Upstream Ag Insights - January 30th 2022

Essential news and analysis for agribusiness leaders

Jan 30, 2022

Welcome to the 102nd edition of Upstream Ag Insights!

The index for for the week:

UPL Investor Presentation Highlights + New President & COO
2021 Global Food & Agribusiness Annual M&A Review
Carbon Forces A Y In the Road For Ag Retail
Precision Planting Enters Sprayer Technology Space
Precision Application of Biologicals
Digitally Native Agriculture + A tech enabled world with analog first mindsets
Kula Bio Closes $50m Series A to Develop Biofertilizer
FBN Brings Adjuvants to Market
Carbon Acre Context

Thanks for reading and for sharing!

There have been almost 500 new Upstream subscribers since the start of 2022! For those that may have missed it, the article that I have been getting a ton of feedback on has been on this article, highlighting channel dynamics in North America:

Influence Erosion in Ag Retail - Upstream Ag Insights

Upstream Ag Insights Video Edition

2021 UPL Investor Presentation Highlights - Upstream Ag Insights

Over the last few weeks I have been digging a bit more into some of the biological dynamics within agriculture.

According to UPL they are largest biological provider globally while being the #5 ag chem manufacturer by revenue, so I dove a bit more into their sustainability initiatives and biological businesses. Through this, I ended up going through a couple analyst presentations that I hadn’t covered before that touch on their business and strategy, so I thought I’d highlight some of my take aways, including:

Biological Revenue
New Revenue Models
“Differentiated and Sustainable” Solutions

UPL advances OpenAg 'Reimagining Sustainability' goal with appointment of Mike Frank as President and Chief Operating Officer UPL - PR Newswire

UPL, a leader in global food systems and sustainable agriculture technologies, announces today that it is appointing Mike Frank as President and Chief Operating Officer UPL Crop Protection. Mike brings deep industry knowledge and extraordinary 'end-to-end' expertise, gleaned from his years at Monsanto and most recently at Nutrien, where he served as Executive Vice President and CEO, Nutrien Ag Solutions.

2021 Global Food & Agribusiness Annual M&A Review - Verdant Partners

The *Verdant Partners put together a great overview of the 2021 year from an M&A perspective. It includes quick insights, easy to digest images and summaries from the staff and Verdant’s global advisory team on all different facets of agribusiness.

In the report I highlight the M&A trends in ag retail along with the carbon progress in ag retail.

*Disclosure: I am an advisor to Verdant Partners

Carbon Forces A Y In the Road For Ag Retail - The Daily Scoop

This is a really well done article with lots of good commentary from Winfield United President, Brett Bruggeman. Below are my highlights from the article.

We used to say it starts with seed—but it starts with soil. That’s the greater purpose. That’s the livelihood for the grower. If it doesn’t start with the soil, you’re missing a step

This has been a mantra of mine almost from the start of being a retail agronomist and readers will have seen the emphasis that everything starts with the soil come up dozens of times within Upstream, so I whole heartedly agree with Brett here. What stood out to me was the first line of Brett’s quote, as it is a key point that was a key part of what started my fascination with soil in circa 2012.

As a new agronomist, I knew fertility was important for influencing yield. The emphasis of most crop protection products is protecting yield whereas nutrition and fertility actively increases yield potential.

But what reinforced the soil to me was actually needing it as a crutch. Let me explain with some personal experience.

In ag retail there is a constant emphasis of starting with seed, like Brett’s line indicates. But what I learned in my first year as an agronomist, seed is commoditized (though I wouldn’t have thought of it as “commoditized” back then…more so just a pain in the ass to sell). Talking to farmers about a 3% increase in yield across a constrained number of basic parameters (standability, days to maturity, disease resistance etc) was really easy, meaning everyone could do it. Easy conversations meant challenges to differentiate in building relationships with farmers and adding value to their business. Difficulty differentiating means tightening margins. My aim was to build relationships with farmers through sound agronomics, yet I was also being told to sell seed…in my mind they didn’t really go all that well together.

In my 1st year, one customer near Lucky Lake, Saskatchewan had already bought his seed for the year so I went to the next logical place: soil sampling (in my mind at the time it went seed -> soil sampling). The farmer had had soil samples done before, but they were very basic, only emphasizing macronutrients. So I talked to him about doing a full test - from pH, to EC, micronutrients, base saturation’s and different phosphorous extractions etc on his fields.

When we sat down to go through them we were talking about aspects of his soil that he never really knew existed, or had never had it explained how these attributes impacted his production, and we were able to identify some opportunities for his flax and canola specifically. Not only did his fertilizer rates increase (along with yields), but the types of products he used evolved. More specifically to Microessentials SZ and S15, Mosaic products that no other retailers in the area had access to at the time. So now, I was able to talk to this customer about parameters of his business that competitors weren’t (or couldn’t) plus position products that were differentiated and higher margin.

This was just the tip of the iceberg. During the growing season itself, I was able to draw upon the soil test insight to further augment the relationship and agronomic opportunities through tissue testing and talking about in-season fertility which made crop protection discussions easier. And like a bad infomercial, there’s still more…that fall, when it came time to discuss soil sampling the farmer asked me about seed. And because of understanding his farm and soil better, I was able to discuss rotation and varieties even better. That was when it was reinforced to me that everything starts with the soil. As my interest in soil grew, my rationale for thinking “everything starts with the soil” evolved as well through looking at variability, soil health, water etc.

Now as we see more emphasis towards sustainability, carbon etc, the need to focus on soil is even more important!

Back to quotes from Brett (emphasis mine):

Having a green strategy might be as important as a hiring strategy. You’re going to see us continue to focus on a green strategy at Land O’Lakes

Leading to this:

This isn’t an experiment. We are making sure we are clear that we are shaping a market and building a market. We have people in this space who are treating it like an experiment or treating it selfishly to offset their credits. You build credibility a thimble at a time and lose it a wheelbarrow at a time.

I have been talking about the opportunity for retailers to integrate and lead on the carbon and sustainability front as a key opportunity and I think comments from an individual like Brett really illustrate that a leading organization like Winfield is fully committed (just like Nutrien is).

It also reinforces that having a soil understanding and focus is crucial to moving this forward. What also shows is how Winfield’s digital strategy underpins this: data silo, Truterra etc are all important to executing on the “green strategy”.

In fact, I would suggest that a companies sustainability strategy (aka green) is incomplete without addressing their digital endeavours and competencies first. Otherwise, the sustainability effort is being built on a house of cards.

I basically think about it like this in a retail company setting:

I am not concerned about the specifics of where “precision” is compared to “digital” or anything. But it seems pivotal to me to acknowledge that without an agronomic understanding, a sustainability strategy is much more difficult.

Precision Planting Enters Sprayer Technology Space - Real Agriculture

Precision Planting is entering the sprayer technology market, with the unveiling of several products focused on improving the sprayer operation and data collection.

There are a few aspects to this announcement, but I want to zero in on this one:

The third and final part of the announcement focused on a camera system that will also be field tested in the spring of 2022. The company says it sees multiple applications for the system, including steering the sprayer between crop rows, counting plant stands and collecting data on emergence, and weed identification, enabling targeted spraying. The combination of vision and Symphony will allow spray rates to be varied within the label rate to be effective against the weed pressure in a specific area

As an AGCO company there are some interesting aspects in here to potentially help with their autonomy solutions and enabling smart spraying capabilities with camera based systems. This is beneficial when looking to compete with John Deere.

What I think really aligns with Precision Planting today though is the ability to count plant stands and collect data on emergence with the camera system. Precision Planting has capabilities in seed metering, seed delivery, fertilizer delivery and downforce control - all important to achieving best possible outcomes with the planting pass. However, being able to improve these systems for a farmer or being able to deliver quantified outcomes around plant stand counts and seed mortality for example can be a real benefit for farmers when it comes to identifying optimal planting rates, planter speeds etc. This over time can save costs and improve yield and quality.

This camera capability really can augment the core Precision Planting business, plus bring other new capabilities in.

If you want to learn a bit more on other AGCO technology capabilities, their Investor Technology Day Presentation has some good background.

Precision Application of Biologicals

Precision applying products of all sorts is a trend that is unlikely to fade away. Across almost every product line, whether fertilizer, crop protection or biologicals, there is an opportunity to apply products in a way that optimizes outcomes. This could be via smart spraying technology, via drone applications or via planting/seeding methods.

This week there were a couple announcements specific to biologicals on planters.

The moment seed goes into the ground is the point in time when a seed has the highest yield potential. From that point on the seed is in a battle to fend off all kinds of biotic and abiotic stresses. This means, the better you can equip that seed to fight from the very start, the better off it should be, leading to better yields and quality.

On top, from a crop input sales perspective getting on the seed/in the ground at seeding is one of surest paths to executing a sale - all sorts of challenges can come up and hinder other fungicide, biological or nutrient applications in season, meaning your sale might not occur. This emphasizes products to be applied at planting (and as stated before, this is good agronomically in many instances).

Couple the above realities with the fact that seed real estate is tight on seed. Too much liquid product being applied to the seed means it could have flowability issues through the equipment.

These aspects show us there will continue to be a convergence of focus at the planting timing. But there is even more, particularly when we are talking biologicals.

Biologicals applied on seed can be exposed to a toxic environment from micronutrients like zinc, or fungicidal/insecticidal seed treatments. This leads to a lesser amount of active microbial load being able to support seeds once in the ground.

The ability to to treat the seed right as it is going into the ground presents a great option for management of seed flowability through metering systems on planters:

Beck’s, Inflexion Technologies Partner to Bring Farmers Prescriptive, On Planter Seed Treatment Solution - Agriculture.com

Inflexion Point Technologies, LLC (IPT) and Beck’s have formed a collaboration that will help farmers tailor their use of biological seed treatments to agronomic zones and growing conditions, say officials for the companies.

IPT is an ag tech company that has developed the industry’s first prescriptive, on-planter seed treatment (POP-ST) solution.

This also allows for a variable rate aspect, deploying the biological where it is more likely to get a beneficial outcome. For example, in low lying areas that may be wetter and cooler at planting, a farmer may be more inclined to apply a higher rate of a biostimulant.

Second announcement surrounding biologicals and planters this week is from AMVAC:

iNvigorate Biological Is First Liquid Formulation to Join Growing Line of SIMPAS-applied Solutions - PR Newswire

AMVAC® is pleased to announce that its iNvigorate® Biological is the first liquid product to be made available for application using the SIMPAS® system on corn and soybeans.
iNvigorate – developed by Agrinos®, now an American Vanguard® Company – is part of AMVAC's expanding line of biological and Green Solutions products. iNvigorate creates a highly productive microbial community when applied to the soil, assisting in nutrient uptake, improving fertilizer efficiency and optimizing root growth.

For those that aren’t familiar with the SIMPAS, I encourage you to check them out.

I wrote more about AMVAC and their SIMPAS system when I highlighted the American Vanguard Annual Report last year.

The capability of SIMPAS gets more exciting looking further out when we see other technologies converge with SIMPAS, such as Stenon as one futuristic example.

Ironically, I was browsing the SIMPAS site before this news came out and I found one area to be interesting:

They have a tool on their site to help calculate savings and product needs for farm customers using the SIMPAS. A smart tool to have. You can access it here.

This calculator has a “print” feature:

Share your results with a SIMPAS-applied Solutions™ Retail Agent to get a quote and determine the exact ROI for your operation.

There is irony in this to me.

We are living in a tech enabled world with an analog first mindset.

In this instance, we use a 2002 process (print page) to get access to one of the most cutting edge ag technologies out there. It doesn’t have an “Email" export option either (which is at least in the 2015 sort of tech range) so a farmer could email it directly to their sales person. We can take this one more step and say, how could this be integrated directly into a portal at the retailer where the request from the farmer could be seamlessly put into software to create an order for the product?

This isn’t intended to be a knock on the SIMPAS website, I think they are also working with where their current customer base is generally using today.

What the situation sparks in my mind looking out across the agtech landscape is that technology needs to be thought through with people and process in mind - sometimes we just bandage on technology creating a frankenstein-esque approaches. We need to remove our physical world bias wherever possible in designing the experiences and processes for farmers.

Every new type of technology has been looked at as an expensive bolt on at first, not the central “thing” that gets designed around.

This occurred with electricity even. At first it was more of a novelty for the wealthy, and an inconvenience at best for them: there were closed off systems, it was considered a burdensome workload, there was no industry standard and companies would create custom systems and there was little interchangeable between these systems (this likely all sounds familiar…).

Even the way electricity was initially used: in lighting a room the old oil lamps were lit by physically walking over to the fixture and lighting it. When electricity came in, this same approach was applied: walk over to the now “electrified” fixture to turn it on. It took decades to come up with the concept of a light switch (a benefit of electricity and a better design) that was disconnected from the light itself, saving the awkward dark walk to attempt to turn on/off the electric light.

The same occurred with the evolution from steam powered factories to electric - changing to electricity powered factories was difficult, but once new factories were being built with the emphasis of power from electricity, the consistency of how it worked to power the factories along with the layouts being designed for production efficiency and not efficiency of delivering steam power made electricity more valuable.

In the world we are in today, I call this a digital first mindset and I think those that insert themselves in that way of thinking are set up for innovating and delivering value in the industry. This leads into what my friends at Tenacious Ventures call “digitally native agriculture”:

Digitally Native Agriculture - AgThentic

We’ve coined the phrase Digitally Native Agriculture to identify an analogous set of transformations taking place throughout the agri-food value chain. Looking from a systems perspective, agricultural production is still largely partitioned along lines defined by industrial-era technology. This partitioning defines what level of economic opportunity organizations can identify, operate, and participate in.
The size, shape, frequency, and commercial opportunity associated with agricultural production all stem from these baseline partitions. Field size, machinery size, crop cycles and rotations, timing, and economic outcomes from harvest, trade, and transformation all stem from these lines.
Agriculture that is digitally native operates on the assumption that all required information is available at the highest possible spatial, temporal and spectral resolution. Decisions no longer need to be framed and constrained by the partitioning established around industrial-era infrastructure (emphasis mine). Pervasive, inexpensive, high-resolution imagery is available for the entire plant, every day. Complex statistical and machine learning computer models can use this and many other massive data sets to build increasingly accurate models of the real world — the factory has no roof.

Evolving to this digital first framing sets us free from physical constraints, and opens up doors of opportunity, unshackled from previous approaches.

Today digital agriculture is still something people “do”. How I think of technology is often from the perspective that if I notice it, it’s a sign that it can be improved. I’ll stick with the electricity example: we don’t “do” electricity, it is something that enables in the background. Sure, I hit the switches and turn the light bulbs, but that’s natural and simple.

What this article illustrates to me is that when digital fits into the background of agriculture, that’s when the real opportunity will be unlocked. It won’t be easy getting there, thankfully there are a ton of smart entrepreneurs innovating around this, and as Matt states, some might be “fanciful thinking”, but it’s also something to strive for because it can allow for better outcomes across the supply chain.

Kula Bio Closes $50m Series A to Further Develop its Low Emission Biofertilizer - AgFunder News

Kula Bio, a US-based startup developing a biological fertilizer, has raised $50 million in Series A funding to increase production capacity and further innovate on its technology.
The round was led by Lowercarbon Capital with participation from Collaborative Fund, Grantham Environmental Trust’s Neglected Climate Opportunities Fund and iSelect Fund. Other investors included Pillar VC, Embark Ventures and BOPU. The Series A follows a $10 million seed round in May 2021, in which AgFunder participated. Kula Bio was founded in 2018.

The active bacteria in this product is a relatively well known one:

Kula’s product, Kula-N, is a microbial product leveraging the bacteria Xanthobacter autotrophicus.

While there is a lot of work done validating N fixing capabilities of the bacteria, I could not find anything talking about exactly how efficient the bacteria is at feeding a crop nor under what conditions it is stronger or weaker.

However, what was possible to find was a patent show casing the system created to enhance this bacteria (and others):

The disclosure provides a bioreactor system for conducting nitrogen fixation with renewable electricity to produce an engineered soil microbiome enriched in ammonia and carbon. The disclosure further provides an inorganic-biological hybrid bioreactor system that couples the generation of H2 by electricity-dependent H2O-splitting with the nitrogen-fixing capabilities of autotrophic, N2-fixing microorganisms to cultivate NH3-enriched and/or carbon-enriched biomass. The disclosure also provides methods for using NH3-enriched and/or carbon-enriched biomass for applications, such as, biofertilizers for improving the characteristics and performance of soils, e.g., to enhance the yield of agricultural crops. The disclosure further provides biofertilizers, as well as engineered soils and seeds augmented with a biofertilizer.

What this essentially states is that they have created a process that augments the bacteria with an energy source - which signals to me increased N fixing capabilities and longer life span for the bacteria (though it’s unclear by exactly how much and requests to the company and their investors for background weren’t returned).

I look at this and wonder how it can be used in conjunction with other biological products out there (from the companies below).

Kula’s investors have been stating they are working to turn the lights out at Haber Bosch facilities, though I think we are more likely to see combination approaches at least for the foreseeable future.

This raise is one of numerous companies with N fixing biologicals on the market today, including Sound Agriculture, Symborg and Pivot Bio.

For deeper dives on all three of these companies and their N fixing products, see the links:

FBN Brings Adjuvants to Market - Agriculture.com

Farmers Business Network (FBN) has launched a new lineup of adjuvants and crop nutrition products under its new private label brand, “Farmers First,” the company announced today. The adjuvant business is a crowded one, but FBN believes the combination of new products that optimize crop protection and fertilizer efficiency, sourced from USA manufacturers and available through the FBN online store are a good fit for farmers seeking to maximize crop input investment in 2022 and beyond.

This announcement won’t catch anyone by surprise. I think it reinforces what FBN has talked about doing and has done for the last number of years: looked at the market to identify products that can be brought into to support their members.

What caught my eye in this was something I have talked about since starting in retail (and have seen used effectively), and talked about as beneficial when it comes to e-commerce in agriculture:

The FBN Direct online store was recently redesigned to include a recommendation modal that highlights recommended adjuvants whenever a crop protection product is added to a user’s cart. It is the first of several digital agronomy features coming to the online buying experience with FBN.

Having a recommendation come up based on products being browsed, or products in the “cart” (back of the truck?) that are complementary to one another. I first worked with a team to do this with glyphosate and pre-burn add-in products such as group 14’s to help act a prompt to mitigate resistance risk. But that’s just the tip of the ice berg and FBN is now tapping into this tactic. It can get into basic recommendations or algorithmic tank mix suggestions as a couple basic examples.

Agoro Carbon Alliance’s US Program: Heading For A Million Acres Of Carbon Farming - Agoro Carbon Alliance

If we want to decarbonize farming globally, we’ll need to think at scale – and it’s safe to say that we have big plans for the US in 2022. After officially launching our US pilot in 2020, we’re aiming to sign up one million acres of US farmland to our Agoro Carbon Program in the coming year.

Agoro is the carbon business of Yara. This 1 million acres would put them on similar grounds to Bayer Crop Science who has publicly stated they have 1.5-2 million acres of farmers using their carbon service, while Nutrien is around 200,000 in North America.

These numbers are still actually really small in the grand scheme of things, yet make a lot of noise. I’m pretty confident we will see the numbers ramp up (see Winfield comments above), especially as competency and understanding in the space increases along with more proof and validation.

But for context, if companies like Bayer of BASF launch a new crop input product in the market, how many acres do they hit in the 1st year?

Here are a couple examples:

Bayer/Monsanto:

The company expected NemaStrike to launch across up to eight million U.S. crop acres in the fiscal year.

BASF:

LibertyLink GT27 soybeans were launched last year on over 4 million acres, according to BASF.

Millions of acres in year of launch for these companies, in the USA alone. In Canada, a much smaller acerage size than the USA, an average product launch is going to be across 500,000 - 1,000,000 acres.

I’ll be the first to say, it’s a generally unfair comparison because one is a singular product fitting into a pre-existing system, while carbon programs are a new system implementation and have more complexity. But it puts it into context how fast these large companies can scale up and deploy new products, usually.

Non Ag Article

The Power of Capitalism - Blackrock CEO Annual Letter

Blackrock has assets under management of over $10 trillion. This makes them one of the biggest influencers of not just publicly traded companies, but capitalism itself.

CEO Larry Fink in his annual letter highlights some interesting things that even if you disagree, are notable because of who they are coming from.

Here are a couple notable thoughts:

The next 1,000 unicorns won’t be search engines or social media companies, they’ll be sustainable, scalable innovators – startups that help the world decarbonize and make the energy transition affordable for all consumers.
I believe the decarbonizing of the global economy is going to create the greatest investment opportunity of our lifetime. It will also leave behind the companies that don’t adapt, regardless of what industry they are in.

Upstream Ag Insights