Hi everyone,

I want to do a better job enabling navigation of the weekly newsletter, so I have added an index.

Below is the topic in order of appearance.

This week includes:

• AgTech Investment Trends

• Vive Technology Investment

• BASF H1 Results

• Microsoft and DTN Announcement

• Product Strategy Article (my favourite)

• How John Deere Got Good at AI

• AgRetail and COVID-19 + Ag Retail Omnichannel Experiences

• Biostimulants and Biopesticide Overview (most in depth portion)

• Farmers and Data Usage

• Brazillian Farmers and Digital Ag

• Tech CEO’s Go on Defense

• Other Ag Articles and Non Ag Resource of the Week

  I hope everyone has a great week!

Agrifood Investment Trends in the COVID-19 Era - Pitchbook

Agtech investment totaled $2.2 billion for the first two quarters of 2020; in contrast, our 2019 Report with PitchBook Data noted $2.7 billion was raised in 2019 FY and represented the highest year of funding on record.

Anecdotes from regular meetings with fellow venture capital firms (including Bayer Leaps, DCVC, Evolv, S2G, Lewis & Clark, Innovation Endeavors, Pontifax Agtech, TPG Circularis among others) indicate that syndicates with dry powder have moved quickly to extend the runway for their portfolio companies with bridge funding or round extensions intended to push drywell (or cash-positive) dates out to the end of 2021 and beyond. 

Valuations tend to be “sticky” so it will likely require a year or more for the true impact of COVID-19 to manifest in this metric. That said, we can see a clear delineation by stage impact. While pre-money valuations in early-stage investments across agrifood have decreased, valuations for late-stage financings have remained strong despite the current pandemic.

Late stage funding was huge in the first half of 2020 for agtech.

Worth noting:

• ~38% of the funding was for the top two deals: Indigo’s $500M Series F and Manus Bio’s $340M.

• The top 10 deals accounted for 70% of the total dollars of investment in H12020.

• Deal count remained relatively flat on a quarter basis compared to the last few years.

• Crop protection and input management was the biggest category in terms of dollar value of deals.

This move towards later stage funding is a trend we have seen in the space for the last few years (from 2019 Finistere Report):

This makes sense as there is start-ups that VC’s are continuing to invest in in the later rounds and the later stages tend to have increased dollars.

Agtech companies are likely to face a turbulent outlook for 2021. With farming margins already under pressure prior to the pandemic, the availability, cost and health of labor, trade conflicts and consumer/voter pressure for sustainability gains all pose meaningful headwinds. The venture investment consequence is likely to be that startups in this space are under a double imperative: to prove their return on investment to farmers and their agronomists that they are essential and will help drive better on-farm profit, while also showing they can scale to profitability.

I think we will continue to see consolidation and partnerships in the space as organizations look to scale, return $$ to shareholders and look to build out a viable service for farmers.

Vive’s Nanotech-Powered Crop Inputs Land $5.4m Funding - AgFunder

I’ve been following Vive for a while now and they seem to have an interesting technology that’s relevant in the market place, whether for their own product line up or licensing out the technology to other players in the space.

We haven’t seen much for funding in the synthetic chemical space, but this technology has cross segment applicability - fertilizer, crop protection and biologicals:

Essentially, this takes existing chemical or bio-based inputs that farmers are already accustomed to, but delivers them in a new way using nano-scale technology.

We take the existing product and wrap it in these small polymer particles. When we do that, those particles now control how the active ingredient interacts with its environment and how it behaves when it’s on the farm

Their technology can breathe life into old active ingredients as well as be supportive of other trends in the space, such as biological use and nutrient use in combinations with one another or crop protection products.

This is beneficial for numerous reasons:

Better tank mixability - Ensuring a farmer has a good experience with a product in their spray tank, or in the future drone tank, is key to having uptake. Strong active ingredients that are tough to formulate have been dropped specifically for their formulation challenges in certain geographies. This can mean a potentially better fit for active ingredients that have been challenging before or it can mean enhancing the tank mixing experience with current products that aren’t strong in that area, decreasing gelling or antagonistic activity between products.

Better viability of biologicals - Enhancing the viability of a biological product in general from a longevity of life in formulation/packaging or increasing it’s ability to be tankmixed with synthetics is hugely beneficial to biological products.

Technology to create better tandem products - We have seen an increase in many geographies with tandem products as well as the increasing interest in tandem cross segment products, such as micronutrients packaged with herbicides.

There could be other benefits including increase plant penetration even with difficult environmental conditions, or higher efficacy even under good conditions. This has benefits when we start looking at formulations that may be in lower water volumes, such as through drones as well as can even help to better manage resistance. Delivering a higher percentage of the active ingredient to the target plants ensures adequate dosage and uptake by the weeds.

BASF H1 2020 Results - BASF

The Agricultural Solutions segment recorded a slight improvement in sales compared with the first half of 2019. This was due to higher volumes, especially in North and South America. By contrast, sales were dampened by negative currency effects, particularly in the region South America, Africa, Middle East. Prices were on a level with the prior-year period. We slightly increased EBIT before special items. This was mainly driven by higher sales and lower fixed costs.

Sales for agriculture were up a total of 3% globally, similar with what was reported from Syngenta last week.

Agriculture Weather Insights from DTN Now Available in Microsoft FarmBeats - DTN

DTN, a leading data, analytics and technology company, announced today that the company’s highly-accurate agriculture weather forecasts and data will be available through Microsoft’s Azure FarmBeats. Agribusinesses leveraging FarmBeats will be able to access real-time weather information from the DTN global weather network.

This is a strong partnership for Microsoft as it will also give them access to the real time weather information, but the data that is geospatially tagged and relevenant to building out their modelling and predictive capabilities. Weather drives a lot in agriculture and with hyper local weather information to support the other soil and crop information, this is a strong partnership for Microsoft and their FarmBeats platform.

Strategic R&D Management VIII: How the Biopesticide & SMART-TECH Industries Create a "Blue Ocean" of Uncontested Crop Protection Market Space (Part I) - LinkedIn

Harry Teicher continuously puts out exceptionally insightful content surrounding product and R&D strategy.

In the globally competitive world of crop protection, long-term survival is increasingly dependent on a shift from conservative product portfolios (“Settler” and “Migrators”) to strategically balanced portfolios which include “Pioneer” products.

• "Settler" products comprise the mainstay of generic portfolios, and the term is used to describe generic or copied products, for which the main competitive driver is cost domination.

• "Migrators" are products with value improvements, typically in the form of formulation developments, for which the main competitive driver is improved efficiency.

• "Pioneers" are products providing value innovations, such as the integration of technical advancements or novel technologies.

I often talk about this from a retail perspective and I think this can apply to product manufacturing companies or retailers looking to differentiate themselves in the market place with a strategic partner.

This for retails could be looking at adapting something in the market place to your specific needs, such as building out a co-package of products that you know will sell and increases convenience and ease of use or it could be looking towards the future identifying what a customer in the geography will need or something that is ancillary to what they are doing now, such as adjuvants or biostimulants.

I think as e-commerce and digital initiatives in retail begin to ramp up organizations will need to continuously look at their product line up and adapt it accordingly. This is something we don’t hear talked about often in regards to digital, but it is a reality in terms of positioning and counter positioning through a new medium. It’s also consistent with the message I ephasize that digital and e-commerce does not happen in a silo, it needs to be considered within the context of the entire go-to-market strategy - and that includes product offerings and positioning.

In order to differentiate you need to play in a different world, metaphorically a blue ocean vs. a red ocean:

How John Deere Got Good at AI - Fierce Electronics

We’ve learned that in order to preserve the entrepreneurial spirit of a company that we acquire, we need to treat the company like an innovation hub and give the team the space to stay creative.

If you were to look back 10 or 15 years, our technical workforce consisted mainly of mechanical and electrical engineers. But we are slowly transitioning from being just a manufacturer of hard iron to embracing bits and pixels.

For more around John Deere’s evolution with data and technology check out this article:

How Data-Driven John Deere Wins the Market

How Ag Retailers Are Feeling the Effects of Covid-19 - CropLife

The survey’s organizations like CropLife and Farm Journal do are always interesting to look at. I tend to focus on the digital aspects, so here are two take aways relating to that:

• Almost 60% of retailers in the survey stated that more of their customers had taken up digital communication initiatives. Worth considering is what will that percentage look like and

• Only about 35% of surveyed retailers agreed that their customers increased usage of e-commerce options. A caveat to this for me is trying to understand what percentage of those questioned actually offered an e-commerce transaction option.

Why Omnichannel Experiences Beat Transactional eCommerce in Ag Retail - AgVend

A McKinsey study found that when in the early research stage, 45% of growers prefer a digital experience over interacting face-to-face or on the phone. Whether browsing alternative fungicide options or checking the price and availability of urea at midnight, many of your customers will utilize an online channel.

This quote to me gets at the core of having a digital portal for ag retailers.

I often think of not having a digital avenue, or a route to get there planned out, as the equivalent of a bank that doesn’t have online banking as a feature or an app to send e-transfers, pay off a credit card bill, or check how my portfolio did that day. No matter how good my relationship was with that bank the inconvenience of not having those friction-reducing and time enhancing services would have me looking elsewhere.

Retails always refer to themselves as value add and service based. The focus of what a service is just needs to expand. Offering these sorts of tools are services and they are value adding - they don’t add value in terms of physically scouting a field or physically delivering a product, but they deliver convenience, time efficiencies and peace of mind. These aren’t just beneficial in consumer market places, but in farming too.

Related: From The Front Lines: Alexander Reichert (AgVend)

Biostimulants Continue Their Meteoric Rise - Agribusiness Global

In 2019 the biostimulant market edged past the $2-billion mark, according to study from DunhamTrimmer, a leading market research firm in the biologicals space…. U.S./Canada at $370 million

Biostimulants are anticipated to grow at a double digit CAGR. Significantly more than any traditional crop input product.

I find lots of confusion in the market place about these products, so I’d like to throw together a fundamentals start with some more commentary later.

What is a biostimulant?

a substance or microorganism that, when applied to seeds, plants, or on the rhizosphere, stimulates natural processes to enhance or benefit nutrient uptake, nutrient use efficiency, tolerance to abiotic stress, or crop quality and yield.

The terms biostimulant, microbials, biologicals, biopesticide, biorational etc all get lumped together.

Lets briefly define them for clarity:

Biological - living and naturally occurring (so encompasses all of the space, including biostimulant and biopesticide)

Microbial - very small naturally occurring organism, like a fungi, bacteria etc

Biorational is an all encompassing, catch all terms, meaning biostimulants and biopesticides.

Biopesticide - pest management agents and chemicals derived from natural sources such as bacteria, fungi, viruses, plants, animals and minerals.

Generally speaking, a biostimulant enhances plant health or plant production capabilities, as stated above.

What falls under the biostimulant category?

I’ve shared this image before, but it’s worth sharing again to help illustrate:

Just like specific groups of herbicides and fungicides have specialties in what diseases they are active on or what weeds they kill - biostimulants have strengths as well, and just like we began seeing different groups and mode of actions packaged together, we see and will continue to see MUCH more of this in the biostimulant space.

These technologies and products obviously align very closely with other initiatives and trends within the ag industry: reducing carbon footprint, soil health, sustainable production and a reduction of synthetic pesticide use (all of these are intertwined of course). On top of this we know crop protection products have done an exceptional job of reducing biotic stresses (yield reduction from insects, disease, weeds) but there is a significant opportunity in managing abiotic stresses; heat stress, cold stress, drought stress, saline stress etc:

This is a 20 year old image. I haven’t been able to find a newer one over the last couple of years, but even if the last two decades were really successful in mitigating abiotic stresses, we could see that there would be opportunity to reduce them further. If you look at some of the world record holders in each crops plan for that year, you’ll notice that they do an exceptional job of mitigating abiotic stress - through practices, nutrition and specialized product applications like bio based inputs.

Additionally, those biotic losses are so low because of synthetic crop input products - if there is a demand to decrease synthetic pesticide use while continuing to progress yields, biologicals and specifically biopesticides will need to be used to keep yield loss due to biotic stresses low. I do think digital types of technology will drive this too - artificial intelligence and modelling layered in with imagery to decrease insecticide use, see and spray technology to manage weeds and much more.

And just like with biostimulants, there are different types of biopesticides:

Source

The focus of major manufacturers in R&D, corporate VC and numerous start-ups has enabled much progress on these:

• better understanding of mode of action

• unique use cases

• better survivability in transport, jugs etc

• higher efficacy

• formulation with other molecules or in conjunction with varying biologicals

• more targeted application methods (seed applied vs. foliar vs. soil applied)

The reality is we will not see a mass shift to biological based products over night. It will be a transition where we see them used in conjunction with one another, slowly integrating biologicals in as complimentary to synthetics. This might be in tandem first with a 1-2 punch of synthetic, then biological to manage weeds then on to a conjunctive approach where both are used in the same tank.

Where we will see this shift the fastest is in the holy grail of biologicals: nitrogen fixation. This is where there has been the biggest investment. The global market itself is >$100billion USD for Nitrogen fertilizer. If this gets solved effectively and performs, there will be rapid uptake. Nitrogen costs tend to be the highest input costs for farmers.

The last time I touched on this space I stated:

This presents a significant opportunity for retailers, agronomists and other organizations: What sort of assets need to be assessed to better support the growth of these products? What technology could be used to distribute them to the farm customer? What type of training is necessary for industry professionals? There is ample opportunity to be ahead of the curve, or before the chasm is crossed so to speak.

With them being a $2B market globally (biostimulants specifically) and growing significantly faster than many other products in the ag input space it presents a unique North American opportunity for organizations.

Every major crop input manufacturer is playing in this space. From Bayer to BASF to Koch to Yara to Nutrien to Corteva and everyone in between through either direct R&D dollars, M&A, corporate VC, JV or strategic alliance. With many big name upstarts in it as well like Gingko Bioworks (Joyn Bio JV with Bayer), Pivot Bio, Indigo Ag and Sound Agriculture to name a few.

Survey Results on Biological Products - Agribusiness Global

58% of responding suppliers and distributors from 43 countries say they are integrating biological products into their portfolios, and another 21% are looking into carrying them, and 21% said they are not developing a biological strategy.

The survey respondents represent primarily crop protection manufacturers and formulators (55%), distributors and trading companies (27%), and plant health suppliers and distributors (17%). About 42% do not originate any molecules, and 30% do not formulate any products, indicating that trading companies and non-formulating distributors still represent a significant share of the industry.

Will we see consolidation in the biological space?

We are seeing biological organizations pop up like crazy, some with very little to differentiate themselves and no route to market, while others are launching and then looking for other product lines to build out on top, such as Sound Agriculture or Indigo Ag. We are also seeing organizations going under, like Agrinos. I think a space we will see more consolidation and acquisition in the short term is in the biological space. There is a lot to be said for pooling resources and managing regulatory costs in the space. On top of this, there is a lot of redundancies in the market place (two slightly different bacillus subtilis strains that have similar efficacy for example) and only so many acres and routes to market that will be viable.

To me this indicates there is an opportunity to consolidate where there is overlap, but even that are adjacent to one another, say one focusing on biostimulants and PGPR’s joining forces with one focusing on the bio pesticide space. There is also a steeper climb to market in the row crop space versus the higher value horticulture or veg space and many of these organizations could achieve more scale and viability across a number of different crops and products over time by consolidating.

It's Up To Farmers' Advisers To Bridge The Data Divide - AgPro

71%

This number shows the “slice” of farmers from the survey who said their primary ag adviser or consultant has never suggested increasing on-farm data collection, data sharing or both

62%

That’s the number of farmers surveyed who did not use farm-level data software in 2019.

These numbers are surprising to me.

I wish there was data to show the numbers over the last 3 years to hopefully show there is a trend going in the right direction.

When you start to look at agtech uptake being relatively slow these numbers give a peak as to why. If the trusted advisors aren’t recommending the desire to adopt is low and if the desire to use one of, in my opinion anyways, the most fundamental agtech tools in a management system it shows there will be apprehension for other technology utilization.

Brazilian Farmers Approach to Digital - Mckinsey

This is a Mckinsey piece specific to Brazil. Brazil is a powerhouse in the world of ag and I talk about them relatively often in Upstream. While the culture is different than North America, and we can see some of the variances vs. the USA, it helps put things into perspective.

Digital penetration is higher in Brazil than in the United States – 34 percent of farmers say they make online agricultural purchases compared with 26 percent in the United States

70 percent use digital channels daily for farm-related matters beyond information searching. A third of farmers are willing to buy seeds, fertilizer, and other inputs online. Almost a third – and 56 percent in specific crops like cotton – say they are eager to sell their production online.

Three Concerns: cybersecurity, poor website user experience, and inadequate Internet connectivity at the farm level.

I think these three concerns are relevant to North America and while there may be other more pertinent I think this provides some insights for organizations:

1. How do you instill confidence in data security to increase use and confidence?

2. UX and UI cannot be overlooked. Product is important. Mitigating friction is important. This should be a priority, especially when onboarding customers.

3. How to manage a short term lack of connectivity needs to be considered.

Related: CNH: Connectivity for All Brazilian Farmers Next Step - Future Farming

Tech CEOs Go on Defense

While not directly related to agriculture, the tech CEO hearings down in the USA are something to stay abreast of. The questions and subjects are very relevant to the digital aspects of agriculture as you see large organizations scoop upstarts, look to competitors for feature innovation and down the line own the route to market for other organizations.

Other Ag Resources

Bayer Announce Partnership with SproutX to Drive Innovation - SproutX

Keys to Agrochemical Sourcing in China in 2020 and Beyond - Agribusiness Global

Bosch and BASF Found Project House for Smart Seeding and Fertilizing Solutions - BASF

AgTech Replaces In-Person Strategies With New Tool - CropLife

WinField United Canada Partners with Country Farm Seeds to Expand Seed Portfolio - RealAgriculture

Selling Strategic Planning as a Service - Precision Farming Dealer

Mystery Seeds from China are Landing in Americans' Mail Boxes - CBS

AgTech startup RealmFive Revolutionizes Wireless Connectivity in Agriculture - Silicon Prairie

Non Ag Resource

Screenshot Essays

This is a unique resource that distills important ideas down to write ups the size of an iPhone screen. The site is just rolling, but has many relevant ideas for business already.

My favourite one so far is “Humble Giants are Unbundling the Internet”.

Thank you to everyone for all the continued feedback, thoughts and for sharing with friends and colleagues! It is much appreciated.

I hope you all have a great week!

Here is this weeks YouTube Video/Audio highlighting parts of the best of this weeks edition:

Upstream Ag Insights July 26th YouTube Edition

Share Upstream Ag Insights

Farmers Business Network Expands to Australia with Farmsave Acquisition - AgFunder

FBN has officially expanded beyond North America. I think the way they are moving into Australia is notable too: acquisition. All ag markets are different and Australia is definitely different than North America. Being able to acquire a company that already has an understanding of the culture, the market and the customers goes a long way in setting themselves up for success.

The company they acquired, Farmsave, has 5000 members currently, along with the ~12,000 FBN members currently in North America.

I think expansion to Australia is smart for FBN for a number of reasons:

1. Generics - There is a heavy generic presence in Australia for the crop protection products. Significantly more than Canada and even more than the USA. This means less influence from manufacturers and with FBN emphasizing generics they may be able to penetrate the market in a more meaningful way.

2. Number of crop input providers - Nutrien and Elders have significant market share when it comes to retails. This indicates farmers may be wanting another cross country player with some scale to be in the market. Even within this, the Australian market seems to have more independent agronomists (this is anecdotal - I can’t quantify this statement) when I talk to my contacts down there, again reinforcing the positive opportunity for a direct to farmer model.

3. Not as tight of a season - Logistics are always going to be important in all areas, but when you look at Canada and the USA a lot of the cropping season occurs in a very tight time frame. Australia is a longer growing season meaning there is a bit more slack in the system so to speak. The FBN direct distribution model will not see the same sort of strain and constraints in a longer growing season.

4. More Scale - With one of the biggest attraction of members to their business being the attractive crop inputs pricing, they now will have even more meaningful scale when it comes to purchasing active ingredients globally. This means more negotiation power from a pricing but also from a formulation management perspective.

Many would say there is opportunity to focus on the North American front and I am sure there are targets to improve this as it is. But I do think looking at the Australian market makes a ton of sense if they are really trying to scale and IPO in the coming years. Other hot beds of agriculture like Latin America have numerous marketplaces already where as Australia, specifically with an acquisition entry, allows them to get in and control the board to speak.
Financial details were not disclosed.

Retail-Centric Venture Capital Investment Takes Center Stage with New Funding in Taranis, Growers Edge - CropLife

This is a well written article from Paul Schrimp (great thoughts and commentary in it surrounding these companies). I do find the framing interesting surrounding these companies being “retail centric”.

Growers Edge for example does have a great fit in the retail space with what they deliver to the market place. However, I’d suggest these companies and the VC’s that backed them aren’t attempting to be inherently retail friendly; what these companies are though is in need of distribution.

Distribution trumps product (unfortunately) and the organization that can gain access to the market, with a sufficient product, tends to come out on top. What some early agtech start-ups didn’t realize is that very fact.

Great product and product market fit is a key piece, but customer acquisition is expensive. And obtaining scale one farmer at a time would be tough sluggin’. Getting to scale and positive unit economics before running out of money from the VC’s has it’s challenges. Enter the retail. They have access to hundreds, and even thousands of customers. Couple this with the retails wanting to better serve their customer and to avoid becoming obsolete and you end up with the B2B relationships we see today that Paul alludes to.

Worth noting, there are initiatives from both of these organizations to work with manufacturers of crop protection products, seed organizations and I’d bet the openness to work through other channels like equipment dealers. Agnostic to the specific route, but targeting large farmer access.

I think what this does show is both groups, retails and agtech start-ups, adapting to do what’s in the best interest of both of their organizations and the farmer. To me, that’s a win for the industry.

Ag Inputs Distribution: Is E-Commerce the Only Way to Go to Digital? - Linkedin

My answer to the title is an overbearing no.

E-commerce does not equal digital and digital does not equal e-commerce. E-commerce is a component of digital, among other things - artificial intelligence to manage the supply chain, digital agronomy tools to offer unique services, virtual connectivity to inform customers and beyond. The opportunities are endless.

The question around retail shouldn’t be “should I do e-commerce"?” The questions should be how can I use digital tools and technology to enhance the value I deliver to my customers and how can I use it to grow my organizations business? Now what needs to be answered is, who are my key customers and target market? How will customer demands evolve?And what do they value (value can mean very different things)? How do I need to structure my offering, build out my team and prioritize capital to deliver on this? Digital technology enables retails to deliver value, identify value added service and manage their internal business. It enables you to execute on your strategy, it isn’t in and of itself a strategy or a saving grace; after all everyone has access to technology too. It’s how it gets integrated and executed on that’s the important part.

I do not anticipate significant success by any retailer or agribusiness simply by putting up a website so they can check a box and “do e-commerce”. The need for integration of the entire business is necessary. I’ll be talking more about this moving forward. For more on ag retail, check out my newest blog.

Bayer Launches Carbon Capture Program for Farmers in U.S. and Brazil - Reuters

Bayer Cropscience CEO Liam Condon has been talking about farmers getting paid for carbon for a while.

Bayer AG launched a pilot program in the United States and Brazil on Tuesday that will pay farmers for capturing carbon in cropland soils, making it the latest agriculture company to capitalize on environmental initiatives.

Bayer’s program requires that farmers enroll in its Climate FieldView digital farming platform, where growers would log data about their eco-friendly farming practices such as no-till farming or planting cover crops. Those claims could then be verified by satellite imagery.

The verified by satellite is interesting, there are organizations working to do this currently through machine learning techniques. There has been 3rd party research that also talked about the challenges within this as well, but also some that show the viability to accurately assess the crop, yield and practices.

Bayer would compensate growers for sequestering carbon and pay them in cash or credits to buy products on its Bayer PLUS rewards platform.

The article originally stated that farmers would receive approx $13/ac. This is consistent with what we see in other areas of the USA (California), but 5x higher than what we see in parts of Canada.

At the end of the day, we have to have a clear line of sight that this has to contribute to Bayer’s bottom line and benefit our share owners as well.

Carbon is one of the biggest buzz topics around. There are a lot of moving parts. There are environmental benefits but also optical benefits surrounding shareholders and trends towards ESG investing for Bayer. But these also have to drive business. And for Bayer, there are a lot of opportunities to drive their business through carbon initiatives.

What is a carbon credit?

A carbon offset is a reduction in greenhouse gases in one area that counterbalances the emissions created in another. 

Specific to farming, these credits are created through a change in farm practice that increases the storage of carbon sequestered in the soil (eg: reduced tillage) or the emissions necessary to produce the crop have decreased (eg: less Nitrogen or less fuel used).

How are they made?

These typically are made through research backed protocols that establish a baseline (what is typically done in a given geography) and then identify what practices could be implemented to increase the carbon sequestered. There is then a need to aggregate and verify these in order for them to pass. I am over simplifying, but here is a reference to read more.

Source

While what holds up the core of carbon credits and offsets tends to be practices, such as reduced tillage, cover crops or more efficient fertilizer applications, there are products that can fit within the practices that are beneficial to managing things like tillage and fertilizer applications and are supportive of Bayers business.

1. Biologicals - Bayer has significant investment and skin in the game surrounding biologicals. Through their joint venture with Gingko Bioworks (Joyn Bio) they are working to produce microbes that can fix nitrogen in any crops as well help plants fend off disease. This means less synthetic fertilizer and pesticides and potentially less passes over the field. These can also be beneficial to various cover crops.

   Within the Leaps Venture portfolio (Bayer corporate VC) you’ll find companies like AgBiome, Plant Response, and NewLeaf Symbiotics. All closely associated with driving an understanding of soil and the microbiome.

2. GMO’s and Breeding - Last week I highlighted:

   Farmers who planted genetically modified (GM) crops increased their incomes by almost $19 billion in 2018 and reduced carbon emissions by 23 billion kilograms or the equivalent of removing 15.3 million cars from the roads that year.

   There of course needs to be transitions to new practices and the majority of North America when it comes to corn, soybean and canola is already GM. Same goes for Brazil. But if you look at the opportunity in other parts of the world this could be significant from a macro level for Bayer and they do intend to expand beyond Brazil and North America.

   Bringing it back to North America, Bayer has announced they will be releasing short stature corn. This breeding fits nicely into a strategy leading to a reduction in the need for tillage.

3. Digital - They are requiring everyone to be on FieldView, which isn’t surprising. This helps in numerous regards for them.

   The first being more reason to sign up for FieldView, meaning more acres and more data.

   Next up, they are able to collect and verify the data/practices via their in cab telematics device and remote sensing technology down to the field, or even acre. Verification is expensive, but they can have a real cost advantage through their technology where they obtain the data without significant manual effort and can verify that data or send to the proper verifier.

   Modelling can also help them to make better recommendations surrounding farmer Nitrogen applications in season, or fungicide applications which again can help to manage the greenhouse gas emissions and practices.

   Recommendations of seed and product in general can deliver a higher reduction of GHG given a higher output of grains, making for a really positive ratio of reduction (of emissions) to output (of grains).

Not to mention they can participate in the monetizeation of carbon as a new revenue stream to their business, selling the carbon offsets with strategic trading and guarantees that give them flexibility at scale and allow them to manage their exposure as well as their upside. The value of the ton of carbon that Bayer is able to obtain will be interesting, specifically depending on what the “sequestration” amount per acre works out to.

Related: Soil Offers Key to Curbing Climate Change and Why Precision Agriculture is Essential in Combating Climate Change

Accelerating AgTech Adoption - Linkedin

No matter what area of the world, we are seeing slower than anticipated adoption of agtech, for numerous reasons:

• lack of consistent ROI

• lack of connectivity

• apprehension to change

• lack of education/expertise

• inability to connect across technologies

• non-updated equipment

And others depending on geography.

Adoption is specifically of interest to me in the context of this quote from Peter Thiel:

Software has these incredible economies of scale, these low marginal costs, and there is something about the world of bits, as opposed to the world of atoms, where you can often get very fast adoption and fast adoption is critical to capturing and taking over markets because even if you have a small market, if adoption rate is too slow, there will be enough time for other people to enter that market and compete with you. Whereas if you have a small to midsize market, have the fast adoption rate, you can now take over this market. So I think this is one of the reasons Silicon Valley has done so well and why software has been this phenomenal industry.

If you put that to ag, it shows one reason we haven’t seen any real run away winners in the space and why we see traditional players able to keep up (we haven’t seen bankruptcies of agribusinesses for example, but the consolidation shows things are moving fast).

Australia is looking to change this as it should drive their agricultural productivity and output as a nation and I think they lay out a few great points in the below presentation:

Dropbox Link to Presentation

Here are their 7 Pillars:

1. Networking and Collaboration Integration of the AgTech ecosystem through AgTech Hubs and Networking Forums is key to ensuring AgTech meets the needs of primary producers and enables a high-growth, internationally competitive AgTech sector

2. Demonstration Use Independent Intermediaries and AgTech Ambassadors as trusted advisors, as well as showcasing events, case studies and demonstration sites to improve primary producers' understanding of the best AgTech solutions available

3. Entrepreneurial Capability Ensure SA’s innovation support initiatives, such FIXE, prioritise AgTech opportunities with a strong focus on primary producer needs

4. Skills & Education Equip primary producers and service providers with the knowledge and skills to identify and utilise effective AgTech solutions

5. Connectivity Identify and promote effective farm-wide network connectivity solutions to primary producers, particularly in remote areas

6. Compatibility Provide primary producers with a working understanding of AgTech offerings that are easy to use and can be readily integrated with other devices and data sources to provide a whole-of-farm solution

7. Government Leadership The SA Government can increase sector confidence by clearly enunciating the importance of AgTech and its adoption to the state, and by policy and program initiatives that support the AgTech supply chain

Related to this:

Hi-Tech Farms Grow Ag Output

We are seeing many of these farms that are open and emphasizing growth and success in the agtech space. I think these are great initiatives to push the industry forward and identify ways to collaborate and ensure success with digital tools and technology. This is in Australia, but there are also initiatives in Canada at the Olds College Smart Farm, the UK at Hartpury Farm and in the USA.

Precision-Farming Startup Taranis Bags US$30m in Series C Round - Business Times

New investors in this round include strategic investor Hitachi Ventures as well as Mitsubishi UFJ Capital, Micron Ventures, UMC Capital, La Maison, Mindset Ventures, iAngels and Gal Yarden. Existing investors Vertex Ventures Israel, Viola Ventures, Finistere and OurCrowd also participated in the round.

This brings Taranis’ total fundraise to US$60 million to date. 

I’ve talked about where I think drones are a couple of weeks ago and again here.

Taranis may not necessarily be purely a drone company though either, which is what they were looked at not that long ago. Ultimately, what a lot of these organizations do is capture data and deliver insights. Drones are a medium to do that, but not the only answer. I think we will begin to see non-traditional drone companies be open to utilizing drones to capture data and traditional drone companies use other mechanisms to capture data, such as companies like Deveron UAS or Hummingbird Technologies that started out as “drone” companies.

What these companies are doing is deriving actionable insights from the data collected and processed to deliver better outcomes. I do not see why a company needs to discriminate surrounding the mechanism as long as costs and outputs are reasonably aligned.

What’s going to differentiate these companies? Their ability to deliver profitable outcomes.

This, in my opinion, will come down to execution through unique business models and the machine learning/data analytics capabilities surrounding not only agronomic decisions, but things like verification of practices for carbon for example (as briefly mentioned earlier).

Q2 Ag Company Summaries from the Week

Yara Reports Increase in EBITDA

• Second quarter EBITDA up 8%, mainly reflecting improved margins and lower fixed cost

• First-half 2020 deliveries in line with a year earlier

• Lower sales of their specialty product line, even with 10% growth in Brazil and growth in the rest of Latin America. Challenges in Europe, North America and Asia.

If you go back to my review of the Yara 2019 Annual Report you’ll be able to reference the emphasis of Yara surrounding their digital initiatives and specialty products.

Their specialty products have not grown in H1 2020, outside of Brazil/LatAm. Interestingly, it looks like specialty and biobased products are growing significantly in Brazil (faster than Yara’s numbers indicate):

Sales of Bio-Inputs for Soybean Crops Increased by 31% in Brazil (this is specific to soybeans and biological based products, but Yara does have biological based products within their YaraVita line up, associated with that specialty product line).

One of my favourite slides from their Q2 earnings deck is this one surrounding digital:

1. It’s great frame to digital success in ways beyond simply “sales” or “cost reduction”. I am a big proponent of this, so I love the simplicity of the chart.

2. It gives some insight into next moves from Yara:

   • Outcome based models - We hear about these constantly and they only make sense for Yara to look at as well. In order to do this they need an all encompassing, data driven platform. They do not have one of those yet. They have the pieces, but the integration and delivery of this on a macro scale has not been seen in North America. Their go-to-market in North America has been non-existent with any of the tools in a meaningful way to drive business - whether talking about their apps (there are numerous, disconnected from any data acquisition mechanisms and not integrated into one another) or their digital tools like Adapt-N for example, that without meaningful investment into specific geographies by crop to train the model, have little value. Even if they were to accomplish this, they need a go-to-market strategy through the retail likely that will be challenging to monetize. I could be off, but there may be a partnership with Bayer/Climate Corp that might be a strong alignment in North America for Yara - granted Bayer might figure they can accomplish on their own.

     They have some digital components in parts of Europe and South America, but a robust, all encompassing platform will be something to watch for.

   • “Direct-to-farm online platform” - This likely isn’t road mapped for the near term in North America, but it’s something to watch in terms of how they execute in countries like Asia, South America, EU and India.

   • Carbon marketplace - I do not want to beat the carbon horse to death in this edition (see Bayer overview), but the buzz is taking off and companies that prioritize GHG reduction, as Yara has been vocal about, will be looking at this type of offering.

   • Yara Connect - This is a grower rewards program in Europe. This enables a depth of understanding surrounding the farmer, using digital engagement and programming, to be able to deliver added value to the customer and position more Yara product on farm. Seed and chemistry manufacturers have done this for years, but Yara and most bulk, commodity fertilizer producers never ventured this way. Yara now has a differentiated, value added business segment as a primary focus that requires them to create demand through marketing. This will still be a challenge in NA. However, Yara has a robust depth of portfolio (bulk commodities, specialty biostimulants, micronutrient in foliar, coatings and granular plus digital tools), they’d be better off going further up the value chain and creating a system that incentivizes the distribution/retail chain through bundling.

Primarily, the above in the short term relates to other jurisdictions outside of North America. From a North American perspective though, it’s all worth watching.

Syngenta H1/20 Results

Sales $7.1 billion (2019: $6.8 billion), 5 percent higher

Crop Protection sales up 6 percent

Seeds sales up 2 percent

EBITDA $1,675 million; $1,503 million excluding capitalized development, 9 percent higher than 2019 adjusted for change of control royalties.

In North America, sales for the half year were up 4 percent at constant exchange rates. However, sales were impacted by cold weather and excessive rain in Q2.

Led by Syngenta Group, China’s Agrochemical Industry Focuses on the Food Value Chain - Agribusiness Global

There is an interesting overview in here regarding the Syngenta group, but what really caught my attention was the Chinese pricing for 12 significant active ingredients.

10 out of the 12 have a lower pricing than this time last year, many by a significant amount. Actives like tebuconazole, glyphosate, glufosinate, florasulam and azoxystrobin are all included.

What Kind of Systems Thinking is Necessary to Design Investment Products? - Medium

This post covers a different approach to financing for farmers that are looking to transition to regenerative agriculture.

Replant’s loans are tied to soil health. If the farmers is demonstrating it with improved soil health, higher organic nutrient density, water conservation, water infiltration, carbon sequestration, the stronger those metrics are, the lower his or her cost of capital.

While there are challenges to tying this to soil health as it’s tough to successfully monitor and verify (especially on a large scale) it is an interesting topic.

What about if we take this down a level in difficulty and look more towards financing for traditional farmers first? There are models and years of yield data that can show how strong of a farm operator someone is. What if there were varying lending rates for farmers based on their competitiveness in their geography and capacity to produce, giving easier access to financing and a lower cost of capital if they are making effective agronomic decisions? Agronomy is only one area of farming and of course marketing, capital allocation and more influence a farmers success, but if they are able to better manage their bushel production year in and year out, they should have a higher cash flow and better chance of making their payments - should they have the same cost to a financier as someone poorly managing? Almost like a credit score.

Interesting article to read nonetheless.

Staying on the topic of regenerative ag and interesting reads, here is a tweet thread from Carl Lippert, co-founder of FeedX:

Carl Lippert @CarlLippert

Agriculture can be evaluated on a spectrum of passive to active. On the passive side sits holistic management, regenerative, pastures etc. On active we have conventional industrial monocropping, confinement, big green tractors etc.

July 20th 2020

16 Likes

Behind the Label: An Inside look at the US EPA Approval Process - AgroPages

It takes 10 to 12 years and around $300 million to bring a new pesticide, including herbicides, fungicides or insecticides, to market. While much of that time and money is spent in a lab and on in-field testing, U.S. EPA and other governmental agency reviews have started to take a bigger piece of that pie.

In addition, products have to re-register every 15 or so years with updated data.

Related: The Cost of New Agrochemical Product Discovery, Development and Registration in 1995, 2000, 2005-8 and 2010-2014.

U.S. Court Allows Sales of Corteva Herbicide, Adding to Edge Over Bayer - Reuters

The decision to allow sales of Enlist Duo boosts Corteva’s advantage in the farm sector a month after the same court blocked a rival herbicide sold by Bayer AG. The companies compete for sales of chemicals and seeds in the $40 billion U.S. soybean market.

This is a big win for the Corteva group moving forward. Will be interesting to watch this dynamic play out over the coming couple of years.

RH Accelerator and OAFT Form Strategic Alliance to Support Innovative Agrifood Companies - RH Accelerator

Both organizations recognize the exploding opportunity and need to foster innovation in the agriculture and food sector. Using their deep domain knowledge and entrepreneurial expertise, they will to play a more meaningful role as they scale up and activate the ecosystem of high potential companies and investors.

Other Ag Resources

Evidence, Data and Farmer Decision Making - FarmDoc Daily

Earth Observation, AI and Feeding Nine Billion People in 2050 (Podcast with Farmers Edge CEO Wade Barnes) - Kratos

GroGuru – Increasing Profit, Inspiring Sustainability In Agriculture - Exeleon Magazine

Smart Irrigation and Weather Forecasting Using LoRaWAN - The Things Network

Agronomists Take Flight with Drone-Based Image Recognition Software - Real Agriculture

Nitrogen-Fixing Corn Seed Treatment in the Pipeline - AgProfessional

Non Ag Article

Disrupting Disruption by Nathan Baschez

Disruption might be the most overused word in business - even more than “value”.

Disruption has a very specific definition according to Clay Christensen and what we are often calling “disruption” is simply Joseph Schumpeters long coined (and continuously experienced) “creative destruction” that’s defined as:

the process of industrial mutation that continuously revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one

The actual theory of disruption as laid out by Christensen has been poked at by numerous individuals. What Nathan Baschez sets out to do is take all the valid critiques and synthesize them. This is the first of a five part series that I think will be worth following as he identifies a more accurate model. And to me, the better the model, the better the ability to identify the right strategy or determine how a business initiative will play out.

Thanks to everyone for reading Upstream! I have been loving the feedback and thoughts over the last few weeks!

For the Upstream YouTube Video this week I focused primarily on ONE topic, going through some of the nuances in my new blog post (below) that I didn’t necessarily write about.

I hope everyone has a fantastic week!

Porters Five Forces and Ag Retail

Porter’s Five Forces’s framework is a staple in MBA classrooms globally. He is one of the godfather’s of strategic analysis. Porter's Five Forces Analysis is an important tool for understanding the dynamics that shape competition within an industry. It is also useful for helping you to adjust your strategy to suit your competitive environment, and to improve potential profit.

Porter's Five Forces are:

1. Competition in the industry

2. Potential of new entrants into the industry

3. Power of suppliers

4. Power of customers

5. Threat of substitute products

Check out my newest blog where I go through the five forces in the context of the ag retail industry.

Follow Up on AgTech Exits

I had a lot of feedback from my overview on agtech last week.

Some of the commentary I received added what else has kept back agtech exits and success in many instances:

Leadership - A great comment I received was surrounding leadership coming from within agriculture starting the majority of the tech companies. It’s a fair point in that if you look at many companies changing other industries, the founders and CEO’s are coming from non-traditional backgrounds. Interestingly enough if you consider ag, some of the most valuable organizations have founders and CEO’s from outside of ag.

Competitive Moats - A lack of scale and therefore competitive moats (check out the non-ag article in this edition for more) which goes hand in hand with this individuals other point: no viable path to cash flow positivity. In many instances it becomes a race to the bottom vs. a service that adds enough value to truly gain a share of wallet, consistently and develop any sort of pricing power.

Some other comments included regulatory and customer adoption speed.

Thanks again to everyone for the feedback. I enjoy receiving comments and thoughts from readers!

There has been a lot of talk about whether these continued major investments in agtech are good or if there is a bubble and how farmers are still no better off etc. than they were 10 years ago.

Tim Hammerich tweeted this last Sunday and I think it kicked off some great discussion on Twitter:

Tim Hammerich @timhammerich

Can someone help me do the math on what makes @Indigoag worth $3.5B? Still scratching my head on this one. I realize it’s what investors are willing to pay. Just wondering what kind of thought process is leading to this?? Crop sustainability developer Indigo Ag raises $300 millionIt’s now the world’s most highly valued agtech startup.axios.com

July 12th 2020

6 Retweets70 Likes

In regards to answering Tim’s Q, I do not know particularly, but guessed in this edition of Upstream.

The problems that are significant in ag such as labour, becoming more efficient with inputs while producing more are not simple problems to solve. They require big ideas, innovation and creativity. They also require money. Without those things, progress decreases rapidly. And while we may not have seen as significant of progress from the last 7-10 years of investment as farmers and the industry would like, the billions invested have and will continue to go a long way to attracting human capital to the ag industry along with funding the R&D required to solving these very real problems and to making the ag industry better off. Of course there will be collateral damage along the way, whether that’s many organizations going bust or frustration amongst the industry - the alternative is a crawl towards progress. I’d suggest stagnation is worse than a boom/bust cycle (dot com boom has its positives for example).

I’ve never sat in on a pitch meeting where David Perry (Indigo CEO) was attempting to raise capital from me, nor have I ever sat in on a pitch meeting of any sort, so I am the last person who can have an informed opinion on this. I don’t necessarily see exactly how Indigo makes the money or sells at their valuation, but that’s venture capital - being contrarian, but right and doubling down on that view point fully knowing 80-90+% of your views could go bust. These individuals are seeing things that 99.99% of us don’t see. Air BnB in 2008 trying to raise money? Can you imagine at a time when meeting people from the internet was frowned upon, internet dating was looked at with disdain and you are co-founders Brian Chesky, Joe Gebbia, and Nathan Blecharczyk pitching a business that is a two-sided platform where someone with an extra bed opens their doors to a stranger on the internet and that stranger actively pays to stay there? Better yet, saying they see a time where people will actively seek out AirBnB rooms over traditional hotels! Yet, that’s exactly what happened and they have changed the travel industry, many would say for the better.

Now there is still the question around how this capital is being raised, including the types of shares being offered and more, but I do think empowering organizations with big ideas to try has a net long term benefit to the industry.

Related: Q&A: MoFo Partners Talk Agrifoodtech Exits, Regenerative Tech, and Covid-19

Nutrien Acquires AgBridge

Agbridge is a wireless data transport solution that enables the transfer of precision agriculture data between equipment operating in the field and the computers of growers and trusted advisers, say Nutrien Ag Solution officials. 

This is a nice acquisition for Nutrien. The ability to transfer data around seamlessly is foundational to a few things Nutrien does and will do in the future:

1. Enhances their fleet of rolling stock that services farmers - Being able to transfer data to and from different pieces of equipment and their database allows them to derive further insights for customers and create new services, plus deliver better information to their farm customers. This will help them manage their fleets from an efficiency perspective and cover themselves even on risks like misapplications.

2. Builds out their Echelon digital services - In order to serve their farm customers being able to transfer data from customers mixed fleets to their Echelon system and back this will give them better (and easier) visibility surrounding as applied maps, sending prescriptions, looking at other technology like edge computing and round out more of their digital initiatives.

3. Allows them to layer on additional services and digital products that make sense in the future - Being able to connect everything together and “talk” is great for them to build upon for customers as well as their business itself.

Agri-Pulse Open Mic Interview with Mike Frank (CEO Nutrien Ag Retail)

I always enjoy listening to Mike Frank’s perspective. I think one of the most compelling components in this interview is his opinion on carbon sequestration, carbon markets and traceability. (minutes ~13:30 - 15:30 for carbon part).

Related: Mike Frank Presentation

Nearly Half of Farmers Have Concerns About Sales Reps Being On Farm

Of 640 farmers and livestock producers surveyed, 45% say they have reservations about allowing sales reps back onto their farm.

This will have significant implications for the fall season. Whether you are a retailer, seed seller, fertilizer company or simply looking ahead to the spring season it says to me a few things:

1. Online panning and purchasing mechanisms are going to be paramount for the winter season and moving into the 2021 season.

2. Remote communication and connection is going to be emphasized. Whether this is for answering questions or customer acquisition.

3. Virtual tools and digital services will go a long way. Whether that’s soil testing, digital polygons for 2020 trials or reviewing 2020 yields and background, organizations will be able to add value farm customers through these tools when they aren’t physically on farm.

Going through the entirety of a year with COVID-19 impacting the agricultural business cycle I think will drive even further the use cases for these digital tools and increase not only the adoption but reliance on digital tools for both farmers and agribusiness.

Related: How the Coronavirus Will Accelerate Digital Agriculture and How the Coronavirus will Impact Ag Research and Technology

ChemChina in Talks With State Funds on Syngenta’s Pre-IPO

China National Chemical Corp. has held talks with potential investors including China Investment Corp. for a stake sale in Syngenta Group Co. before an initial public offering of the Swiss agrochemicals company, according to people familiar with the matter.

Land O'Lakes and Microsoft Form Strategic Alliance to Pioneer New Innovations in Agriculture

This was a significant announcement this week between a powerhouse technology company and a powerhouse agriculture company.

These strategic alliances have seem to become the norm, but as usual what’s more compelling is “what happens next?”

When these strategic alliances happen between big organizations occur they typically lacks any big news that comes next. One example is IBM and Yara. While you can’t judge partnerships by the first year or two of their occurrence, so far these partnerships seem to be more along the lines of two experts in their own space identifying one another as potential partners and the tech company saying “Hey! We are a big tech company with lots of compute power, and you are an ag company with loads of expertise (DATA!) in the space. We know there is a lot of opportunity to revolutionize the ag space, lets see how we can do it together…just make sure you bring your entire business onto our high margin cloud computing service and we will figure it out from there”…In this instance, Azure.

While I am mostly joking with the above, there are inherent challenges with strategic partnerships in terms of alignment, priority and culture. They are necessary in many ways, but not always optimal.

For Microsoft, Land O’Lakes makes a lot of sense as a partner in ag because they touch so many different areas of agriculture. As much as I focus primarily on large scale farming, there are significantly more areas of agriculture that can be influenced readily by some of Microsoft’s expertise, such as in the animal space, so this partnership makes a lot of sense for them (not to mention the scale).

So what might some of the initiatives look like for LOL and Microsoft?

Initially, the companies will focus on developing a connected AgTech platform, built on Microsoft Azure, that will bring together Land O’Lakes’ portfolio of innovative AgTech tools, such as WinField United’s R7® Suite, Data Silo and Truterra™ Insights Engine under one unified architecture. By standardizing on Azure and harnessing the power of Azure FarmBeats, Land O’Lakes will be able to derive insights that enable intelligent agriculture solutions for farmers to be more productive with their time and resources. This includes early mitigation of plant stress to guide precisely where and when farmers should take action on their field for ideal growth conditions, maximization of yield potential by planting the right seed varieties and nutrients, optimizing fertilizer investments, and ensuring accurate output ratio to meet demand properly, all while lowering the farm carbon footprint.

This to me points to better processing (cloud computing), but even enabling LOL to be stronger with the real time data utilizing faster edge computing (low latency, real time) to do more things in an automated fashion. This could look like some of the below:

Built on top of the AgTech platform, the companies will collaborate to advance an aggregator of data with Data Silo, as well as leverage Microsoft Azure and its AI capabilities and insights from WinField United Answer Plot® test fields, to support more predictable decisions for placement of crop inputs such as seeds and treatments, with the goal of increasing return on investment with the entire acre.

Winfield is one of the most impressive trialers as an organization through their retailers. They do significant amounts of in depth trials across North America, giving them a significant amount of data to leverage over and above farmers data itself.

Advancing sustainability initiatives… The Food and Agriculture Organization of the United Nations estimates that agricultural soils could hold up to 10% of human-caused carbon emissions within 25 years. Yet, soils are largely absent from global carbon markets. As a result, farmers lack adequate information and incentives to practice regenerative agriculture to capture and store carbon…

..The companies are working together to change that by developing a technology suite to help farmers improve their profit potential and generate new revenue in carbon markets. The new alliance will develop capabilities to quickly and effectively predict the carbon benefits of regenerative practices like no-till, precision nutrient management and planting of cover crops.

The last sentence of this statement intrigues me. Today we can’t consistently measure carbon benefits, they are largely based off research that is broadly brushed. So to “quickly and effectively predict carbon benefits” will be a compelling value prop if they can execute.

There is a lot of potential anytime organizations of LOL and Microsoft’s size get together. This definitely gives LOL some strength to enable unique insights for farmers, but even to streamline their retail/distribution/supply chain business through some of the computing capabilities - an area of these types of partnerships that doesn’t get talked about enough.

Porters Value Chain Analysis

While supporting farm services is one aspect these partnerships drive opportunities and growth, a lot of this data and compute power goes a long way to delivering value throughout the supply chain.

Fundamentally, the announcement is exciting, but as is typical with announcements it features heavily on the potential and not the how.

For more surrounding the value chain analysis and Michael Porter in general, check out my new blog post.

Related: WinField United Data Silo and Climate FieldView Announce Connectivity - AgWeb

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Sharing the “Why” Behind Your Digital Strategy

This is a great post by AgVend CEO Alexander Reichert. Him and I share a favourite book in “Leading Digital” by George Westerman, Didier Bonnet, and Andrew McAfee.

This book is exceptional from a digital perspective, but I have said before it is a great book for leading change in an organization, digital or not.

It also contains a solid 4x4 chart to assess where you are and where you could be when it comes to “leading digital”:

I recommend checking out this post by Alexander as he synthesizes and frames some of the most useful take away’s from Leading Digital, and another book, into their application in the ag industry.

Pinpoint Placement of Inputs With The Planter

SIMPAS from AMVAC is a technology that I think is exciting for the future of agriculture and farming.

“The biggest advantage to this system is its ability to deliver the exact nutrients and products where they are needed. Which is a huge message for sustainability,” Schultz says. “And we hope to grow the number of products licensed into SmartCartridge containers to be applied using  SIMPAS.” 

I discussed this product and the AMVAC business a few weeks ago in Upstream.

New System Targets Farm Automation, Control

Integration of digital and sensor systems + automation are huge drivers in the space today. We see it with the Nutrien acquisition of AgBridge this week and see it with other start-ups like Leaf Agriculture.

This is an on farm piece of technology that connects and automates:

The FieldBot is the data collection and control system; it ties into the SmartFarm system, which is cloud-based. And the platform uses two-way communication. “If you need to automate something or control it remotely, we can do that,” Brownlie says. “You can control a gate opener, or send a signal to shut off an irrigation pivot.

The SmartFarm system is for data capture and management. The aim, Brownlie says, is to provide the farmer with total control of the farm. The company has an agreement with John Deere to collect telemetry from equipment and show that in the SmartFarm system, and he shares that the platform can pull in other information from third-party providers.

These companies can solve a significant problem for farmers and agtech companies, but can also be a nuisance in the eyes of major players being that they now influence/ control the flow of data enabling them to position themselves at the centre, becoming the hub.

Nutrien Announces Industry First Smart Nutrition MAP+MST Homogenous Fertilizer

While Nutrien has done meaningful things in all areas of fertilizer, digital ag, ag retail and beyond, they still were lagging in a specialty line-up to compete head to head with the value added phosphate products from Mosaic. This product gives them a homogeneous phos option to position in the market place.

Startup “Turns Up” Gene Expression For Yield Advancements

You can think of gene expression like a volume dial," Bayer says. "Turning the dial up or down changes the expression and characteristics of the plant. This is very different than genetic modification, which would be more analogous to swapping out the technical components of the radio."

Sound Agriculture using their breeding platform in conjunction with their biological products is unique. No matter whether you look at Indigo or an organization like BASF, we see biologicals not being used simply as stand alone tools for farmers, but as integrative approaches with iterations throughout the rest of the offering. This builds out the value into a systems approach vs. a linear approach, and that is what will ensure farmers have more success with biologicals, and in general.

That leads to an article out of Europe:

The Age of Agrochemicals is Ending: It’s Time for Agricultural Biotechnology

The EU has recently laid out a series of targets to dramatically reduce the amounts of chemicals used in European farms by 2030. These include reducing by 50% the use of chemical and hazardous pesticides as well as reducing fertilizer use by 20%.

If these targets come to fruition in my opinion there is going to need to be a 4 pronged approach to supporting:

1. Genetic modification (not preferred in the EU)

2. Strong growth in biological efficacy and effectiveness, whether talking biostimulants, biopesticides or otherwise.

3. Practices adapt (eg: intercropping)

4. Digital and technology (pest modeling, more accurate pest ID with AI such as see and spray technology)

This article itself goes into pheromones, soil bacteria and protein biocontrols.

And one more that is interesting surrounding the EU and biotechnology:

Crop Biotechnology Continues to Provide Higher Farmer Income and Significant Environmental Benefits

Farmers who planted genetically modified (GM) crops increased their incomes by almost $19 billion in 2018 and reduced carbon emissions by 23 billion kilograms or the equivalent of removing 15.3 million cars from the roads that year. 

The above is a GREAT stat!

In 2018, farmers in developing countries received $4.42 as extra income for each extra dollar invested in GM crop seeds, whereas farmers in developed countries received $3.24 as extra income for each extra dollar invested in GM crop seeds.

There is a significant emphasis for the EU to decrease GHG emissions and pesticide use. One of the best routes to accomplishing that is GM crops.

Conundrum for the EU?

Other Ag Articles

Yara Q2 Reports Improved Margins and Lower Fixed Cost - Yara

Project to Investigate Digital Ag’s Impacts on Rural America - Seed World

A Conversation with Dan Cosgrove, CEO, Growers Edge - Precision Farm Dealer

Smart Predictions For The World’s Largest Berry Producer - Forbes

92% Cotton, 90% Corn Areas in the US Produced with GE Seeds - USDA

Canadian Agricultural Equipment Sales a Bright Spot for June - RealAgriculture

Corteva Flight™ Takes Off in Eastern Canada - Corteva

BASF and PowerPollen Collaborate in Research on Hybrid Wheat - Seed World

Robots on the Rise - Agriculture.com

Striving for Broader Broadband in Agriculture - CropLife

Non-Ag Articles

Moats Before (Gross) Margins

Business quality is about defensibility. Defensibility comes from moats. And while high gross margins are often a reflection of moats, they are not a moat in and of themselves. And when faced with a low gross margin business, you need to focus even more on moats: without those extra points of revenue to invest in sales & marketing strategies or research & development, you need other ways to generate cash flow over time.

Like most people interested in moats, I learned of it first from reading Warren Buffet. Since first hearing about moats I have been continuously interested in them and their implications for businesses. This article from a16z talks about business quality and how different moats need to be considered versus purely looking at gross margins.

If interested in learning more about moats check out 7 Powers by Hamilton Helmer. (summary here)

I hope everyone is having a great weekend! Welcome to all the new subscribers from the past week. Thank you to all of you who have shared Upstream with your friends and colleagues of late!

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AgTech Hasn’t Expanded Markets like Consumer Tech Has

One thing I’ve been thinking about lately is why agtech hasn’t seen sizable exits or IPO’s. Having had conversations with my friend Matt Coutts, seeing rumblings on Twitter and having sporadic questions had me think on it a bit more. I am by no means the best person to have a thought on this and I welcome others to send me an email with their comments.

Here are a few of my thoughts:

• Lack of scale - Consumer products scale much better, companies like Instagram or Uber can fundamentally be used by everyone all over - agtech doesn’t have that same benefit. Mid western corn farmers are different than Pacific North West cherry growers who are different (and have different challenges) than western Canadian canola farmers. This limits robotics and digital technologies. Farmers are much more fragmented and are simply not the same everywhere, not to mention connectivity variability in rural areas, but also connectivity among other digital technologies. There is also a longer time to scale, with longer feedback loops (growing seasons…this also influences adoption rates) so we see time to meaningful scale (and strong revenues), and therefore exits, expanded out beyond 5 or 6 years and into 10-12+.

  The major agtech investments have only happened in the last 7-8 years!

  Not to mention reaching that agtech scale looks different than many consumer unicorn based businesses because they require boots on the ground and infrastructure, like sensors or other expensive (and depreciating) assets.

• Lack of Product Market Fit - Ability to offer value in the market place is paramount. Often times we see technologies that do not deliver enough value to justify the cost, effort or hassle or they are extremely niche. This isn’t just for the farmers, but even the B2B segment where promises to make traditional farmer supporting organizations more effective have not come to fruition either.

• Few potential acquirers - There are only so many organizations in the ag space that would be able to acquire start ups and as I have seen Seana Day and Gabriel Wilmoth allude to in a twitter conversation, a lack of middle market agtech consolidators with a viable balance sheet to tackle acquisitions. An example I do see of this occurring is with TELUS in Canada beginning to acquire/invest in numerous technology companies in the agtech space, some of which that can be synergistic to one another (eg: Decisive Farming and Hummingbird Technologies) and synergystic to their core business of connectivity. These acquisitions are smaller in nature though. This is consistent with a lack of private equity rolling up acquisitions into one meaningful offering.

• Overcrowded and Commoditized- There has been numerous start ups, an explosion one might say, in the agtech space in the last few years. This has lead to numerous investments, records actually according to AgFunder’s reports, but lots of these technologies are redundant. There are only a few “unicorn” organizations in ag. In order for any of these organizations to IPO, they need to be increasing their actual revenue (likely beyond $100 million), have a roadmap to grow towards $1 billion in revenue in the coming years, be cash flow positive (or neutral) and have improving unit economics just to name a few considerations. When there are redundancies it’s tough to build up any sort of meaningful scale and the attempt to build up scale often commoditizes the organizations efforts.

What we haven’t seen done in farming and agriculture is market expansion either. Markets have expanded, but not in the same way tech companies have changed consumer spaces. Take for example AirBnB, there are now more AirBnB rooms in Paris than hotel rooms! When AirBnB started they were going after a small market - over crowded cities (San Francisco) with conferences selling out hotels. That market in and of itself doesn’t enable a multi billion dollar valuation. What gives AirBnB their teeth is that they have expanded the demand for open beds in cities, decreasing the friction for travel and the cost to travel and doing so with very low overhead. Similar can be said for Uber in that they didn’t just take out the high end black car market, or the taxi market - they upended public transit and even purchasing of cars! That fundamentally changes their total addressable market.

Now consider this in farming - has anything like this been done? Indigo (and others) is trying to expand farming into “carbon farming” (but it’s also been attempted before), some organizations are increasing the use of of digital tools like imagery - but it hasn’t quite stuck or influenced farming in the same way as AirBnB for example. Farmers Edge* is moving in this direction with expanding digital tools beyond agronomic uses into finance and insurance - multi billion dollar industries that have opportunity to expand their product offering, customer experience and business/product lines.

Will we see market expansion in agriculture in the future? Is this what is required to begin to see IPO’s or larger exits in the space?

*I am employed by Farmers Edge

Online Sales of Ag Inputs

This is an article out of Purdue over viewing the approaches to ag retailing that have been evolving:

(1) the retailer-farmer online-only marketplace (no physical presence);

(2) the manufacture-farmer direct online sales;

(3) the retailer-farmer omni-channel experience (both online and physical presences).

Based on this analysis, it seems the omni-channel model would have an edge as long as the price premium between omni-channel and the other two options does not become too wide

I find this quote interesting. It seems to insinuate that one route can win out so to speak.

I do not inherently disagree with the point made, but I think this is an opportunity for a more nuanced discussion that I’ll go about simply with questions.

An interesting aspect that this article doesn’t touch on is the last mile distribution of the non-omni channel routes - in many cases they need bricks to get physical product to farmers.

Does any particular type of retail “win”? Or do they each fit a specific niche in the market? At least to start.

What product segments may have a fit for online? Glyphosate for example that requires little service, is bulky and consistently used so may be a product more consistently purchased online. Fungicides, which can be more reactionary, to pull the trigger or take back, often require agronomic expertise so they may stay primarily as a purchase from a brick and mortar retail.

Another factor is how do these two other types influence the omnichannel retail? They will unbundle a lot of what the omnichannel retail bundles - service, product lines, or event different business lines (eg: crop inputs and fuel). This influences margins and customer retention.

If there is uptake of the other retails/routes to market, how does that influence the traditional omni-channel retails profitability?

From The Re-Engineering of Ag Retail:

Zeroing in on e-commerce and taking a look at traditional retail now to put things in perspective. Today about 12% of commerce is done online , peanuts right? Think about the carnage this small percentage has had on traditional bricks and mortar retails; Sears, Toys R Us, Radioshack bankrupt just to name a few, plus many others struggling. When you are dealing with significant overhead costs, a fine line on inventory and tight margins, losing access to a small percentage of customers to online stores can hurt.

In traditional consumer retail we see challenges for bricks and mortar retails once you approach the ~15% range of their product lines being sold online based on their cost structures.

Do ag retailers need to think about cost structures NOW? Re strategizing their product lines and offerings? Initiating service offerings? Changing how they bundle product offerings? Re-thinking the entirety of their go-to market strategy? Or are there enough synergies from integrating the physical and digital store fronts?

Can an omnichannel player evolve their strategy to become platform-like and serve farmers, manufacturers and their shareholders (eg: Nutrien..) in a unique way?

I have opinions surrounding all of these questions and more, but they are very nuanced.

I like to use Clay Christensens “jobs to be done theory” to think about this, and briefly it goes like this:

There are different types of farmers - business savvy ones, service focused ones, price conscious ones and relationship focused - or some combination of all of those.

What does a retail offer? The basics: knowledge, services and logistics to fulfill those different types of farmers needs of products, information and services (lots falls into those 3 pillars though).

What “job” is each of those different types of farm customers needing? How many are there of each? What’s their acreage? How can you fulfill those needs for them better than a competitor and just as importantly, as cost efficiently?

This will help retailers identify what segement of the market to go after, or access.

I have started a post on Porter’s 5 Forces assessment of ag retail that I think fits into this conversation well, hopefully you will see that next week.

Unmagic Quadrant on Digital Agronomy

Venky Ramachandran always has unique perspective on the world of Indian ag retail. While there are many things that vary between Indian ag retail and North American ag retail, there is also overlap. One of the tools that Venky laid out in this article is a 4 x 4 Quadrant that enables a framework in which to think about how a retailer wants to add value, or looks to compare how they line up to other retailers/competitors along the lines of their values and what they wish to deliver to their customers.

Venky lays out this quadrant using Paid/Free and Low Touch/High Touch. This can help to identify where you as a retailer fall and what your niche is and why. I think it goes hand in hand with what I mentioned above.

While this quadrant is using Indian companies:

I think if we were to generalize North American retailers we would see the majority of them fall in this sort of range where the red ‘X’ is (somewhere in the lower right quadrant):

While each company tends to segment customers and would adapt their offering and initiatives within this, most companies would attempt to put themselves towards this ‘X’ spot because that’s where they feel they can increase customer experience and margins. But that leaves gaps in the market place for organizations to identify their niche and serve the customers who they feel are over served, or under served.

It’s important to note there is no good or bad in these quadrants; none are inherently better than the other, it’s how a retailer executes on that type of offering and insuring you have identified the right customers, there are enough customers and your assets, knowledge and staff base aligns with where you fall.

This exercise can be overly simplistic, yet exceptionally insightful as part of a larger strategic initiative.

Drones in Farming

Drones came in blazing onto the ag scene ~10 years ago, promising to change the agricultural landscape with every farmer and agronomist using one along with the thought that satellite imagery wasn’t going to be useful. Then some of the challenges set in surrounding scalability and regulation - excitement slowed.

There appears to be a rejuvenated excitement in them as new technology (automation, size and capabilities), regulation and positioning surrounding them has come into play, as I’ve talked about in this popular Upstream Ag Insights edition.

This discussion surrounding them brings to mind a popular graph:

The Gartner Hype Cycle

It seems we (or maybe just me) can now place drones on the lower part of the “slope of enlightenment”. We have begun to identify their fit, specific use cases and have come to the reality that they are not going to eliminate satellites or larger crop sprayer equipment, but be ancillary to them, the “right hand” so to speak; delivering value in other ways that empower not only farmers but ag professionals and agribusinesses.

Here are some of the popular drone stories this week:

Drones' Use in Ag Soaring

As far as we’re aware, Corteva has the largest commercial fleet of drones with more than 1,000 pilots

DroneDeploy has grown into a leadership position in providing data management for those that do put these flying data gatherers to work

To put the rise of drones in perspective, from 2018 to 2019, the company saw a 32% increase in drone flights across agriculture, and a 55% increase in agriculture acres analyzed by drones. And despite the coronavirus, DroneDeploy has seen a 39% rise in drone takeoffs and a 33% increase in takeoffs across U.S. agriculture users from mid-March to mid-April.

Related: Corteva Flight

Maximizing Drone Coverage with a Swarm

Having numerous drones per field can help manage the efficiency and work load and offers unique service offerings for companies looking to scout, spray or monitor fields.

After a lot of work with the U.S. Federal Aviation Administration, Rantizo has gained permits to operate legally with drone swarms in rural areas in the lower 48.

Agtegra Cooperative Launches Drone Program For Crop Monitoring

Agtegra is already offering a service with drones for their farm customers.

Funding for Agri-Drone Companies in a Time of Corona: Futurism or Folly?

According to AgFunder research, drone tech reached its funding peak five years ago, when investors committed $326 million to startups promising an agricultural future where skies were filled with super-agronomist drones, capable of mapping or spraying fields with unprecedented efficiency and precision.

The point from AgFunder reinforces that peak hype (“peak of inflated expectations” happened ~4-5 years ago and declined since. While I don’t think it was all coronavirus that drove the increased uptake (see quote further above from Drone Deploy), it still is propping up the interest and uptake, something that we shouldn’t see decline because of the decreased regulatory burdens and increased technology capabilities.

Related: Bringing 21st Century Technology To A 12,000-Year-Old Industry

UPL: Solving Ag Problems by Breaking the Ag Innovation Mold

I have covered corporate venture capital relatively regularly. And I talk about R&D from these organizations often as well. But what UPL is doing is slightly different.

Just recently we opened the doors to our new OpenAg Center in RTP, USA as part of our efforts to attract partnerships with promising start-ups to characterize and bring new technologies to market.

We’re working with innovative entrepreneurs and partners to rapidly onboard and evaluate new technologies. Working together, we’re breaking down traditional barriers and significantly speeding the process of getting new technologies tested, approved, and out in the field. Through this type of collaboration, we believe we can accelerate innovation and transformation.

UPL is offering resources to support start-ups, in almost a tech accelerator like fashion. This approach is somewhat unique among the crop protection manufacturers; some have partnered with accelerators, but building a facility to essentially cultivate their own is unique.

Most Recent Crop Protection Molecule Poster

150 Most Recent Crop Protection Active Ingredients

The breakout looks like this by molecule type:

The chart goes back to 2004, meaning since 2004 there has been a discovery of 150 new molecules. Many of these are in commercial use already too.

What came as surprise to me was how many of the discoveries came from non big 5 organizations. Mitsui, Nissan and even Sumitomo (who had 12) had a significant number of discoveries.

How did it break out by the top 5 crop protection manufacturers?

Bayer Cropscience (one includes a nematicide by Monsanto) clearly had significantly more molecules discovered in the time frame.

While absolute numbers are interesting; how these organizations end up packaging these in conjunction with their other molecules, biologicals, digital offerings and seed/traits will drive much success. With that, Bayer has been very transparent about their R&D and their road map. They have actually shared their R&D Pipeline and have discussed their 5-way herbicide tolerant traits that are raising questions among experts:

New Bayer-engineered seed raises questions among experts on the future of weed control

This compelling pipeline along with the show case that they are punching above their weight class in terms of molecules discovered indicates exciting years ahead for their portfolio and the solutions they’ll offer growers gloablly.

Big 5 companies breakdown by molecule segment:

There are a number of ways to analyze it, when looking at it from the last 5 years perspective the big 5 are all very close in terms of total molecules in the pipe.

A couple other points:

• FMC has 3 new herbicide molecules, 2 of which are new mode of actions that have a fit in North America.

• Corteva has 2 new fungicides with unique modes of action from the picolinamides fungicide family.

Why it is time to invest in AgTech in Brazil

I tend to reference stories and things occurring in Brazil in Upstream. While this article emphasizes why to invest in Brazil, it is a fascinating read just as an individual interested in agriculture. We are seeing significant expansion in Brazil from major agribusiness and have been the last number of years. There is lots of opportunities, and these opportunities are highlighted. They also highlight the challenges of agriculture in Brazil which gives a good perspective.

Cox and Bunge Back Growers Edge in $40m Series B Round

$40 million Series B round co-led by S2G Ventures, Skyline Global Partners, and Atlanta-based media and automotive giant Cox Enterprises.

Bunge Ventures, the VC arm of global agribusiness and food company Bunge, also joined the round – offering Johnston, Iowa-based Growers Edge a potential avenue into overseas expansion. 

Growers Edge is looking to offer risk mitigation tools that will help to increase the uptake of new technologies in agriculture, and potentially help serve ogrnizations with new business models.

Growers Edge is interesting in that partnerships with other agtech startups, seasoned manufacturers or ag retailers is really where their business will thrive.

We know companies like Bayer Cropscience and BASF with xarvio are looking to deliver outcome based pricing plus Syngenta is offering weather based parametric-like insurance in Australia and the USA - does it make sense for Corteva to look at Growers Edge?

New Zealand Farmer Breaks Wheat Yield World Record

Record breaking crops always pique my interest. Specifically, some of the numbers that revolve around hitting them.

The new world record is 257bu/ac!

The crop was in the ground for 305 days from April 2019 until February 2020 - showing the growing season dynamics that influence these record yields. The records, specifically in wheat, tend to move between the UK and New Zealand based on their climatic conditions.

How many nutrients are required to grow a crop this size?

Blue = pounds/ac. Green = grams/ac. This is referencing the Taurus Nutrient Uptake Chart.

Obviously, the farmer did not put down this many pounds of nutrients and factors in New Zealand influencing nutrient use efficiencies and needs would be different than North America, but this begins to give an idea of what sort of nutrient needs there are for a crop of this size.

When you think about crops of this nature it shows that utilizing specific products and tools to manage becomes a high priority. There were micro nutrients applied and phased feeding.

His latest success was a result of trying new cultivars, switching to liquid nitrogen and monitoring plant health more regularly.

How he managed and monitored plant health was not mentioned. With that said, it becomes an easy jump to think about what tools would be useful for achieving this sort of yield: regular NDVI analysis via drone or satellite, soil microbial analysis to identify how to maximize nutrient availability, biologicals to manage abiotic stress, insect alerts, real time sap analysis sensors just to name a few.

Large yields emphasizing the most efficient use of resources is what really intrigues me. This means a better chance at profitability for the farmer and highlights the ability to better manage resources. With technology coming down the pipe like N fixation, enhanced biostimulants and superior genetics, it’s easy to see a time when the needs of nutrients and overall inputs will decline on a per bushel of production basis - a signal of progress in crop production.

FMC Corporation Partners with Nutrien Ag Solutions to Deploy Arc™ Farm Intelligence Platform in the U.S.

This isn’t a surprising move from FMC. In the June 14th edition of Upstream I stated that we will see FMC move fast to cultivate partnerships with retailers so they can integrate and get this Arc technology to market.

FMC Corporation has partnered with Nutrien Ag Solutions on a pilot program to use the new FMC Arc™ farm intelligence platform. This platform delivers real-time pest mapping and predictive forecasts of diamondback moth populations in brassica crops to Nutrien Ag Solutions pest control advisors (PCAs) in the Salinas Valley of California. 

Nutrien as a partner makes sense. They have been vocal about aligning with suppliers, and have done so with the likes of xarvio already.

Other Ag Articles

Lindsay Corporation Acquires North American AgTech Company, Net Irrigate - PR Newswire

Companies Move Forward on Removing Weeds Selectively with Chemicals - FarmProgress

Bayer, Prospera Technologies to Develop Digital Solutions - Seed World

Building Blocks For Carbon Markets - AgPro

The One Person AgriFoodTech Can Never Have Enough of Is… - Walt Duflock on Medium

Mosaic Seeking Countervailing Duty Investigations into Phosphate Fertilizer Imports from Morocco and Russia - World Fertilizer

COVID-19 pandemic: The Right Time to Go Online - Future Farm

Rabobank Expects Fertilizer Prices to Remain Low Over Next Six Months - World Fertilizer

Pivot Bio CEO Karsten Temme had a Vision to Create a Better Way to Feed the World - The Rising

Non-Ag Article

Keep Running! by Morgan Housel

Evolutionary biology has significant relation to business. I’ve long been enthralled by the Red Queen Effect and it’s application to business and strategy. Morgan Housel does a great job of bringing this relationship to life.

Competition isn’t like a football game that ends with a winner who can then take a break. It never stops. A species that gains an advantage over a competitor instantly incentivizes the competitor to improve. It’s an arms race.

Some advantages create new disadvantages. Most species tend to get bigger over time because big things are strong. But being big also makes you slow, clumsy, and unable to hide.

Evolution is the study of advantages. Van Valen’s idea is simply that there are no permanent advantages.

With this week being significant in North America for Holidays I hope all Canadians had a Happy Canada Day and hope all Americans are having a Happy Independence Day long weekend!

1st Half 2020 Reflection and Highlights

For 2020 I decided to make writing a more consistent habit for myself, through not only Upstream, but my blog at www.shaneagronomy.com.

Through the first 6 months of 2020 I have written 25 Editions of Upstream, 17 blogs, numerous tweets and tweet storms plus 3 YouTube video’s.

Through this I have shared more than 100,000 written words.

In the above link, that is a rolled up tweet storm, I highlight the 3 most popular Upstream Editions, 3 most popular blogs, 3 key learnings through the first half of 2020 and share a goal for the second half of 2020.

Study Calls for Increased Investment in Biologicals in Agriculture

This article argues we need more investment in the biological space. I’d suggest there is plenty of investment currently - whether we are talking start-ups or whether we are talking investment from major manufacturers, or even joint ventures.

While there is significant opportunity in the future for farms and agribusinesses, I do think we are seeing plenty of investment in the space.

In fact if you look at 2 of the LARGEST agtech unicorns by valuation in Gingko Bioworks and Indigo Ag, they involve a biological component to their business!

Not to mention the organizations like PivotBio (amongst many others) investing in solving one of the “holy grails” of the agtech industry, N fixing microbes for all crops.

Here is an expected market growth study in the space for reference (~13% CAGR for next 5 years).

Even the large manufacturers like Bayer Cropscience are emphasizing it with joint ventures and R&D investment and others like BASF and FMC doing the same, plus deploying the venture arms of their business into the sector.

Even indirect investment can benefit the biological space - such as the story below emphasizing computing to deliver advanced efficiencies in the biological space.

Accelerating Innovation of Formulation Engineering Technology through Digital Technologies

Unsurprisingly, BASF is using digital technologies to enhance their formulation expertise:

The intensified use of digital technologies is one of BASF's guiding principles in strengthening our leading position in chemistry-based innovations. Since the start-up of our supercomputer 'QURIOSITY'  mid 2017 numerous contributions from scientific and data driven modeling and simulation of formerly unthinkable complexity had a strong impact on chemical product development including formulation engineering, for example:

Quantum chemical modeling of surfactant and polymer mediated interfacial stabilization provide valuable input for the design of formulation compositions to achieve optimized performance in the application.

Modeling solvency of active ingredients and dispersibility of hydrophobic particles and liquids in water helps to predict new polymer structures with improved formulation performance and was successfully used already in the development of complex formulations.

With active ingredient discovery increasing in cost and time to market increasing:

Source

Plus adding in the complexity of biological formulation, the stakes for effective discovery, formulation and high level efficacy have never been higher.

The crop protection manufacturers that are successfully utilizing super computers, AI, and even quantum computing (like what’s happening in pharmaceuticals) have significant potential to manage their pipeline/discovery, future launches, costs, product performance and longevity of their product line.

Related: FMC: Strengthening the Application of Automation Control and Artificial Intelligence in Formulation Development and Engineering

CommoditAg Adds New Suppliers Stoller USA and Northview Family Farms to Expand its Extensive Product Line

I’ve been waiting for news like this. The focus has been around agriculture marketplaces like CommoditAg to partner with existing ag retails, but there is an inherent opportunity for manufacturers to participate in marketplaces directly just like in consumer goods, building a more direct relationship with the farm customer.

For manufacturers in ag, the challenge is always distribution.

If you want to watch something of interest, here is a video of a presentation and Q&A from Nutrien Ag Solutions CEO Mike Frank where he talks about their initiatives to cut down on suppliers, cutting out 195 in the last year and focusing on strategic suppliers and their own proprietary products. Nutrien is the biggest retailer out there..aka biggest gateway to the farmer for crop inputs. Other retails are constantly looking to do the same to manage inventories, SKU’s, streamlining of staff training etc.

What this means is more product manufacturers are going to be looking for a route to the farm customer.

Secondary to distribution, for manufacturers like Stoller (a nutrition and biostimulant based organization, but beyond them too), a challenge is obtaining relevant data and customer insights about the customers that do purchase their products when they do receive distribution.

CommoditAg and other market places can help alleviate both of these pain points.

This partnership will help alleviate both of these issues for Stoller specifically, plus gain access to customers they wouldn’t have had access to before - whether due to a retailer opting to support one of their competitors in a given geography instead, or because the economics of a representative in the area to drive demand haven’t penciled out previously.

There is a natural fit for organizations with unique product line ups like Stoller to align with organizations like CommoditAg, however, does it make sense in the near term for CommoditAg bring on numerous organizations of this nature before bringing on larger chemistry and seed based organizations?

Future Partnerships

While seemingly unrelated, another start-up - AGvisorPRO ties into this as well, not in the sense that they deliver input products, but because the avenues that manufacturers are gaining for a direct relationship with the farm customer was almost zero from a digital technology perspective 3 years ago, to now having numerous avenues.

An interesting progression for a group like AGvisorPRO would be to look at partnerships with organizations like CommoditAg - this may be further down the line for both organizations (I’m jumping the gun on new marketplace businesses that are simply attempting to build out their users and network effects here), but when it comes to experts making agronomic recommendations on a service like AGvisorPRO to farmers seeking advice, the farmer naturally ends up with some friction - after hanging up the call, they now need to phone their sales representative to purchase this. Friction means opportunity. If there was the ability to obtain an answer and streamline that directly into an order through the marketplace, that can be valuable for all parties.

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Why AgTech Might Be the Tail That Wags the Agriculture GDP Dog

“How big is the AgTech opportunity? It’s huge because the 3 biggest problems — labor, food safety, and water — all require a lot of innovation to either improve or replace existing solutions.”

Another great post from Walt Duflock going through the numbers in terms of opporutnity in agtech, specifically in California.

The logic laid out here by Walt is excellent - it has piqued my curiosity on the opportunity outside of California, in areas/crops I am more familiar with like the mid-west USA and western Canada.

ASEAN 2020 AgriFoodTech Investment Report

AgFunder has been doing a great job of building upon their often referenced AgriFoodTech Report and breaking out specifics by geography or segment. This is their recently released South East Asia Report.

A total of $423 million was invested in startups innovating across Southeast Asia's food and agriculture segments in 2019. While that may seem low compared to more matrue markets like the US and Europe, it represents a 400% increase since 2014. And this year is set to surpass that with investment already estimated at around $350 million in the first half of 2020.

They just mentioned they will be producing a 2020 Mid-Year Report as well, which I’m sure will present some interesting insights when published.

2020 Precision Ag Dealership Survey: Moving the Needle on Decision Agriculture

I often discuss services in ag retail and technology in ag retail. This survey provides interesting insights into the growth of these areas of business for ag retails in the USA.

After a decade where approximately half of dealers were offering grid and zone soil sampling, this increased to 67% of dealers offering in 2015, to 82% in 2017, 90% in 2019, and now at 92% (Figure 1).  Dealers offering satellite imagery, a possible foundation for creating management zones or guiding site-specific decisions, increased from 48% in 2015 to 59% in 2017, 70% last year, and leveling out at 69% in 2020.

There was growth in primarily every area and while part of it is due to more comfort, education and emphasis around these technologies in the last number of years, the biggest jump in my opinion has come due to the new technology itself being easier to use, more effective and delivering a better experience and ROI. This is in regards to satellite imagery being more frequent and higher resolution, drones becoming more reliable, seeder/planter technology and even ease of deployment of prescriptions for variable rate applications.

Being able to benchmark and aggregate data to deliver meaningful improvements for decisions is beneficial for farmer. This is now being done at a higher level among retails to support their farm customers now:

The biggest news last year was the remarkable uptick in crop management decisions from pooled data, and for the most part this uptick held in 2020. We asked dealers to gauge the influence of data shared among farmers on crop management decisions (Figure 4). Pooled data is aggregated from multiple farms, either managed within the dealership or as part of an outside offering.

The projection for growth in the coming 3 years is encouraging as well.

I think what I found discouraging, although I could not determine the exact levels, was that there are still dealers that “do not know” whether they are breaking even or making a profit on some of their services:

When dealers were asked about profitability of the services they offer, precision soil sampling and VRT fertilizer applications stood out positively from the others (Figure 5), where 85% to 88% of dealers, respectively, indicated a profit or break-even. Notable on the unprofitable side were dealers who offer UAV services, where three-fourths of those with a UAV indicated they were not breaking even or didn’t know, even more negative than recent surveys, and for satellite/aerial imagery where half were not breaking even or didn’t know.

The lack of profitability could be a number of reasons, but I do think some of it could be due to a lack of strategic bundling and service approaches by retails. “Imagery” in and of itself is only so valuable. It is how gets integrated into other services, like VR fungicides, PGR’s or desiccants, or how it is leveraged to support other services such as variable rate fertility just as a couple examples.

Three-Way Partnership to Scale Verification of Sustainability Practices

Remote sensing and verification of sustainability or carbon sequestration comes with many challenges. There has been research to identify the viability of this sort of initiative for cover crops and residue levels:

Mapping Conservation Practices and Outcomes in the Corn Belt

TerrAvion, FluroSat and Sustainable Environmental Consultants have worked to change this:

When combining the Terravion and Sentinel imagery, and making use of all available remote sensing bands (RGB, 3 Red Edge, NIR) the analysis revealed several classes of pixels detected in the image, which enabled training the algorithm for separation between the tillage types.

Closely related this is The Value of Monitoring Soil:

In their paper, Pete Smith and his colleagues are calling for a global soil MRV platform — one that includes benchmark demonstration sites on representative soils across the globe, in conjunction with models that can take the data from benchmark sites and project changes in soil carbon into the future. A global soil monitoring system of this scale will require international cooperation, capacity-building, and technology transfer, often from countries with ample resources to under-resourced countries. It will require collaboration and ambition that matches the scope of the climate change challenge.

The talk of monitoring carbon and producing sustainably (as dynamic as that term is) is growing every day. The exciting part is how technology can play a role in this to increase the execution, manage the workload in verification and enable there to be value for farmers and throughout the value chain.

Syngenta to Commit $2bn to Sustainable Ag by 2025 & Two Tech Breakthroughs Each Year

This announcement was initially made in October 2019. It seems it is just being rolled up into a new package within their “Good Growth Plan” and a more pointed “two technologies per year”.

Syngenta is pledging to invest $2 billion into sustainable agriculture by 2025 and to deliver two new technological breakthroughs to market each year, according to a company press release. 

As the article from AgFunder states, there is a lack of specifics around how Syngenta will drive “two breakthrough’s a year”.

Their Venture initiatives will surely be a component of this, along with their ~$1.3B in R&D expenditure annually.

I previously highlighted their venture portfolio:

Out of their 18 portfolio companies listed (not including their 2 exits in Blue River Technology or Marrone Bio nor their undisclosed investments) here are the categories their venture portfolio companies fall into:

8 include microbials, sustainable use technologies, pheromone technology, enzymes and essentially technology that would be considered bio based.

This shows that almost 45% of their disclosed investments are directly in technology that can influence sustainability - such as synthetic chemistry reduction, soil health etc.

6 include precision, data, software, aerial or financial analytics based organizations.

This number is actually seven now - as they have invested in Greeneye, an Israeli AI weed identifier that uses “see and spray” technology. That’s seven more companies that are adjacent/ancillary to the sustainable movement, using precision data and technology to more efficiently and effectively apply crop protection products, decreasing amounts used.

That means out of their 19 disclosed investments (not including their Blue River Technology and Marrone Bio exits, that also fall into this category), almost 80% fall into a category that influences “sustainability”.

Their ability to sit side by side, and learn from the innovators driving these new technologies positions them well to make a go of the two break throughs a year.

In their core business, Syngenta from a North American perspective has made some moves surrounding sustainability in their partnerships with Land’O Lakes Truterra platform as well as Cool Farm Tool integration with their Land.db platform.

One last quote from the release:

Syngenta commissioned a study with Ipsos MORI to assess large-scale farmers’ attitudes across the US, France, China, Brazil, India, and throughout Africa. According to its conclusions, 72% of survey respondents are worried about the impact that climate change will have on crop yields, animal health, and their ability to do business over the next five years. Fifty-nine percent believed reducing greenhouse gas emissions would make their farms more financially stable or competitive. 

I actually was surprised to see the numbers as high as they were in this, but find it positive that they were this high to at the very least be cognizant of what challenges may be coming at them.

Who Let the Data Out?

Last week I had a brief component on data. However, this week I read a very in depth piece on data, privacy and transparency in agriculture from Rhishi Pethe.

The piece provides great overview and context for where we are at and what needs to be considered moving forward when it comes to sharing data.

Rhishi conclusion is concise and simple to follow when it comes to data:

Follow the "golden DATA rule": Treat your customers' data the way you treat your data.

Keep it simple: Don't confuse your users with legal minutiae and a complicated user experience

Be honest and transparent: Say what you will do and do what you say.

Communicate and educate, educate, and communicate.

Post-Patent Agrochemicals Market has Enormous Growth Potential

High-quality post-patent products will stand out among the strategic tools available to the producer 

While this post is based upon Brazilian opinion, I think the same holds true for North American agriculture as well. Not just strategic for farmers, but ag retailers as well to better manage their portfolio of offerings - post patent active ingredients present unique opportunities to customize products specific for farm customers needs by geography, benefiting farmers as well as enabling a more dynamic product offering for the retailer.

If you look at the two largest retailers in the USA - Helena and Nutrien, they both have an emphasis toward their own post patent strategy and formulation facilities for crop protection through to nutrients.

If you look at this chart from the Nufarm 2019 annual report, it shows that the growth has been in off patent for numerous years now:

Tiny Weed-Killing Robots Could Make Pesticides Obsolete

This is a well written piece on weed control realities for farmers.

It overviews weed control and then gets into what could be, talking about electrifying weeds:

The Small Robot Company is a UK-based agricultural robotic startup that makes robots that electrically “zap” weed seedlings. It finalized a €2.1 million ($2.4 million) crowd-equity funding round, bringing its venture capital fund-raising up to €5 million to date.

There are also other companies out there looking to deliver this type of weed control, including CNH through their AgXtend offering.

A description of what occurs during this electrocution:

The electrical energy is targeting and destroying the chlorophyll as well as the water and nutrient system right down into the roots. The green leaf pigment or chlorophyll is torn out of the photosynthetic process and then carries on destroying itself because it can no longer emit the absorbed light energy. The current itself causes cells to burst and cell sap to seep into the intercellular spaces. The plant’s vascular bundles, its main arteries for water supply, are going to be destroyed beyond repair.

The article states that large ag manufacturers should be worried. I’m not entirely convinced yet that they should be on a large scale plus they are all watching, I am sure of that.

A few questions I have surrounding electrification of weeds:

• Getting down to the roots for the large established perennials and large rhizome weed species is something I’d like to see some data on personally.

• Effectiveness when there are 200+ one-leaf grass weeds that just emerged in a 2 foot square area, consistently throughout the field.

• Soil health is a prominent topic. How does a huge electric shock impact the microorganisms in the soil? In the short term and the long term?

I find the concept fascinating and there likely is a fit for this approach to move into farming in the future.

Worth noting on Small Robot Company is that they were one of the first agtech start-ups to leverage a crowd equity funding round.

Agro Insurance Trends

There is plenty of opportunity to enhance the insurance offered to farmers in all areas of the globe. One of the surest ways to deliver this is through digitalization.

Being able to effectively deliver

A representative from Munich Re was asked some questions around the future of crop insurance:

Dicamba: What Does the Research Say?

A research summary from Iowa around the realities of dicamba usage in the USA.

All of the aforementioned research supports that secondary movement (volatilization) is a significant contributor to dicamba movement from treated areas.  Combining this volatility with the extreme sensitivity of non-resistant soybean makes it essentially impossible to use current formulations of dicamba in a landscape where both resistant and susceptible soybean are grown without significant crop injury.

Other Ag Articles

2020 Formulation & Adjuvant Technology - AgroPages

Just-In-Time Soil Health - WSU

Proximity to Customers, Funders, Ag Leaders Make Iowa a Perfect Home, Say 3 Agtech Startup Founders - AgFunder

Azelis: Strengthening Innovation Through Formulation, Accelerating Expansion in Asia-Pacific - AgroPages

Corteva Agriscience Acquires Full Ownership of PhytoGen Seed Company, LLC Joint Venture - Corteva Investor Relations

Sask. Gov't Announces $4B Project to Double Irrigable Land - CBC

Taranis Partners with UPL in Brazil - News Release

BASF Digital Farming to Launch AI-Based Digital Crop Optimization Platform with Zen-noh in Japan - News Release

Non-Ag Article

Deloitte Survey Finds Digital Maturity Is Critical To Business Success

A deeper dive into the report’s insights shows that growth is particularly apparent at organizations whose digital strategies center on innovation and developing new models of business. In straightforward terms, those that don’t just use data and digital technology to do things differently – but also to do different things.

I am a big proponent not just of technology to increase production in agriculture, but utilizing technology and new capabilities to transform business models (and businesses), aligning incentives and achieving better outcomes.