Upstream Ag Insights - August 1st 2021

Essential news and analysis for agribusiness leaders

Welcome to the 78th Edition of Upstream Ag Insights!

Last week I linked to Janette Barnard’s Prime Future newsletter, however, the link was broken. I wanted to re-share to ensure there is easy access to her site for those interested in reading about opportunities in innovation, especially as it pertains to the animal sector. This week’s edition on ego’s and incentives was particularly good!

Index for the week:

  • 2021 AgFunder FarmTech Report (with Indigo information)

  • xarvio Customer Touch Points and Influence Erosion

  • Factors Affecting Farmer Buying Decisions

  • Biological Reports and Market Synthesis

  • Enko and Bayer Collaborate on New Chemistry Discovery

  • This is what it takes to turn scientific research into a commercial software product in a repeatable and scalable way

  • Carbon: Who’s Positioned Well to Support It?

  • Netflix for Seed and Algorithms in Agriculture

Have a great week!

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2021 AgFunder FarmTech Report - AgFunder News

One of my favourite reports each year is the FarmTech report from AgFunder, which was released this week.

This year I had the opportunity to collaborate with the AgFunder News team and dive into some of the data as well.

Signals of Farm Tech sector maturity this year include the fact that in 2020 investment volumes experienced the largest projected jump since 2018, accelerating to $7.9 billion – a 41% increase from 2019.

This is greater growth than the downstream area of agrifoodtech.

Here are some interesting notes:

  • FarmTech investment increased 41% YOY in 2020.

  • The US accounts for 83% of all Farm Tech investment. California had 35% of the total. Early-stage investment volume and deal count declined for the second straight year, while growth stage activity accelerated.

  • The most active corporate VC in the space was Leaps by Bayer.

  • Ag Marketplace companies had the two largest investment rounds of 2020: FBN and Indigo

Speaking of Indigo, they have been quiet after changing CEO’s and announcing a renewed focus on core areas of their business like the grain and carbon market places.

This year, the report includes interview questions of some of the most prolific agtech start ups and Indigo is one of them included.

When asked “You raised a lot of capital in 2020. What can we expect to see from you in 2021 in terms of deploying that capital?” part of their response included this:

Additionally, we will prioritize building our partner network with Ag retailers to accelerate adoption of natural solutions.

Distribution is a helluva of a drug.

Last week I talked about the challenge of direct to farmer models surrounding Pivot Bio and their go-to-market strategy. Indigo has been feeling that pain for years. When you need to ramp up sales to meet demands of investors in reaching a multi-billion dollar valuation, tapping established distribution channels becomes the default tactic.

Jeff Bezos has a mental framework for making decisions and prioritizing time spent on making them: are they one way door or two-way door decisions? Meaning, if it’s a two way door, the decision is easily changeable if the underlying assumptions were wrong and a pivot is necessary. One way means you can’t go back once the decision is made. Traditionally, go-to-market strategies would be considered two-way doors. In the case of Indigo’s go-to-market and the alienation of the traditional channel with their emphasis on going direct to farmer initially, specifically with a product line (“natural” or biologicals) that is difficult to differentiate, it seems tough to see this playing out positively. Unless their “natural” (aka physical packaged goods) are infinitely superior (which most likely isn’t the case), it seems unlikely any retails would entertain a conversation with Indigo, outside of an attempt to get some competitive intel for themselves.

How Indigo manages this strategic pivot will be worth watching.

Last note on the report: Also included are lists of major 2021 exits to date including IPO’s, acquisitions and SPAC’s for those interested.

xarvio Launches Virtual Tours - xarvio

This is news out of Latin America, but I find it relevant to North America.

What xarvio has done is created an online experience that enhances the relationship and touch point with the farm customer regarding their digital system.

The concept has 3 main sections:

  1. In the central space of the stand, and after going through the reception counter, a farmer can directly link with the xarvio contact center or social media channels. Then a farmer can find:

  • An auditorium: where xarvio hosts webinars and where farmers can also look for webinars that already occurred.

  • Meeting room section: a place where farmers can get to know sales representatives and book a meeting with them (either online or face to face).

  • A Space for alliances: xarvio communicates why they seek out agreements to boost the xrvio offering and some highlighted info on those occurrences.

  • Press section: a space for individuals to interact with journalists and for any one to find everything that is happening with xarvio in the media.

  1. (and 3) Then you have dedicated sections for xarvio SCOUTING and xarvio FIELD MANAGER products for users to access relevant information. In these sections visitors can find information about features and functionalities, with interactive videos, downloadable materials and tutorials, available at all times.

One can argue that farmers want more face to face and I would agree with that.

However, this reinforces another digital marketing avenue to augment farmer access to information, open doors to relationships and create a unique digital experience for the individuals looking for it. This is a smart move in my opinion by xarvio in Latin America. And while it might not be executed the same in North America, it very well could be. And it’s these tactics that lead to one of my favourite topics at the ag retail level: influence erosion.

I have talked about this concept numerous times since originally bringing it up in 2020.

We can see below the ways that manufacturer organizations over the last decade have accessed a tighter relationship with farmers through numerous mediums and therefore retailers have had influence decline and therefore margins decline. If you aren’t influencing as strongly that means your relationship has declined, which means loyalty won’t be established and therefore margins fall.

As we continue to see more manufacturer initiatives that support ease of farmer access to information and digital touch points for relationship building it will be pivotal that retailers navigate this proactively. And it isn’t about pushing back on manufacturers, manufacturers are taking the logical business approach: gain a better understanding of your end customer and then support that end customer with your understanding of them through the channels or mediums available.

What is going to further engrain retailers in the farmers routine, their decision making process and ultimately successful outcomes for their business? I think about this through the lens of The 7 Powers as identifying ways to corner resources (talent, culture), establish process power (unique integration of tools and systems) and ultimately increase the switching cost (increasing loyalty) to farmers.

This can essentially be done through strategic combinations of these areas:

While it’s laid out as a venn diagram, there is also an aspect of a flywheel where they all feed one another too.

As a retail this leads to ever evolving focuses like insuring farm customers have access to value added services (eg: novel precision services), incremental margin opportunities for the farmer (eg: create premium grain marketing opportunities), seamless access to expertise, online touch points for major needs plus “in-between” moments and learning opportunities (the list could go on) is going to help manage this and augment the (business) relationship. Where the flywheel aspect comes in is that there are opportunities for data acquisition from your staff and customers within these pillars and tools that leads to a better understanding of things like what products and services to establish or gain a better psychological understanding of your customer as well (eg: Marketing avenues, How does price influence customer action or in action? How do staff touch points influence sales? etc.)

These changes don’t happen in a vaccuum of course, they all need to be aligned with:

  1. Capital investments

  2. Organizational design (eg: specific roles) to support the assets and systems, whether physical or digital

  3. Staff expectations and incentive alignment

One example that illustrates the above nicely is a well known independent retail in western Canada, G-Mac’s AgTeam, where we can see from this image on their website how they have built out service offerings as one pillar of differentiation to support their customers along with establishing aligned roles observed through Linkedin and their career postings (sales staff for traditional products, agronomy staff and innovation roles for new services):

The above image would primarily showcase the digital infrastructure as it pertain to services and systems for the farmer. If we look further at their website we can see a grower login page (aka beginnings of customer engagement) and when reading their Agronomy Den newsletter on the site we can see they also have proprietary approaches to services as well as physical input products. This begins to check off human capital, digital infrastructure and proprietary infrastructure - uniquely differentiating them in the market place while aligning their investments and organizational design (and presumptively the expectations and incentives within the org too).

What this organization has done is essentially taken the ag retail tack stack and integrated it effectively into the physical realities of the retail strategy. This is the beginning of ambient ag commerce. Supporting the customer themselves via physical and digital medium while also beginning to deploy sensor based and data driven support functions. Theoretically, it leads to better agronomic outcomes, better customer experiences and therefore stronger relationships leading to a more loyal customer.

I still need to dive deeper into ambient ag commerce and get a post written and this concept of managing influence erosion is tightly related.

To bring this back to the beginning: All manufacturer organizations are incentivized to establish a closer relationship to the farm customer which leads to digital augmentations tools being built as one avenue to achieve that. Retails need to be cognizant of how this changes the dynamics of influence and ensure they have plans in place to manage accordingly.

Related: Quit The Paper Chase, Go Digital - The Daily Scoop

Business to Farmer: Factors Affecting Farmer Buying Decisions - WS

B2B purchases are needs-based, not wants-based. However, B2B buyers are still people, and they can make decisions based on what some might consider to be irrational factors. While B2C consumers often make purchases that may be seen as frivolous and driven by emotions, they aren’t the only ones. 

This is always a fascinating topic to me because farms are businesses. However, there are numerous decisions on many farms that get made not based on needs, but optics. There is an element of this in all businesses of course, but specifically farming.

Farmers are humans. And as we know, all of us as humans make decisions that tend to be irrational and based on subjective psychological predispositions. This can be peer perception, fear of missing out, or something as simple as ego. It’s not uncommon to hear a farmer do x or y because the neighbour did it or to spray the field beside the busy highway an extra time because they want it to look clean.

This is the reality. And what this article linked gets at is the importance of identifying and understanding farmer persona’s. We so often get tied to farmers as “progressive” or as “large” or as a “premier customer” based on purchase history. But none of those get into the psychology of what drives decisions. Those labels are actually outcomes. Understanding what underlying world views, goals and fears a farmer might have is ultimately what will drive the ability to build a relationship, develop loyalty or identify product market fit.

Last week I stated that I think most companies in agriculture will use longer term climate and weather forecasting in their business in the future. I believe psychographics and persona’s will be the same. They are similar in that they help you to understand aspects that influence your business that were previously less well known. But with technology and a pointed emphasis, both create an insight that informs your decisions and they are both unique ways to use data.

Understanding how your target customer makes decisions better than your competitor (or your partners as I alluded to in the influence erosion comments) and acting accordingly is a huge strategic and tactical advantage up and down any organization.

Biological Crop Protection and Plant Health Annual Report - Meister Media

There is a lot of information in this report so if you take the time, you will find something valuable. A warning: it’s choppy to navigate and search through. While some of the aspects (embedded videos) are a nice add on, the challenge in navigation made it a less than stellar experience to attempt to consume.

Still with biologicals, what also came out this week was this article from Dr. John Gottula which I thought was a concise and exceptionally well synthesized piece on the biostimulant market:

Technology, uncertainty and change – A turning point for the US biostimulant industry? - AgReads

He alludes to the variance in the bio market versus traditional crop input space which has oligopolistic tendencies with few large players, where as biostimulants are much more fragmented with smaller players:

These changes follow economic model predictions that big fish – small fish dynamics like those of the present in this market incentivize mergers and acquisitions. Assuming perfect information, acquisitions create opportunities for synergy, market growth beyond the core business and an opportunity to reap anticompetitive profits. Ironically, imperfect information regarding the technology (i.e., hype) tends to inhibit the benefits of a merger while simultaneously incentivizing it.

I think his last comment on incentives to consolidate is accurate. Unless you have a company building out a platform approach that enables a different business model of discovery of microbes or licensing of them, it is typical for a company to only have one or maybe three products. This makes it challenging to gain relevancy in the market. This incentivizes consolidation.

He even aggregated numerous biostimulant market growth reports and plotted it into this very telling chart illustrating consensus market growth:

I think he nailed it with this below comment too, I agree and have talked about it on podcasts and in previous Upstream editions:

It may also be worth keeping in mind that ‘now’ may be the wrong time for the right technology. Judging by the widespread inability to enact precision-enabled insights prior to 2021, the heyday of biostimulant innovation (2016 to 2021) may have come somewhat before its time. While a 2% yield increase may not have been sufficient to incentivize a grower based on a return on investment model, it may be ample to incentivize for the value chain based on a data-driven actuarial insurance model. 

(*emphasis mine)

He also finished off with a great quote about the dynamics of farming from W. V. Lambert:

“We must remember that that agricultural research is not a static thing. Many of the problems of farm production are so intimately bound together that when one factor is changed, the whole system may be changed. Limiting factors under one system of farming may be eliminated, but new limiting factors may develop as the result of a new discovery.”

It illustrated the complexity with biostimulant products and beyond. Can digital capabilities and predictive models help manage this better in the future? I think we will see it eventually, it’ll be challenging though, as I discussed in the July 11th edition of Upstream Ag Insights.

Systems Thinking, and an understanding of complex systems, is required to move the needle ahead in agriculture for this very reason. For more on a systems thinking framework, see my write up from June here.

Enko & Bayer Collaborate on New Chemistries -

Enko, a crop health company, has announced details on its partnership with Bayer to develop diverse chemistries for crop protection. Applying drug discovery approaches from pharma to crop protection will allow the companies to identify unexpected product candidates that safely target pests in new ways

This is the second big partnership announcement from Enko in the last month. In June they announced a relationship with Syngenta. The relationship itself sounds very similar, specifically the emphasis of herbicides (although this could just be the way the ag media emphasized it when there are diverging focuses between the different companies - one would think they are focused in slightly different areas).

Most manufacturers such as Bayer and Corteva typically screen for molecules that result in dead pests, Enko screens for specific modes of action. That means that thanks to the Enko platforms, scientists can know how each molecule candidate works to kill a weed or fungus for example. Enko’s approach combines pharma tech like DNA-encoded libraries with machine learning and biology to improve the scale and speed of crop protection R&D. The approach allows scientists to screen more than 120 billion compounds simultaneously to identify molecules that bind to specific enzymes in pests.

Numerous alignments between Enko and major manufacturers is beginning to look a lot like Gingko Bioworks (or Novozymes), where many major crop input manufacturers have a relationship with these organizations to try and augment their discovery pipeline.

The desire for these relationships reinforces two aspects of the agriculture industry:

  1. Innovation is likely to come from outside industry incumbents. This has been true in many (most) industries and especially in closely related industries to agriculture such as pharmaceuticals. The other side of the coin to this is that start-ups have a need for distribution.

  2. The desire for sustainable crop protection products continues to grow and traditional manufacturers want to leave no stone left unturned.

What else was noteworthy to me was the first 5 words of the article: the positioning of Enko as a “crop health company” (in re-reading other Enko marketing material it showed I had missed this previously). I don’t have qualms with the statement, but it’s an interesting positioning considering Enko is no different than a traditional crop protection discovery company in terms of what they output - pesticides. Enko has just developed a faster, more economical way to discover active ingredients. Will more creative positioning of brands and companies be a trend we see across the greater crop protection industry?

Related: Powerpollen® Announces Commercial License Agreement With Bayer for Innovative Corn Seed Pollination Technology Designed to Increase Yield - PowerPollen

PowerPollen® announced today a commercial license agreement with Bayer designed to help corn seed production growers increase their yields. PowerPollen’s Pollination-on-Demand technology gives farmers greater flexibility by allowing them to optimize the timing of pollinations. By accessing the Iowa-based ag tech company’s first scalable pollination technology for corn seed, Bayer will be providing farmers with the prescriptive expertise they need to increase their seeds’ yield and purity.

This is what it takes to turn scientific research into a commercial software product in a repeatable and scalable way - Avi Bhargava of Ukko Ag

I loved the logic and systematic approach taken in how to think about turning research, or a concept, into a successful product and company. This is specific to agriculture too.

Carbon: Who’s Positioned Well to Support It?

Carbon Market Outlook For Consultants - The Daily Scoop
The Carbon Credit Game: Ag Retail Has The Strongest Hand - The Daily Scoop

Two articles came out this week from the Daily Scoop about supporting farmers on carbon.

One talked about the opportunity for consultants to support farmers and the other talked about retailers. I agree with both articles: these two parties are uniquely positioned to support farmers in navigating the complexity that comes with carbon credits as it comes at us in the coming years. The biggest similarity is that they have a depth of understanding of agronomy and soil a neccessity.

But the retail is even more uniquely positioned, in the USA specifically, because of the reliance on fleets of fertilizer floaters and high clearance sprayers. These retails have access to essential data layers for obtaining carbon credits along with the understanding of farm and agronomics…not to mention the knowledge of stitching the fragmented data sets together. I have alluded to this before, specifically as it pertains to Nutrien who I believe has significant tools and superior positioning in place to support farmers and capitalize on the carbon opportunity as it move ahead. I think we will even see growth in carbon specific roles at the field level at retail organizations like Nutrien.

The ability for the retail to stitch together the necessary data layers and decisions positions them well, for those willing to invest in the understanding and execution of carbon credits.

Netflix for Seed -

Netflix knows nearly as much about what movies you like as you do. If you love dog movies, for example, Netflix combines your favorites with ratings by other members who are fond of dog movies to deliver a personalized recommendation list.

..This same technology is being used in corn breeding.

“We use the same kind of preference algorithms from the video streaming world in order to predict hybrid performance”

For many readers this isn’t surprising. Algorithms can be interchangeable depending on what the desired output is. Just check out this 1-minute scene from The Social Network (the story of the beginnings of Facebook):

On top of this, the ability for organizations like Microsoft or Amazon (Azure and AWS) to support these sorts of algorithmic initiatives is powerful too - for example, enabling collaboration and the seamless movement of data from one strategic partner to another can speed up the time and reduce costs to better outcomes as well (eg: low yield drag with a disease tolerance trait). The point with many of these algorithms that can be used for ag is not to necessarily be 100% accurate, but to play the odds or probabilities and in some areas, remove the fat that would have to be sifted through in the past.

The applicability of non-ag original algorithms that can be used in the agriculture world is vast. Companies like Amazon, Google, Facebook all use algorithms that understand the needs and wants of consumers - the same can be applied to agriculture too. It simply comes down to having the data and training the model. This is based on desired outputs and access to the necessary inputs (data) .

Non Ag Article

18 Things I Stole From Some of History’s Greatest Leaders - Ryan Holiday

This is an excellent compilation of short stories and examples of leadership that are applicable for anyone looking to improve their leadership capabilities.

Other Ag Articles

33 Tips for Turning Billable Service into Recurring Precision Revenue - Precision Ag Dealer

Digital Collaboration Helps Build On-Farm Efficiencies - Precision Farm Dealer

The Role of Drone Technology in Sustainable Agriculture - Precision Ag

Blind Boxes x Nori collaboration: CO2 removal NFTs coming soon - Medium

Growers Edge Partners with DF Seeds to Deliver Warranty-Backed Alfalfa Challenge to Growers - Growers Edge

New partnership to develop new pea and hemp varieties for ingredient processing (FBN participating) - Food in Canada

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