Upstream Ag Insights - August 29th 2021

Essential news and analysis for agribusiness leaders

Aug 29, 2021

Welcome to the 82nd edition of Upstream Ag Insights!

Index for the week:

Indigo, Marketplaces and Grain Marketing Tech
Semios Acquires AgWorld
Corteva Announces Carbon Expansion and Partnership with Indigo
What It Will Take To Get More Women At The Agtech Table
InnerPlant Launch
Why Won’t Farmers Share Their Data?
AgVend Launches New BI and CRM Tools
The State of Play for Blockchain and Why ‘Tech Stacks’ Help Drive Adoption

Have a great week!

Indigo, Marketplaces and Grain Marketing Tech - Upstream Ag Insights

This past week a notable article was published in the Wall Street Journal highlighting some of the challenges, and the new moves ahead for Indigo:

How a Billion-Dollar Farm-Tech Startup Stumbled, Then Revamped

The article is good, showcasing challenges farmers have had with Indigo, and it got me thinking on a couple of areas of agriculture, specifically marketplaces in grain and the opportunities for technology to improve the grain marketing process.

I went through some of the dynamics of marketplaces, business model shifts by companies in grain marketplaces and opportunities in grain tech moving forward.

This week’s edition of Upstream Ag Insights is sponsored by AGI!

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Semios Acquires Agworld to Form Independent Global AgTech Powerhouse - The Globe and Mail

Semios, the leading precision-farming platform for permanent crops, announced today that it is acquiring Agworld, a leading data-driven farm management platform, to deliver even more benefits to growers around the globe. Together, Semios and Agworld will form one of the largest independent AgTech solutions providers in the world, servicing growers, agronomists and ag retailers in the US, Canada, Australia, New Zealand, Europe and South Africa.

This is a big deal in agtech! Not only was it huge monetarily speaking, but from a cannon-ball entry perspective of Semios into row crops. This was the 3rd acquisition of 2021 for Semios, a company with unicorn valuation status, who also acquired Altrac and Centricity earlier this year.

In the June 27th edition of Upstream Ag Insights I asked the question about what row crop companies could learn from Semios, a company with a high customer retention that generates operating profit, something that isn’t consistently seen in digital technology row crop companies, and whether Semios might get into row crops. Turns out, they see the opportunity.

The price paid for AgWorld? $100 million (CAD). AgWorld has raised over $20 million (USD) since 2010, with Syngenta Ventures being a notable participant in a couple of the rounds.

The annual revenue from AgWorld was $10 million, bringing the combined businesses revenue to between $65 and $75 million. For context, Farmers Edge revenue is expected to be ~$55 million in 2021.

AgWorld is one of the largest digital platforms out there, touching >100,000,000 acres globally, meaning Semios is now one of the largest independent platforms out there in row crop and permanent crops:

Note: This hasn’t been updated meaningfully since March 2021.

It appears Semios isn’t done acquiring either as CEO Dr. Michael Gilbert stated they are in more talks for further acquisitions and can access more than $100-million in fresh capital from investors – if needed, emphasizing accessing capital to acquire isn’t a problem.

Semios is looking to build out an even more robust platform. This brings up similarities to two other Canadian companies: TELUS Agriculture and AGI, both acquiring extensively to create a robust offering both upstream and even downstream in the value chain. The difference with Semios for one is the permanent crop emphasis (although TELUS has Agrian and will likely enter that realm further at some point too) but also their emphasis upstream in the value chain today.

Here are Semios’ core service offerings:

Climate Monitoring
Insect Pest Management
Disease Management
Frost Management
Water Management
Scouting
Reporting and Alerts
Plant Stress Monitoring

And through acquisitions of Altrac and Centricity they also can do automation and control along with compliance and work flow for the farmer.

AgWorld also adds planning, scouting, grower engagement, job creation, work flow management across row crops and precision agronomy tools.

All their capabilities and acquisitions to date have been focused on making the farmer more effective. So far, less emphasis further downstream although the upstream data supports any venture downstream later.

They have a strong offering in permanent crops at the farm, and a strong start in row crops. But I think we can anticipate acquisitions that enable them to participate downstream:

telematics capabilities (also, not downstream related, but in-cab experience in row crops is an area worth looking at)
supply chain management like Provision Analytics or FoodLogiQ
artificial intelligence and analytics capabilities to supercharge their insights

I mentioned earlier that Semios is unique in that they run an operating profit as a stand alone precision and digital ag business. To my knowledge, there aren’t many in row crops that can say the same. This has me wonder if Semios will look into another asset that can help add value to the row crop farmer and create a sticky revenue stream for themselves, a quote from a customer:

What you really need to do is integrate these things so there’s one dashboard that provides us with all the answers so we can use precision data to drive more of our operations

Once you have a “killer app” or strong product market fit, there is the ability to augment with other functionality which leads me to this acquisition opportunity:

insurtech assets

They already track “plant stress” and have climate and frost management, a parametric insurance offering could be a next step…after all, they would already have the data and this would provide another revenue stream.

Distraction or Scalable Opportunity?

While operating a successful permanent crop business with ample opportunity to expand acres across the globe it becomes a legitimate question to ask if row crops become a distraction taking away from their core business.

Row crops are not permanent crops and the core functionality that gained their business traction, an insect management technology that released pheromone mimicking product into the orchard to disrupt mating, is more challenging to scale in a larger row crop setting due to field/geography size, smaller dollar figures and inconsistency of insects to name a few reasons. However, this very well could be their novel in. No one has attempted integrated biology, let alone prophylactic biological systems like pheromone disruption, successfully into row crops with sensors/IoT or digital assets. And while Semios might not claim to be a “biological company”, their foundational insect product shows they have competence in it. Not to mention, their CEO has a PhD in organic chemistry and has a work history in chemistry manufacturing.

A strong value proposition has been more or less elusive to row crop digital ag companies, can Semios take their unique competency and integrate it successfully into row crops by augmenting AgWorld with a unique biological approach that ties outcomes with the digital service offering?

What has been apparent is that the strongest players in digital ag platforms have been the groups tied to physical products. Specifically John Deere and Climate Fieldview (will we see AGI progress meaningfully as well?). Farmers need the physical products and tying a digital system to those products has proven to be the strongest bundle in digital agriculture. These are high margin products that act as the key revenue stream for the companies (Bayer, JD) which can erode the value associated with paying for digital platforms when they are tied to those physical products.

After all, you can’t harvest your crop with bits, you need atoms.

A few weeks ago I asked the question:

Do digital businesses in ag need to be operated like John Deere or Bayer with Climate Fieldview, tied to physical products or tied to financial (and insurance) products? This goes into the discussion about where in the value chain the technology companies are targeting and “who” is paying their bills. Today, the farmer is being tapped into for the majority of their revenue.

Economics in permanent crops leave much more room for per acre fees than row crops. Might Semios identify a new offering and revenue model in row crops? Can the potential monetization of traceability and carbon provide a viable avenue as well?

What is sure is that Semios is going to continue to emphasize points like this:

A lot of our customers are more trusting of data that’s independent of chemical suppliers

They are banking on that very fact to win out above the major input manufacturing companies and their traditional revenue models.

What will benefit Semios is they will have massive amounts of data building across millions (2+ million) of sensors in permanent crops that could inform models from those acres to row crop acres, amplifying their ability to understand disease and insect pressure, plant stress, fertilizer use and become the go-to source for independent digital insights. This is a unique asset that none of their competitors have if that data is cross usable.

I talked previously about the arms race between TELUS, Proagrica and AgWorld in the realm of pure play agtech solutions. Semios now joins that race to enhance the AgWorld offering and push the envelope in permanent and row crops.

Corteva Announces Expansion of Corteva Carbon Initiative for 2022 Crop Year - Corteva

Corteva, Inc. (NYSE: CTVA) today announced the expansion of its Carbon Initiative for the 2022 crop year, supported by a strategic collaboration with Indigo Ag. Corteva's program continues to provide a simple path for farmers to maximize the value of their soil health practices, now by producing independently verified credits measured, generated and sold through Carbon by Indigo.

There are two parts to this announcement. The first being that Indigo has partnered with Corteva after announcing a similar endeavour with GROWMARK recently, showing that Indigo is focused on building partnerships to decrease farmer customer acquisition cost and lean into the MRV and carbon offset sale side of their carbon business. It also reinforces that Corteva has no desire to focus “down the carbon stack” and provide MRV or get directly into the sale of offsets. This can be visualized with the carbon layers image I had in Upstream a couple weeks ago (with some updates thanks to suggestions and more thoughts on it, which will continue to be evolved):

On many of the upper half of the layers Corteva has the assets, competency and capabilities to execute. As we move further down to MRV and selling of carbon offsets, that’s where Indigo comes in and enables this reach themselves or with their own partnerships and contracts (eg: they may have specific soil testing partners).

The next is the announcement of the specifics and expansion:

Aligned Incentives: Farmers will receive 75% of the credit value so as future prices rise, they capture the majority of the upside.

This is on the lower end of the take rate in the carbon world. For context, Farmers Edge has announced a 30% take rate.

Expansion of geography, look back, and crops/practices:

More States: The offering is available across 11 states including Illinois, Indiana, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota and Wisconsin.
Longer Lookback: Farmers will get paid on eligible practice changes that were conducted post harvest of 2020.

Thanks to the reach of Indigo, along with their emphasis on a consistent approach to MRV and soil testing, Corteva can scale their carbon business across a wider geography. Strategic collaboration enables organizations to go further with less and focus on what they do best, exactly what this partnership showcases.

A noteworthy aspect to me is “increased nitrogen use efficiency” as an eligible practice change:

More Practices and More Crops: Increased nitrogen use efficiency is an eligible practice change, in addition to introducing cover crops and reducing tillage. The Initiative also now supports 17 of the most common crop types across the U.S.

I highlighted this in my write-up of Corteva’s initial announcement as the next logical expansion in the future. This indicates to me an alignment across not just Granular and their carbon business, but the product team too.

Corteva has been in the nitrogen stabilizer business for years with their nitrapyrin based products to decrease losses of nitrogen fertilizers.

They have also been focused on biological N fixation product partnerships in 2021 as well! They announced a partnership with Symborg, who’s Blue N product, a foliar applied microbial product that enables plants to fix nitrogen. This creates flexibility in the when and how a farmer can take action to minimize N use and maximize N use efficiency. Not to mention, the potential of integrating a VR N application via Granular could align now too.

The addition of nitrogen to qualify makes participation a more natural entry point for farmers as it is a subtle evolution to their practices and has immediate agronomic benefits vs. and emphasis on longer term benefits. Immediate agronomic benefits are often overlooked in the carbon offset discussion and the immediate agronomic benefits from stabilizers and N fixing biologicals are hard to ignore for what this can do for interest and adoption.

I said it after the GROWMARK/Indigo partnership and we seen more with the announcement of the Regrow raise last week, partnerships in carbon surrounding MRV and sale execution will continue to expand as groups continue to learn about the opportunities as well as their own organizational shortcomings to overcome.

Whats going to be interesting to me moving forward are specifically which protocols see uptake. Which protocols have the combination of demand from carbon offset buyers and are verifiable and executable by farmers and groups like Corteva/Indigo will be interesting to watch. If offsets are worth less or harder to sell, that impacts profitability at the farmer and company level.

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What It Will Take To Get More Women At The Agtech Table - Worth

This was an insightful read with great insight from female leaders in agtech, including from my friend Sarah Nolet at Agthentic.

The topic of board diversity first resonated with me when I listened to Canadian agribusiness leader Art Froehlich speak in this video a few years ago about board based diversity which drove my curiosity to explore the topic, reading great articles like this one and this one (among others out there) to better understand the value diversity brings not just to boards, but all aspects of business.

InnerPlant Launches InnerCircle - a Farmer Collaborative - to Build the FBN of Seeds - WebWire

I highlighted InnerPlant in June when they closed their seed round, however I am guilty of not diving deeper into the company themselves. This announcement itself isn’t what intrigued me as much as the company technology and what they are doing with plant DNA.

Plants communicate with one another via hormone based signals and pulses indicating nutrient stress or insect pressure for example, such as through emitting molecules like jasmonate. However, farmers and agronomists cannot specifically detect these signals. Sensors can.

InnerPlant actually takes this to the next level by encoding specific signalling mapped within the plant and then leveraging sensors to understand that signal and make a suggestion to alleviate the stress or concern. From their website:

We code signaling capabilities into the DNA of crops to detect fungi, insects, nutrient deficiencies, and water stress within 24 hours of emergence – 2 weeks before any other technology. Our plants emit fluorescent signals – invisible to the naked eye – that can be detected from as far as satellites. Our platform captures the signals emitted by living sensors and enriches it with additional data, providing farmers with early and specific actionable recommendations.

For example, with disease there is a latency period where the hyphae from the spore are germinating and penetrating the plant. At this point a plants defense mechanism, systemic acquired response (SAR), begins firing. However, to the naked eye we may not see a disease lesion or visibility of stress for 2, 3 or even 5 days!

They have a tomato product, but are currently working on soybean and cotton.

As a tech geek, I am really intrigued by what this could inform assuming it works as stated. Couple that with my interest in business models and I am even more intrigued.

The realities of bringing a variety to market are challenging, but I find the concept of tightly bundling digital technology and sensors with a novel bag of seed itself to be a noteworthy model. We can see the looser association that Bayer brings with Dekalb seed and Climate Fieldview informing decisions; but Innerplant would actually differentiate the bag of seed and integrate a differentiated experience and route to better outcomes through the use of their digital technology with the bag of seed itself.

The announcement linked above about creating a group is a smart step for InnerPlant as it acts as an opportunity to test out their product and acquire more data to better inform their products.

Related: Future of Ag Podcast with Inari Ag, a fascinating company with a seed technology platform, incubated by the same company that has been a primary financier of Indigo Ag.

Related: The Future of Seed - Upstream Ag Insights

Why Won’t Farmers Share Their On Farm Data? - WS

This is a topic that I am passionate about. The understanding of data is something that has a continued opportunity within the industry, by professionals and farmers. In order to progress that understanding and use of data for better outcomes, there needs to be trust established.

FARMERS DON’T TRUST YOUR COMPANY
This is the bottom line when it comes to being willing to share on-farm data. There is a lack of trust between the farmer and agtech companies who at times may appear too eager to collect their on-farm input and production data through the tools they provide.

Being able to talk coherently about the value of data, how data will be used, why it benefits the farmer and what future opportunities will arise in a concise way for the farmer will help to establish trust. There is an opportunity to educate staff members at all layers of the organizations to be able to talk confidently and accurately about data usage. If you there isn’t that level of understanding in place, it is difficult to build a value added relationship with the customer surrounding digital technology and data.

I covered my opinion around the value of data in the November 22nd, 2020 Edition of Upstream Ag Insights.

From Data to Decisions: AgVend Launches New BI & CRM Tools - AgVend

AgVend, the leading provider of digital engagement software to serve the producer of tomorrow, announced today the addition of Business Intelligence (BI) and Customer Relationship Management (CRM) Sales Drivers to their Grower Portal platform. These new package options provide ag retailers access to the data needed to make strategic business and customer decisions in real-time.

I frequently talk about the ability of retailers to leverage data to inform their short term and long term decisions. This announcement from AgVend* excites me as an ag retail junkie because it delivers tools to empower staff at all levels of the retail. It helps provide the outline for seamless identification of opportunities to support farm customers as well as outlaying an enhanced understanding of specific customers and customer cohorts.

Just this week I was asked if CRM is still a relevant focus for agribusinesses. I think it’s a resounding yes and will grow in importance because it is a new data source if used correctly.

The ability for new aged, connected CRM’s to be used as a tool to quantify how interactions with a customer, or a customers interaction with your digital storefront, can help decipher cost to service, touch point ranges to loyalty and seamlessly identify product opportunities for that customer based on the integration with business intelligence. This aspect of CRM is often overlooked. It is truly 1st party data, a coveted type of data that retails can gain. CRM too often gets focused on as purely a staff turnover management tool, while true, that is limiting in my mind.

A CRM should have a focus on specific drop downs vs. only text boxes with the ability to input information consistently across staff and customers so that accessing specific numbers, averages or metrics is a seamless endeavour that informs business decisions and quantifies opportunities and relationships vs. gut feels. Think ability to export or visualize the data with consistency and assess total touches, total acres by crops, percent of customers with John Deere combines and the list goes on, rather than reading a text box that can’t be quantified and integrated with other data sets. These text boxes are beneficial for staff turn over, but less immediate benefits to the entirety of the organization. After all, if you are going to implement a CRM initiative it should be beneficial day in and day out.

In my overview of Nutrien’s 2020 Annual Report I dove into progressing from an analog retail business to a digitally enabled retail business:

On a basic level you have 3 levels of digitization for retail businesses:
Level 1 - Precision and digital agronomy offerings
Level 2 - Digital as online hub, e-commerce, marketing, programs and staff efficiency
Level 3 - Digital systems as an organizational foundation.

A connected CRM and business intelligence system progresses the organization towards a digitally enabled and connected organization that is better set up to not only support customers, but inform decisions, make staff more efficient and identify how actions are tied to outcomes. This isn’t negating physical for digital, this is about becoming ambidextrous.

I am excited for the future of ag retail because of product launches like this. Organizations with better business intelligence and a culture that embraces decision making via insightful data are the ones that will have an outsized advantage in the coming years in the marketplace and in moving relationships ahead with suppliers.

*Disclosure: I am an advisor to AgVend

Raven Industries 2Q 2022 Applied Technologies Revenues Increase 26% - Precision Farming

Net sales for Applied Technology in the second quarter of fiscal 2022 were $44.6 million, increasing $9.1 million or 25.6% vs. the second quarter of the prior year. Demand across the division's product portfolio remained very strong in the second quarter as favorable ag market conditions continued. These market conditions, combined with the division's industry-leading technology portfolio, led to year-over-year revenue growth in both the OEM and aftermarket channels.

Last week I put out a summary of highlights from some of the largest publicly traded ag manufacturing companies. Raven’s newest quarter hadn’t been released yet, but came out this week with notable results.

A notable comment was the investment amount into autonomy:

Included in the results was investment in research and development and selling expenses to advance Raven Autonomy of $5.2 million on a pre-tax basis, an increase of $1.2 million vs. the prior year.

The emphasis continues to grow on pushing the realities of autonomy ahead. With John Deere furthering their push into autonomy and CNHI acquiring Raven, the major question in my mind is what will this quarterly spend ramp up to once the Raven acquisition is complete and they are an entirely owned entity of CNHI?

For more on autonomy I touched on Raven Autonomy in the August 8th 2021 Edition of Upstream Ag Insights along with the changing dynamics surrounding jobs, responsibilities, tasks and actions in agronomy and on the farm. Rhishi Pethe of Software is Feeding the World brought a great frame to this same topic a couple weeks ago called The Unbundling of Humans (in Agriculture).

The State of Play for Blockchain and Why ‘Tech Stacks’ Help Drive Adoption - Evoke Ag

I thought this was a well done article on blockchain and tech stacks.

What I most wanted to highlight was this great quote from AgriDigital CEO and co-founder Emma Weston:

I have put away my crystal ball in terms of making pronouncements about where blockchain will be in five, ten, fifteen years and my focus now is on what can we do with the broad range of digital technologies to solve real problems today. At the end of the day that’s what it’s about, it’s not about the technology, it’s about making supply chains more efficient and less risky (emphasis mine)

This is an under appreciated take. It is about understanding the problem and then finding the technology that is available to solve that problem today. Not about the technology and attempting to solve a problem.

That’s a recipe to be putting square pegs in round holes.

This was emphasized in a panel I was on a few weeks ago, and summarized in this article, Farmers Are Not Guinea Pigs.

5 steps I often think about in this regard that help from YCombinator:

Identify the problem (this has an entire process)
Assess the intensity of the problem
Identify the frequency of the problem
Assess the willingness to pay to alleviate the problem
Assess the addressable market that has the problem

Sometimes the problem isn’t specific to the farmer themselves, but greater macro considerations like environmental protection for example.

How CommoditAg Will Help Build Out The Digital Ecosystem For Farmers Edge - The Scoop

For my take on the rationale behind the Farmers Edge* acquisition of CommoditAg, I covered it two weeks ago here.

*Disclosure: I was employed by Farmers Edge in 2019 and 2020.

Non Ag Article

Why Is It So Hard to Be Rational? - The New Yorker

I have long found myself focused on improving my rationality, much like the writer of the linked article, I have dove deep into cognitive biases, human psychology and sites/blogs focused on the improvement of rationality, or better stated as the gradual removal of irrationality from decision making processes (an often fruitless endeavour as the article allude to - emotions and biases are challenging to kick).

This author did an exceptional job exploring the advantages, challenges, gaps and realities of searching for rational behaviour.

The realities of rationality are humbling. Know things; want things; use what you know to get what you want. It sounds like a simple formula. But, in truth, it maps out a series of escalating challenges. In search of facts, we must make do with probabilities. Unable to know it all for ourselves, we must rely on others who care enough to know. We must act while we are still uncertain, and we must act in time—sometimes individually, but often together. For all this to happen, rationality is necessary, but not sufficient.

Upstream Ag Insights