons for this, whether it be personality or concerns of bias, but I am surprised we haven’t seen more. The best examples are the Hefty Brothers from AgPhD.
There have been some farmers monetize the speaker circuit and build brands like the record corn and soybean growers Randy Dowdy and David Hula in the USA or the likes of Kristjan Hebert in Canada. Some have even built out their own product line.
Could this be something we see increase in North America?
AI in Agriculture: Be Purpose-driven and Offer High-tech Solutions to Current Problems - Swiss Cognitive
The successful agricultural AI companies will be those who listen first, acknowledge these challenges, then offer feasible, progressive solutions that can make farmers better at what they already do.
Current problems vs. future opportunities. A difficult balance.
This brings in the land and expand strategy where you find a very focused, current need with the vision to grow beyond that. Too often the focus is the later vision, which doesn’t resonate because it isn’t currently hurting customers time, efficiency, or profits.
The Carbon Corner
Researching Carbon in Agriculture :: Why Carbon Sequestration? - Mark Johnson Medium
Check out Mark Johnson, CEO of Grainbridge, thinks of carbon sequestration as he takes us through his recent research and conversations.
Why is carbon sequestration such a hot topic? My working thesis is as follows:
There’s no silver bullet for sustainability in agriculture.
We must focus on solutions that are effective and easy-to-adopt within the current system.
Farmers are driven by ROI.
Land-use change is a major contributor to agricultural emissions.
Plants remove carbon from the atmosphere.
More science needs to be done to understand carbon capture.
We need a ledger to track emissions and a marketplace to buy and sell credits.
There is a lot of innovation in this space.
How Regenerative Ag Affects Crop Inputs - Agribusiness Global
These changes won’t emasculate the pesticide market overnight, but the focus on climate change and carbon sequestration along with ongoing regulatory pressures, consumer demand for traceability in production systems, and farmers looking to cut production costs will erode input use incrementally in the short term and potentially could render many chemical classes obsolete in the next decade.
What the Soil Carbon Incentive? - AgTech So What?
Whatever the incentive scheme is, we need to move towards an outcomes-based approach, and to make schemes consistent in terms of the indicators and metrics they use. If we’re thinking about the outcome, then it’s more likely that we get that consistency and compatibility across all the incentive pathways.
What also gets talked about in this podcast is the challenge of focusing on only one outcome. Just like the “tyranny of metrics” where specific, narrowly focused evaluations result in deleterious performance…in our case, less focus on the crop output and too much on only carbon can cause gaming effects or poor decision scenario’s for farmers.
This podcasts also gets into the conversation of accuracy versus starting and moving the ball forward, which to me is an important piece of the carbon conversation.
Non Ag Article
Digital transformation is a prerequisite for most companies to maintain their competitive or leading position. Especially in these uncertain times, it has become apparent that digitization is indispensable for companies if they want to be and remain successful. The company must be agile and innovative and, moreover, always put the customer first (customer-centric). Digitization is a catalyst that can provide the company with a competitive advantage.
Digital transformation goes beyond just deploying digital tools; it needs to become part of the process, the KPI’s and the culture. This is something we will see in the most successful companies moving forward in agribusiness. This article does a good job highlighting important focal points.
Other Ag Articles
Sumitomo and Accenture Form Joint Venture - Accenture
Farmobile Receives US Patent - Successful Farm