Upstream Ag Insights - February 28th 2021
Essential news and analysis for agribusiness leaders
Welcome back to Upstream Ag Insights!
This week was overflowing with exciting agribusiness news! For the 203 new subscribers this week, this is a great edition to be getting into Upstream!
Index for the week:
Upstream Ag Insights Sunday EXCLUSIVE: Farmers Business Network Entering the Horticulture Market
Q4 2020 Financial Results of Crop Input Manufacturers
2020 AgFunder AgriFoodTech Report
Deveron Acquires Farm Dog
FluroSat Acquires Dagan to Becomes Regrow + Making Soil Carbon a Commodity
Farmers Edge IPO Prices
Partnerships and Acquisitions at the Intersection of Agronomy and E-Commerce
Anuvia Raises $103M
Climate Corp Announces New Leader
Upstream Ag Insights Sunday EXCLUSIVE: Farmers Business Network Entering the Horticulture Market
FBN has been one of the most talked about organizations in agriculture. I don’t traditionally highlight the horticulture market, but when I heard about FBN purchasing Professional Ag Distribution (ProAg) out of British Columbia, I wanted to dig in a little more.
ProAg is a manufacturer of specialty fertilizer plus distributor and retailer of fertilizers and pesticides that sells into the BC horticulture market. Fully integrated, which isn’t typical. When I looked at their website I found out they have some strong technology and an agronomic focus:
We manufacture many different types of fertilizers such as: Phosphites, Silicates, Molecular ionization (nano fertilizers), Acetates, Sulphates, and NPK Blends.
For our wide variety of crops in Canada, we’re always working to understand the different markets and where these products fit. We have the resources to market these products into their specific markets across Canada. We also provide field application demonstrations, research trials, trade show support, and technical training seminars.
This understanding of the market is key for FBN to ease into a new space; horticulture is a different beast than field crops. Plus gives them physical assets to leverage.
But what’s more is that a strong agronomic focus and understanding fits nicely in with another important aspect of FBN’s business - sustainability and carbon.
For example, in creating fertilizer products with molecular ionization technology they can ensure nutrients get into the plant better with these foliar fertilizer products and create informed, staged nutrition approaches that are aligned with some of the carbon initiatives. I am not a horticulture expert, but I have about a year of experience in that market and one interesting aspects is the use of specialty products at strategic times, based on plant physiology, to influence things like brix (sugar) for quality and taste. A place for the FBN data platform to come in handy.
Just this week FBN announced Gradable Carbon and I think that announcement goes hand in hand with this acquisition in the future.
When I spoke to Tom Staples, President of FBN Direct to confirm, he made two comments to me about why he thinks this is a good move for FBN:
Tom used the term “Platform Thinking” - This technology being acquired not only gives them access to the British Columbia horticulture market, but can be used to improve their field crop products for the rest of North America, and even into Australia.
There is no one like FBN participating in the horticulture market - One of FBN’s goals is to support farmers through low cost crop inputs to farmers. There hasn’t been anyone attempting this in the horticulture market. This would also give them access to the Ontario specialty market and even the growing greenhouse market.
I think his comments make sense and I think there is more to this:
Expansion into the Pacific Northwest and California. This may not happen right away, but they currently do not touch the MASSIVE $50 Billion California agriculture market. It’s smarter to start in the smaller Canadian (and likely less expensive to get in) market and then evolve that into California.
California also has a big focus on sustainability and water use efficiency. FBN can leverage Gradable in this market moving ahead.
This acquisition gives FBN a field crop line up, animal nutrition offering and now a horticulture line up. Basically, if you farm, ranch or make wine - FBN can touch that customer. That gives FBN access to something else that feeds their flywheel: data. FBN has the potential to understand food production in depth across all types of crops. In the context of traceability, carbon and other consumer demands, they are positioning themselves well.
This acquisition is compelling for the reasons above. With the raise of $250m in late 2020, I am certain this won’t be the last announcement from them this year.
AgFunder 2021 AgriFoodTech Investment Report - Upstream Ag Insights Highlights from AgFunder
This is one of my favourite reports each year. It provides great insight into what is going on in the world of AgriFood Tech.
You can find the landing page to download the report from AgFunder here.
What’s linked in the heading is an Upstream article where I highlight some of my favourite take aways, quotes, images and share some of my thoughts.
Related: 2020 AgTech M&A Annual Review - Verdant
Q4 2020 Financial Results of Crop Input Manufacturers - Upstream Ag Insights
Highlights from the financial results in Q4 from major fertilizer and seed/crop protection manufacturers, such as Nutrien, Mosaic, UPL, FMC and Corteva.
This isn’t as in depth as I would typically do, but covers some of the financial highlights for those interested. Over the coming weeks I will be diving into the 2020 annual reports of each of these companies as well where there will be more strategic analysis. Stay tuned for this in Upstream.
Deveron Acquires Farm Dog, An Award Winning Data Platform - Newsfile Corp
Deveron started as a drone company, moved to a data acquisition and analysis company, then acquired boots on the ground agronomy consulting businesses and now has acquired Farm Dog, a farm management software.
Farm Dog has focused on simplicity and being a way for farmers to manage their data via their cellular device without all of the complexity that some platforms come with. They have approx 2,000,000 acres using their software.
This is beneficial for both sides, where you have Deveron who doesn't have a platform for their aforementioned customers or agronomists, but does have API’s for the data they have. This helps give their customers a place to access their information no matter what once it gets integrated, but also powers FarmDog with various data and soil layer capabilities that they didn’t have before. Last week I talked about digital portals, this can be considered a portal in the context of Deveron customers.
Deveron raised private placement funds north of $5,000,000 in December and this has been their first acquisition since - the amount paid for Farm Dog was $1,000,000 USD.
In the July 12th Edition of Upstream I mentioned private equity in agtech and how it hasn’t played much in agriculture and while Deveron is operationally focused they are acquiring strategic companies that are ancillary to other areas of their business, that roll up and add dollars to their P&L, but are also synergistic to the overall business.
If you look at where they are located, they have currently bought businesses in the mid-west USA, Texas and eastern Canada. To me this show opportunity for expansion to western Canada soon, similar to how they have in other geographies. They have a foundational product offering, yet their YTD Q3 ‘20 revenue was just $1,628,405 CAD. Lots of room for growth. Their big focus next I think will be further boots on the ground, acre acquisition of agronomy companies like they have been doing.
Crop science company FluroSat and soil health startup Dagan have combined forces to launch Regrow, a new San Fransisco-based business focused on providing “resilient agriculture” solutions.
This is a compelling acquisition, one that could be a major player in the future of the carbon space and agronomy software management space.
Today accurately and cost effectively measuring soil carbon is a challenge. One of the outcomes of this acquisition is a company that can more accurately model soil carbon levels based on practices and agronomic decisions.
Flurosat has a strong understanding of what is going on above ground with crop stage, tillage practices, or yield thanks to their models and satellite utilization, where as Dagan uses a DNDC model to understand carbon sequestration. Both in singulation are good, but imperfect. Both used in unison, while still imperfect, gets closer to the truth.
This creates an interesting play in being the go-to carbon measurement tool and infrastructure in the industry. There are other organizations that are looking at doing so, but between the Flurosat agronomy and crop production tools in combination it can be powerful. Having tools for agronomists and farmer in understanding agronomics, plus for better understanding soil carbon creates a company worth watching.
FluroSat has API’s with numerous of the large ag tech platforms out there, from AgWorld to Climate Fieldview to Proagrica and so they have the relationship to take their carbon measuring infrastructure to all of these companies in the future - their business isn’t going farm to farm, but doing the behind the scenes work for companies like TruTerra or Yara for example in supporting their carbon initiatives.
Worth reading the below article to learn more on the measurement and verification of carbon.
Making soil carbon a commodity: How technology can redesign carbon markets based on rewards and outcomes - AgThentic
When it comes to understanding the dynamics of carbon market places and how it will play out for farmers and industry, Matt Pryor from the AgThentic Group has one of the best grasps on the space out of anyone I’ve ever talked to. This article is one that is worth reading for every one.
Exactly how we create soil carbon commodity markets that function efficiently to draw down carbon and achieve environmental impact is still being determined. One thing is clear, though: technology will play a critical role in creating both more opportunities to incentivize and reward farm-level practice change, as well as more avenues for startups to provide compelling solutions to help scale markets.
A debate I hear constantly is between offsetting and insetting:
Right now, farmers have two choices for how they get involved in carbon markets: offsetting programs that formally quantify the carbon that farmers sequester, usually in vegetation or in soil, and supply in the form of tradable credits; and insetting programs where farmers participate in supply-chain initiatives led by downstream partners (e.g., food companies) who are working to reduce emissions along the entire supply chain
Does it make sense to associate the carbon as an offset tied back to the land, or have it inset with the particular commodity? There is sound logic for both approaches.
Two very important points from Matt’s article:
There needs to be independent and accredited verification through recognized methodologies with conservative assumptions, and the carbon credits need to be unique and traceable (ie. to eliminate double-counting). There also needs to be permanence, such that once the soil carbon has been stored, ideally, the impact cannot be reversed.
We cannot focus on quantification and verification methods that favor absolute accuracy over the cost of implementation, as they can dramatically reduce the level of participation.
Perfect is the enemy of good. There is something to be said about starting and iterating.
This is where the Dagan and Flurosat formation of Regrow is of major interest in my opinion. If you have confidence in the measurement, that moves the needle on what can be done in terms of implementing carbon credit initiatives.
Fairfax Financial Holdings Backed Farmers Edge Prices $125M IPO - Private Capital Journal
Farmers Edge will issue 7,353,000 common shares at a price of $17.00 per share for gross proceeds of $125,001,000, or $143,751,150 if the over-allotment option is exercised in full.
This was in the highest range of expectation that they were looking for + over subscribed meaning demand is big for shares. This puts the valuation closer to $700 million CAD.
For more analysis on their initial prospectus, see my write up here.
Does this indicate others in the space may accelerate their timelines to go public?
I think it will.
Even if looking at a company like Semios ( a company like Farmers Edge for horticulture and high value crops) who just posted their CFO position to include these desires:
Both public and private company experience.
Experience with an IPO.
Experience in companies with revenue in the $50M-$200M range
They were apart of a group I mentioned in my 2021 Outlook for potential candidates to go public in 2021, along with Farmers Edge.
Given what I mentioned in my prospectus highlights: markets are buzzing with capital, there is a tech company FOMO occurring, TELUS has raised the interest in ag tech in Canada and the agtech space isn’t necessarily well understood by investors to assume otherwise, so this pricing isn’t surprising.
What’s interesting to me too, is what sort of interest will there be in another Canadian AgTech company that’s publicly available mentioned earlier, Deveron (TSX.V: FARM) and how their market cap could jump given the interest in this IPO*.
*Not investment advice
Three Seconds to Glory | How to Keep Customer Attention - WS Marketing
This article was of interest to me because of something I have noticed:
Agriculture companies using digital advertising more significantly the last few months.
Social media has been packed with companies using digital ads to get in front of farmers as of late. Large and small companies, from equipment to tech to input manufacturers to retails. Almost a year of no trade shows, minimal in-person visits and a desire for growth…it’s not surprising.
But ads still need a strategy.
When it comes to mobile users, attention is an even harder target. The average person touches their phone more than 2,000 times a day, rapid-fire interactions that often end as quickly as they begin. They’re not willing to wait around for pages to load or to spend too much time searching for the answer they’re looking for. More than half of mobile users will leave a website that takes more than three seconds to load.
This is important for ads and I touch on e-commerce in the next section and I think it’s important to consider there as well.
A must have:
Value-added user experiences. When we ask for the audience’s time, we must offer something in return. Whether it’s an interactive, informative content piece, or an exclusive white paper serving as a lead magnet, brands must create an experience that adds value for the user.
This is not only true for ads, but tweets, Linkedin posts and everything else. Are you sharing something of interest to people? Is it relevant? Is it differentiated? That’s what gets peoples attention, builds brand and incentives action.
Someone I have a ton of respect for is Nick Horob, founder of Harvest Profit (recently acquired by John Deere) and he in my opinion does an exceptional job of creating value and providing unique insight. Many ads and social media posts are unremarkable. When Nick posts, he provides an unfiltered look into his company, their product, or his unique world view. Sometimes it’s giving away tools and knowledge that is actually competitive to his product! There is something novel every time.
This recent post from him (located here) is a prime example.
My biggest take away from the article?
In a battle for customer attention; focus on page load times, targeted messaging, multi-channel campaigns, UX and always optimize.
The largest online agribusiness market in Latin America, Agrofy, and BASF's brand of digital solutions for agriculture, xarvio, have signed an alliance that will serve to enhance the offer of services and products that both companies provide to agricultural producers.
This article is actually in spanish, but thanks to my friends at Google Translate I was able to interpret this announcement from the southern hemisphere.
I have previously laid out a visual of the buying process for farmers in crop inputs and when you breakdown the process of a purchase journey or a problem needing to be solved, it gives you inklings as to where there are opportunities, pain points and where friction lies.
The “trigger” is where we see a pain point, or challenge popping up, such as an insect eating a farmers crop. Next we need to identify what that insect is. Then we need to learn what it is, the threshold level, and how to eliminate it, then there is a need to purchase.
xarvio alone comes in at the “identify” stage, but Agrofy, an online marketplace doesn’t necessarily come in until later in the learning stage or the actually buying stage.
This means friction.
This agreement will serve to streamline and simplify decision-making in the field, by allowing that at the same time that a producer or an advisor detects a problem that affects crops, such as weeds, pests or diseases; they can also quote and eventually buy the input they need to solve it
In the August 23rd, 2020 Edition of Upstream I talked about this. This is a natural progression for both of these organizations to integrate and mitigate the friction for the farmer in the process.
When connecting with Agrofy, the producer who is using Xarvio ™ Scouting directly will have a button that takes him to the e-commerce platform of the field, to be able to quote the product he needs and also purchase it, provided that the price and method payment are of your convenience.
This integration in my mind still misses part of the learning phase. Which means there will be further integrations/partnerships with other parties, or development between one or both of these platforms.
They also note this:
As part of the agreement, in addition, producers that use Agrofy will have the possibility of downloading not only Xarvio ™ Scouting, but also the new tool that adds more features: xarvio ™ Field Manager.
The xarvio scout > e-commerce transaction is great, but I liked the nod in here for Field Manager too. Want to simplify things for farm customers? Have an integration where their purchases automatically populate into their farm management tool including rates and pricing, which is part of Field Manager functionality. Now you’ve made a manual product much less manual for the farmer plus much more accurate.
I stated this in the August edition highlighted earlier:
Agronomy, digital/precision tools and e-commerce in ag inputs will inevitably intersect and we will see it in North America eventually too.
While e-commerce will look slightly different on other continents, I stand behind the statement above and I think we will see this happen sooner rather than later in North America too.
What this intersects with next? FinTech and InsurTech. Ease of access to financing and mitigation of risk are all tied into the purchasing journey.
BASF also announced another compelling partnership this week: Farmers to Access More Precise Weather Forecasts Via BASF, Salient Predictions Agreement
Long range forecasts can enable a better modelling of disease development or insect infestation. This can also be extremely useful to integrate into a vertical e-commerce stack for new, proactive business models or just to better anticipate farmer needs.
Dehaat Acquires B2b Software Company - Your Story
Agritech startup DeHaat on Tuesday announced the acquisition of B2B SaaS platform FarmGuide. The latest move comes after a month after DeHaat raised Series C funding of $30 million. As part of the acquisition, FarmGuide's spatial technology and data science will be integrated with DeHaat's existing platform to build a full-stack platform for agribusiness. The founding team of FarmGuide will also now be a part of DeHaat, and the core database and tech platform will be integrated with DeHaat's full-stack technology, said a statement released by the company.
Directly related to the above xarvio and Agrofy announcement is this story from India.
Without getting deep into it, this is a smart move for Dehaat for several reasons, similar to above plus:
Creates a stickier product experience
Identifies problems earlier than an agronomist themselves might
Do not miss out on sales opportunities, or acts as a back stop at the very least
This is again tying in the agronomy to the purchase in a more tangible, value added way. Owning and vertically integrating this entire experience is a logical step for many of these e-commerce players.
Post this acquisition, DeHaat will provide more customised crop advisory services to farmers based on the tagged land parcels. Based on the advisory, farmers will receive other and existing bundle of agri value chain services like agri input, financial services and market linkage of farm produce in a sustainable way.
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Bio-Fertilizer Startup Anuvia raises $103m Series C to Expand its GHG-Reducing Crop Input - AgFunder News
Fertilizer is one of the most commonly used crop inputs around the world, but it comes with a heavy price tag in the form of environmental harm and detriments to soil health. Bio-fertilizer startup Anuvia is hoping to address this issue by giving farmers better yields while also reducing GHG emissions and sequestering carbon.
Anuvia has made major strides in breaking into the mainstream fertilizer world, with partnerships with Mosaic for distribution in the USA as well as ATP Nutrition in Canada. This is an impressive raise with the goal to expand production capabilities and get onto 20 million acres in the near future.
Anuvia’s bio-based fertilizer for agriculture, SymTRX, is a plug-and-play product that works with farmers’ existing equipment. It targets corn, soybeans, wheat, canola, sugar beans, and sugar beets. It claims to improve crop yield and boost farmer ROI up to five times.
Whether it’s Nitrogen, Phosphorous or Sulfur in their two products (14-24-0-10S or 17-1-0-20S) their technology helps to mitigate conversion of nitrogen to negatively charged nitrate and reduce losses, but also through enhanced microbial activity can work to increase phosphorous availability in the soil - meaning both N and P get into the plant more efficiently.
They have around ~16% of their homogenous granules as carbon from plant waste, which means that for every 100lbs of fertilizer applied, there is 16lbs of an organic material or carbon, added. The low analysis of this fertilizer means a farmer would typically be applying 100 lbs at a minimum across most crops in North America.
This organic technology is what helps to manage the availability of nutrients like Phosphorous; carbon acts as food for microbes which increases their activity and many beneficial microbes secrete/excrete acidic substances that can increase the availablility versus tie up in the soil. Phosphorous is important for root growth as well, which helps drives overall plant health, yield and ultimately through this, carbon sequestration.
Interestingly, it has a different effect on nitrogen:
The binding of nutrients to the Organic MaTRX slows the usual reactions of the nutrients with the soil environment. Then, when these organic matrices are adopted by the soil ecosystem, soil microbes begin to break them down. In turn, the chemical bonds in the Organic MaTRX are broken and nutrients are gradually released for plant uptake.
SymTRX utilizes the unique, natural binding mechanism of our Organic MaTRX to create a homogenous slow- release product without using polymers or synthetic coating technologies. After application, microbial activity slowly breaks down the Organic MaTRX.
One of the biggest issues with inefficient nitrogen use is that nitrous oxide is 300x more potent than carbon dioxide when in the earths atmosphere. Managing the nitrogen cycle ensures nitrogen remains available to the plant in forms palatable to crops and means less loss through leaching or various forms of gassing off.
Anuvia is really focusing on the carbon aspect of this in marketing and talking about the product and I imagine that catches a lot of attention, but it appears to me they have a really sound agronomic product as well, which is the best kind of lead into a carbon or sustainability discussion.
This also doesn’t require any change from farmers typical practices; in fact it’s very similar to other homogenous granules on the market from an analysis and handleability perspective and even spec basis (critical relative humidity, hardness etc). It’s no surprise to me a large player like Mosaic has picked this up and they are needing to raise capital to expand their manufacturing facility out.
One last comment worth noting is that it’s great Anuvia is openly sharing results and the science behind their products, something that we haven’t seen from other fertilizer based organizations that have been in the news raising as of late. This should be table stakes, but within the fertilizer and biostimulant space it is a constant battle. When an organization has sound technology they should do a great job of making it readily accessible.
Agtech Isn't New but What is New is the Speed of Change - Farm Online
I agree with the emphasis of this article, it’s true “agtech” has been around for centuries.
If you think about it, technology is defined as:
the application of scientific knowledge for practical purposes, especially in industry.
In 1837 John Deere began selling basic shovels, but the progression to where we are today was all “technology”.
The speed can be illustrated through Schumpeter’s Creative Destruction Cycle:
We can see that the waves are tightening and ramping up more rapidly. And this is likely to continue, because technology begets more technology.
As we get into cycles of artificial intelligence and CRISPR within ag, the speed at which technology will move and that we will need to adapt will continue to progress.
What does this mean for the industry? We need to be open to change, agile in decision making and looking at collaborative approaches.
Climate Corporation Announces New CEO
As CEO of Climate Corp Mike Stern announced his retirement this week, Climate announced their new Head, Jeremy Williams.
Non Ag Articles
Mental models have become increasingly useful for me personally and they seem to be especially popular among individuals within venture capital. I think what’s worth considering with this framework laid out by Rob Leclerc of AgFunder is that it is not only useful for VC’s, but individuals looking to prioritize the companies their business partners with as an additional example.
I’ve tended to think about product fit and potential in ag in this way:
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
But it’s incomplete in terms of how to think about companies and I haven’t been able to figure out how to improve the framework.
I think what Rob lays out is an additional layer on top of the above framework to help explain.
Especially when you look at the narcotic framework, gamification of various digital tools is something that seems to have an opportunity in specific areas of ag.
Other Ag Articles
WeedOut on the Future of Agriculture Podcast - Future of Agriculture Podcast
DTN Acquires Farm Market iD - WebWire
Growers Edge Partners with Mid-Kansas Co-op - Successful Farm