Upstream Ag Insights - January 9th 2022

Essential news and analysis for agribusiness leaders

Jan 9

Welcome to the 99th Edition of Upstream Ag Insights and the 1st Edition of 2022!

Moving ahead I will be trying some new ways to share Upstream. I have primarily written, but have been wanting to do some more audio and video. To start, each week I will link to a YouTube video where I talk about three of my favourite events and thoughts from the week. If you have suggestions please do not hesitate to reach out.

Note: This week got a little longer than I wanted (~27 min), I will try to keep them shorter in the future.

Google Slides for January 9th, 2022 - Google Slides

To help guide some of the audio for YouTube I will put together a brief slide deck each week which I will make publicly available.

Index for the week:

2022 Upstream Ag Insights Outlook
John Deere Announces Autonomous Tractor
Stenon Raises $20M Series A Funding Round
The North America AgTech and FoodTech partnership landscape, trends, and data-driven 2022 predictions
Nutrien Announces CEO Transition
AgroScout Acquires the Assets of TerrAvion to Broaden its Imagery Data Management for Agriculture
2021 AgTech Venture Capital Investment and Exit Roundup
6 New Year’s Resolutions for AgTech Companies
Business is Biology

Thanks for reading and for sharing!

2022 Upstream Ag Insights Outlook - Upstream Ag Insights

In 2021 I posted an article highlighting what I will be watching the most in the coming year. For 2022, I wanted to do the same. This isn’t intended to be prediction based, simply what I will be keeping my eye on in 2022 and why.

I’d love to make predictions, but full disclosure: I am wrong a lot.

One quote that always sticks in my head as I approach this topic is this from Warren Buffett:

Forecasts may tell you a great deal about the forecaster; they tell you nothing about the future.

I say this to emphasize that this is more about where I will be focusing on learning more throughout 2022 based on what trends I have observed in the last 365 days.

So what will I be watching?

Big Tech in Agriculture
Consolidation and Partnerships
New Tech Trickling into Ag: web3 and the Metaverse
Soil as a Starting Point
More Carbon Focus
FinTech and InsurTech in Agriculture
Ag Retail Awakening
Commercial Technology Launches - RNAi, Autonomy and Smart Spraying
Public Offering Window Closing on AgTech?
More Strategic Data Use

For more overviews and explanations check out the link.

This week’s edition of Upstream Ag Insights was sponsored by EFC Systems

Happy New Year!

Following the trend of the last two years, on many fronts, maybe the tag line should be “Buckle Up for another year of change”.

That’s a good thing.

The six letters in “Change” really can be translated to a better six letters: “Growth” if done right.

Ag Retailers need to be digital in how they interact with Growers, and many are underway on that transformation. We’re confident as that transformation becomes more mainstream that the Ag Retailer / Grower relationship will be strengthened. After all the essence of that relationship is that the top shelf retailers are actually risk advisors to their growers. Helping growers with their farm planning for profitability, access to inputs in a timely fashion, helping manage logistics and crop sales is all about risk management.

At EFC we’re doubling down helping Ag Retailers with the digital transformation, across all aspects of technology. One of the important components is understanding and bringing focus to solve the key challenges that provide the most value to an Ag Retailer. To help foster dialog and educate Ag Retailers we’ve put together an Agribusiness Summit that has a great selection of speakers to supplement our leadership team in showcasing important trends to be aware of. The goal is to provide you some practical tools to Engage your growers, Embrace new processes and Empower your team.

We invite you to join us in Nashville February 21st and 22nd.

John Deere Reveals Fully Autonomous Tractor at CES 2022 - PR Newswire

One of the most buzz worthy announcements of the week was the announcement from John Deere introducing their fully autonomous 8R tractor.

The tractor includes the following features and functionality:

six pairs of stereo cameras that enables 360-degree obstacle detection and distance calculation
Images captured by the cameras are passed through a deep neural network that classifies each pixel in approximately 100 milliseconds and determines if the machine continues to move or stops, depending on if an obstacle is detected.
The autonomous tractor is also continuously checking its position relative to a geofence, ensuring it is operating where it is supposed to, and is within less than an inch of accuracy.
Using John Deere Operations Center Mobile, farmers can swipe from left to right to start the machine. While the machine is working the farmer can leave the field to focus on other tasks, while monitoring the machine's status from their mobile device.
John Deere Operations Center Mobile provides access to live video, images, data and metrics, and allows a farmer to adjust speed, depth and more. In the event of any job quality anomalies or machine health issues, farmers will be notified remotely and can make adjustments to optimize the performance of the machine.

Autonomous functionality has been delivered in John Deere products (and others) for decades. Everything from auto steer, to auto boom height, auto header adjustment and much, much more. This has enabled farmers and operators to manage fatigue, minimize danger and deliver better outcomes. Full autonomous capability (in-field) was the next logical offering from Deere and one many were anxiously awaiting.

Deere’s starting point for autonomy is a familiar spot: tillage. In August 2021 they acquired autonomy company BearFlag robotics (the launch doesn’t include Bearflag technology) that also started with tillage. A logical beginning in my mind. Some of the hesitation around autonomy is a screw up of a high value activity (eg: planting), costing significant dollars. We all have trust issues with technology, I’ve highlighted my own automatic email send hesitation when I started Upstream even. Not only is tilling low risk, it’s also boring. A perfect starting point.

A natural iteration for them after is on the grain cart, where they already have a tethering (“Machine Sync”) functionality launched today.

Autonomy: From Installment Phase to Deployment Phase

Carlota Perez is world renowned for her interpretation of technological revolutions. In her popular book Technological Revolution and Financial Capital she talks about the different phases that technological revolutions go through, going from the industrial revolution, steam and railways, to steel and engineering to now the IT revolution. She highlights the fact that these various revolutions go through the same process along their journey from beginning to become the standard.

The two main phases are “installment” and “deployment” which can be identified through the following:

Source

When a technology moves to “deployment” it is more mainstream and here is what Matt Coutts says about Deere’s influence on that on The Business Breakdown Podcast on John Deere (if you haven’t listened and want to learn more on Deere, I highly recommend):

In a lot of industries you may debate when the installment period ends and deployment period begins. And in agriculture, it's kind of like when Deere says so.

This quote hit the nail on the head. One of the benefits of being a 185 year old company is that there is trust and confidence in what the company launches and built-in legitimacy when they do bring technology to the market.

Marketing Prowess

Raven Industries and others have launched commercial autonomy offerings. They have created buzz, but nothing like we experienced this week with the John Deere announcement of the 8R autonomous tractor at the Consumer Electronics Show (CES). A big part is the Deere name, but it’s more than that.

Deere’s slogan is “Nothing runs like a Deere” (Now with “autonomously” added onto the end). I think what else could be said is that “Nobody markets like Deere”.

Choosing a non-ag show to launch their automation product was genius. They have been going to CES the last couple of years, playing up the emphasis of educating consumers on the challenges farmers face and technology they use to sustainably feed the world. I am certain that played a part. But no company is entirely altruistic. And my suspicion is the marketing funds they spent on CES will be some of the best expenditure they will make all year (probably well beyond this year): Their stock price went up over 6% the day of the announcement, a day the S&P 500 was flat, adding over $6 billion in market capitalization to their stock!

Agritechnica was postponed in fall of 2021 until February 2022 before being cancelled outright and as phenomenal as that show is for us in the agriculture industry, no announcement that happens there is likely to see the same sort of uptake in mainstream media as this announcement did, which I suspect was part of the stock pop.

Deere’s Position in the Precision Market

Autonomy is a key aspect of their precision business.

Deere points out their pillars of precision agriculture as the following:

Telematics
Guidance
Data Management

You can’t have autonomy and you can’t have precision without these three things. Deere is disproportionately well positioned to offer these.

Then factor in that they have the only integrated smart spraying capability among major manufacturers (also launching commercially this year), not to mention how core the sprayer is in general for precision (eg: variable rate fungicide) and anything related to production and sustainability (application of pesticides, biostimulants, fertilizers).

Then consider the fact that every company feeds a Deere network effect: Crops get bigger from input company R&D? A bigger, more precise (harvesting precision) combine is needed. R&D leads to seed costs increasing? Demand for planters increases. Want more digital capabilities? Deere has an app store open for start-ups and incumbents. Want to take advantage of data management to service to have better decision making capabilities? Their system is cohesive and integrated.

It’s tough to find a weak spot in the Deere precision offering and even though we all knew autonomy was coming from them eventually, the launch reinforces their capabilities.

Business Models

Deere didn’t announce the costing or business model for their autonomous product. Bearflag robotics had a model that charged farms only for the work that was done aka on a per acre basis without taking ownership of the tractor.

There is also the Rolls Royce engine model in airplanes that I have highlighted in the past: charging airlines on a Power-by-the-Hour basis while continuously monitoring the engines which de-risks the airline up front and throughout the life of the engine, proactively preventing unanticipated maintenance costs. On top of this RR gets an enhanced relationship with the customer, customization capabilities for the customer and recurring revenues. Now think of the airline as a farmer and John Deere as Rolls Royce. This could be a compelling approach for them in the future.

It could also be as simple as selling the tractor with an autonomous package + RTK package, or something like that. How Deere bundles and prices could be a really significant differentiator in the autonomous market. Competitive products like OMNIPower from CNH (Raven) is charge on a traditional per physical unit basis.

Final Thoughts

Full autonomy can bring numerous benefits to operations, including:

Better timeliness of operations
Operational efficiency
Optionality for farmers time (eg: more time to manage high value functions)
Lower variable costs
Get farmers out of a labour shortage cycle

The benefits are clear, it’s just a matter of what the adoption is like. One objection (minor in my opinion long term) is the the comment from some farmers stating “I enjoy my time running machinery”. People said similar things about horses in the 1890’s. And said the same thing about key boards on Blackberry’s before iPhone’s. We hate change, but when the benefits are so significant, the change is inevitable. There will still be opportunity to derive some of the field level knowledge operators want while having autonomous equipment…in Deere’s case, at this point the cab is still there allowing for farmers to still be in the tractor.

Deere is selling autonomy, CNH is selling autonomy, what about the next largest player, AGCO? What does an organization like AGCO do in response to CNHI and John Deere? There are a number of organizations out there with capabilities in the realm of autonomy and operational efficiency from Solinftec (AGCO currently has a partnership with them), to Blue-White Robotics, to SWARM and Sabanto.

Overall, exciting announcement from John Deere that will drive some exciting new capabilities for farmers.

Related: John Deere Consumer Electronics Show Conference - YouTube

Share Upstream Ag Insights

Real-time Soil-Testing Agtech Startup Stenon Raises $20M Series A Funding Round - Tech Crunch

Stenon, an agtech company that has a real-time soil-sensing solution, has raised a $20 million Series A funding round from Founders Fund, The Production Board and existing investors including Cherry Ventures and Atlantic Labs.
Founded in 2018 in Potsdam, Germany, Stenon’s digital soil data is produced without the need for a laboratory, making it faster and more efficient, the company claims. Stenon says farmers get data to make the best decision about cultivation, boosting yield, crop quality and soil health, while saving significant amounts of time and money by not needing to use a soil testing laboratory.

My emphasis on soil has had me interested in Stenon for a while now, so this raise was notable to me. Before getting into the product, I think what’s worth mentioning is who is involved in this deal: One of the most prominent venture capital funds in the world (not in ag…everywhere) in Founders Funds (Peter Thiel, Keith Rabois) and one of the biggest players dabbling in agriculture in The Production Board (Climate Corp Founder David Friedberg is CEO). This is the 2nd direct investment into the soil space by The Production Board, their first being Pattern Ag. They also have an investment in Tillable, a farm land market place.

Stenon’s primary business in focused on European farmers. They’re model is selling the annual subscription to European farmers directly. No fee for hardware, just an annual cost for access to the hardware, software, cloud data etc. It takes about 30 seconds or so with the hand held unit in the soil to get reading which is then sent to the cloud and accessible to the farmer or whomever has access. The information they collect include: N, P, K, Mg, OM, OC, pH, temperature, moisture and texture.

Their handheld unit has multiple sensor types in it: optical spectroscopy and optical imaging being two of them. For more, you can read their patent here.

The compelling part about Stenon is the time and dollars they can save farmers and agribusinesses from a soil testing perspective along with the increase in data points they enable groups to collect. If we see a take off of carbon offset adoption, the Stenon unit has the potential to augment soil lab needs and decrease the costs to carbon aggregators.

A year ahead of food and fortune: The North America AgTech and FoodTech partnership landscape, trends, and data-driven 2022 predictions - AgReads

This is really comprehensive work from John Gotulla on agrifoodtech partnerships.

The goal of the study was to determine the state of AgTech and FoodTech partnerships and gain insights through a rich analytics framework. I comprehensively mapped the network of interacting private sector AgTech and FoodTech communities and pinpointed opportunities for different industry actors to plug in. I identified areas of growing importance and unpacked potential causal factors. And I modeled how partnership-marketing press release language can be honed to optimize product positioning or recognize the strength of the relationships behind the announcements.

As someone that reads press releases a lot, I found this to be interesting:

Press releases most often name the connection type “partnership.” In a scientific spirit, innovation-related subjects more often get the label “collaboration”. “Alliance,” which connotes a very special bond, is extremely rare (2.56%).

This article brought a more quantified approach to my gut feel surrounding how partnerships have grown, and where they are heading in 2022 (up!).

Nutrien Announces CEO Transition - Financial Times

The Board of Directors of Nutrien Ltd., the world’s largest provider of crop inputs and services, announced today that Mayo Schmidt has left his position as President and CEO of Nutrien and has resigned from the Board. Ken Seitz, Executive Vice President and CEO of Potash, has been named the company’s interim CEO. Mr. Seitz brings extensive global leadership experience in the agriculture and mining sectors and is well-positioned to progress the company’s stated strategy and lead the integrated business during the transition.

After a surprise Sunday announcement in April of 2021 saw Chuck Magro leave Nutrien and Mayo Schmidt replace him, another surprise came this week when just 8 months after that, Schmidt has left the organization.

The release didn’t share much outside they are currently searching for the next CEO and primarily what I heard were assumptions on a misalignment surrounding the current strategy and Schmidt’s long term view. Maybe, but considering he was Chairman when the strategy was put in place, it seems unlikely. A better take I heard was that Schmidt is getting up there in age and may have a shorter time horizon in the role combined with the fact the company is coming to some important junctions for both long term fertilizer asset investment and sustainability initiatives across all business segments.

This becomes the 3rd executive defection in 11 months: Retail CEO Mike Frank in February 2021, Chuck Magro in April 2021 and now Mayo Schmidt.

It brings up a question for me, with Mike Frank seemingly still a free agent, is there potential to see him in the CEO chair?

AgroScout Acquires the Assets of TerrAvion to Broaden its Imagery Data Management for Agriculture - Precision Ag

AgroScout, the agro analytics platform, has announced that it acquired the assets of TerrAvion, a market leader in imagery data management for agriculture. The acquisition fuels AgroScout’s high-resolution agriculture aerial imagery capabilities and agro data artificial intelligence for a wide range of crops. Effective immediately, current AgroScout and TerrAvion clients will have access to a powerful combination of aerial and satellite imagery products and precision agriculture services for their fields.

For context, TerrAvion was an imagery company that went through Y-Combinator before ultimately going bankrupt in 2020.

2021 AgTech Venture Capital Investment and Exit Roundup - Crop Life

Based on our analysis of Crunchbase data, 632 startups globally raised $12.23B. This represents 137% growth in investment dollars in the space from last year, and 410% percent growth from five years ago in 2017.
In terms of AgTech exits, 2021 was also a big year with 39 venture backed startups exiting through M&A or a public listing. That represents a 179% increase in exits from 2020, and a 388% increase from the number of exits five years ago.

6 New Year’s Resolutions for AgTech Companies 🍾

Shane Thomas @ShaneAgronomy

6 New Year’s Resolutions for AgTech Companies🍾 1. UX/UI Improvement 2. Utilization of Data 3. More Interoperability 4. Undersell, Over Deliver 5. Partnership Execution 6. Business Model Evolution (No particular order) Thread ⬇️

Upstream Ag Insights Link Round-up for December 19th to January 1st

Even though Upstream took a break for a couple weeks at the end of the year doesn’t mean agribusinesses stopped pushing ahead. I collected some of the most interesting links from the end of December for those interested in digging in.

New Horizons for Herbicides - Analysis of 2020 Global Top 20 Molecules and Top Crops - Agro Pages

The Importance of Ag Retail Digital Transformation in the 2020’s - AgVend

Designing Crops That Tell Farmers What's Bothering Them with Shely Aronov of InnerPlant - Future of Agriculture

Verdesian and Truterra Partner - Brownfield Ag News

Michael Stern Joins Lindsay Corporation as Innovation Advisor - Business Insider

Is soil carbon agriculture’s secret weapon? - Agro Pages

Non Ag Article

The Biology of Business - Medium

Over the holidays I read several books referencing science and business including Digital Darwinism by Tom Goodwin and Complexity by Mitchell Waldrop. It reinforced to me that the adage “business is war” should really be “business is biology”.

I often use metaphors and mental models from biology to help myself better understand business concepts and extrapolate out implications of decisions and announcements, like the “the red queen effect” and “incentives”. Even the verbiage we use in business, from “ecosystems” to “niches” obviously come from biology.

I started digging into some more books to read and stumbled on this article that I thought brought a good frame to the metaphor:

At their core businesses are organisms, in order to survive they must behave like them. Like organisms, businesses must sustain themselves in harmony with co-habitants, share resources, and develop mutualistic relationships. The hierarchical systems that organize business also draw influence from the organization of cells, tissues, and organs. Behind biology lies billions of years of evolutionary optimizations, from resource allocation, process management, to survival instincts.

Upstream Ag Insights