Upstream Ag Insights - July 25th 2021
Upstream Ag Insights - July 25th 2021
Essential news and analysis for agribusiness leaders
Welcome to the 77th edition of Upstream Ag Insights!
There were two large announcements this including TELUS and Rabobank acquiring Conservis and Pivot Bio joining the unicorn club in raising $430 million in their Series D. Those are the two areas I focus on the most in this edition, however, there were some other excellent articles written by individuals like Mark Johnson of Grainbridge and companies like Leaf Agriculture, along with interesting announcements from the likes of Corteva and Boston Dynamic on use of robotics.
This weeks edition was a lot of fun, I hope you enjoy it!
Index:
Pivot Bio Secures $430million in Funding
TELUS and Rabobank Acquire Conservis
Climate Ai Raise
FinTech vs. AgTech
Lessons from Building a Data Refinery
Corteva Agriscience to Leverage Agile Mobile Robots
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Pivot Bio Scores $430m in DCVC, Temasek-led Series D Round - AgFunder News
Pivot Bio has raised $430 million in funding after seeing its revenue increase threefold since the start of this year. The Berkeley, California-based ag inputs startup is also releasing its latest nitrogen-fixation product, which it says will allow corn growers to cut out 40 pounds of synthetic nitrogen use per acre. Pivot Bio’s technology ‘programs’ the DNA of microbes which naturally occur in the soil so that they produce more nitrogen. The startup then mass-produces these microbes, bottles them, and sells them direct to farmers, who can apply the product — marketed under the name Proven — to their fields.
This is a noteworthy raise and announcement for two reasons:
There is another unicorn in agtech. This raise values the company at almost $2 billion. There was a statement saying this should be their last private raise before a public offering (they’ve raised about $600 million in total now).
Fixing 40lbs/ac of nitrogen is a big improvement over their ~20-25lbs previous in crops like wheat and corn.
What is Pivot Bio?
Pivot Bio is a microbe company that understands the soil microbiome and how it impacts plants. More specifically, they understand a unique group of microbes that have the capability to fix nitrogen for non-legume crops like wheat and corn.
Pivot Bio has created a biological product for corn based on a γ-proteobacterium (KV137) that associates with corn roots and has the ability to fix nitrogen. However, there are specific “sensing” genes within these microbes that identify when there is a high level of ammonia surrounding them, which in turn mitigates them from associating and fixing nitrogen effectively with the corn. What Pivot has done through synthetic biology is managed or muted these genes, ensuring the microbe will still work to fix nitrogen even with high levels of nitrogen availability surrounding them.
They have created a liquid product for corn (Proven) and a product for wheat and sorghum (Return) that both go in-furrow at planting/seeding at a rate of around 0.375L (1/10 gal) per acre. A very small amount which indicates a heavy microbial load.
A logical next product for them is seed applied product to develop and then to expand crops, while working to increase the rate fixed per acre. Down the line I could envision a microbe product from them that is focused on phosphorous use efficiency as well. P run off is consistent with their environmental narrative along with supporting farmer yields and profitability.
Go-to-market Strategy
Pivot Bio is an organizations that has opted to create a direct to farmer sales channel versus going through traditional retail.
In order to execute effectively on this they will need strong repeat customer purchases and a continued progression of N fixation per acre, like we just seen going from ~25lbs to ~40lbs. There are numerous products on the market going through the traditional channel, some applied to the soil via sprayer like Azotic’s Envita (Gluconacetobacter diazotrophicus (Gd) (which just announced a funding raise last week as well) and others applied foliarly like Symborg’s Blue N (Methylobacterium symbioticum) which also has a relationship through Corteva (I dove into this product in the April 25th 2021 edition of Upstream Ag Insights). N fixation of non legume crops is also a big focus for Joyn Bio, a joint venture between Bayer Crop Science and synthetic biology platform company Gingko Bioworks.
The competition in this space will be extensive because it is a HUGE opportunity. Globally, the nitrogen market is worth about $115 billion!
In the United States, Pivot’s focus geography to date, nitrogen demand is dominated by corn, with 58% of the nitrogen use in the country being on corn.
In 2018, the fertilizer use in totality in the United States was on average 135 lbs/ac across all crops.
Pricing
Unfortunately, I was unable to obtain any comment on pricing from them, but tracked down an article from late 2020 where their VP of Product Development was quoted as saying the cost was $20/ac before rebates.
At their 25lbs/ac fix level, that’s expensive nitrogen equalling about $0.80/lbs. A $600 per metric tonne price of urea (46-0-0) equates to about $0.60 per actual pound of N. If we look at their new 40lbs fixing level and assume a consistent $20/ac cost, they are at $0.50/lb. This gets to be competitive even with $500/MT urea. This still isn’t an ROI slam dunk for the farmer though.
If carbon credits become a broad reality, we could envision that switching to a product like Proven or Return from Pivot Bio would help to qualify for credits there too. After all, nitrous oxide (N2) is 300x more potent than carbon dioxide and is an outcome of denitrification, a process that occurs during periods of extensive moisture accumulation in the soil.
Lastly, one can see there is some operational benefit to taking 40lbs/ac of N out to increase efficiency when spreading or seeding crops, or managing on farm storage. On a 2000ac farm seeded to all corn, removing 40 actual pounds of N equates to almost 80 metric tonnes (~170,000lbs) of nitrogen that doesn’t need to be stored or applied.
Market Penetration
What is really interesting to look at is the uptake so far. According to the releases Pivot Bio is on 1 million acres in 2021. If we use the $20/ac price and multiply that by 1 million, we get an annual revenue of just $20 million! That means their valuation is almost 100x revenue multiple on the business.
They will have huge expectations to move fast in this space because of the competition, which brings us back to their direct to farm model.
If they triple their sales every year for the next 3 years, that would put them at 27 million acres in 2024. In the USA there are ~100 million acres of corn and ~45 million acres of wheat. They will likely make a move into Canada with wheat and corn that would bring the North American market opportunity to ~180 million acres of corn and wheat. I think they will have to expand beyond North America in the next few years too. Brazil and Australia are natural fits given the crops they have successfully worked on.
The challenge is that with their product being physical and with going direct to the farmer vs. traditional distribution, they lack network effects and will come up against the aforementioned competitive products being sold via the traditional channel.
My assumption is that the capital from this raise will disproportionately go to building out a more robust direct to farmer team to rapidly grow acres.
There is more margin, more control and long term a direct relationship with the grower will be extremely valuable to any company that does it, but rapidly growing will be a challenge.
There is some precedent set in this approach though. Only one player has had any sort of mentionable success in a direct to farmer fashion with inputs is Farmers Business Network (FBN (one could argue the Pioneer Seeds model should be included as well).
FBN started in 2014 and as of 2021 have membership on 70 million acres across 3 countries and numerous product lines. This is simply a membership number, the acres they touch annually in terms of product sales I would wager to be closer to 25-30% of that. FBN also has a much larger addressable market in that when they have a farmer, they can access all acres across numerous product segments. The point though, it took 7 years to get to where they are today in acres. Pivot Bio was founded in 2011, but has only been selling product since 2019, so this is their 3rd sales year and are just hitting 1 million acres.
Today, Pivot Bio can only access one segment on one, maybe two of the farmers crops in rotation. We don’t know their customer acquisition costs (CAC), or acre acquisition costs. Based on their capital raised I am assuming their CAC to be relatively high (much greater than the cost of the product per acre). Couple this with the slow annual sales cycle plus with limited product segment expansion will make for more challenged unit economics in the short term.
What might save them is a high customer retention and my assumption of high margins (at $20/ac, I’d guess >85% gross margin) and if they are going to successfully build a reliable channel direct to the farmer they will need to eventually build out that product portfolio beyond a few crops and one product line.
The above portfolio thought to expand goes against what has (to me) been a smart move where they have been focusing solely on the nitrogen product and messaging to date.
My bet is they adjust this direct to farmer model in the short to medium term to a hybrid, it may not be a traditional retail either, but more like the Meristem Crop Performance Group.
One major reason I see a challenge is that when a farmer thinks about nitrogen, they will still be going primarily to their local retail for advice and for the majority of the product. Even if Pivot already has a sale, the farmer needs to go get more nitrogen from somewhere and for their other crops. This is going to be a constant hurdle for Pivot to overcome, especially in the short term to gain momentum. Nitrogen is apart of a much larger discussion/decision making process and there is going to be a continued opportunities for retails to bring a product, like the ones mentioned earlier (Azotic, Symborg or others), into the discussion.
At the very least, some strategic partnerships would go a long way in accessing incremental distribution for Pivot. The above rationale is where I get hung up the most on the viability of a pure direct to farmer approach for Pivot along with their valuation. They are also too expensive on a valuation basis relative to revenue in my mind to be a viable company to buy out for any large player.
Distribution is king, but the one major way around these growth hurdles I see is Pivot Bio hitting a grand slam on their product, bringing a large jump in N fixed (closer to ~80-100lbs/ac and manageable price points) to really differentiate them versus any competitors and conversations. If Pivot can get there in the shorter term and no one else does, it will be very notable.
There is significant opportunity in Pivot’s product. But to me the real story will be their go-to-market strategy in the next 24 months.
Related: The challenges & opportunities for biologicals in ag - AgThentic
This is a great overview by Sarah Nolet of Agthentic on biologicals.
TELUS Agriculture and Rabobank Acquire Conservis - Business Wire
Rabobank, the premier global food and agriculture bank, and TELUS Agriculture, global agriculture technology leader, have acquired Conservis, a company that integrates disparate farm technologies into one streamlined interface to manage the business of farming.
TELUS has continued to acquire organizations in building out their suite of digital capabilities for agribusinesses and farmers. This time including Rabobank in the deal, who had a partnership with Conservis previously established.
Depending how you break them out, this would be the 4th acquisition of a farmer centric data platform for TELUS, having first acquired Farm at Hand, Decisive Farming, Agrian and now Conservis. While there is overlap across many of these systems, they all have strengths, whether it is precision ag, ease and simplicity, or in the case of Conservis, financial management - an area TELUS hasn’t had a robust product for until now.
Deal Logic
First and foremost, strong financial analysis tools are good for the farmer in understanding their farm, fields and optimizing making decisions. This is an important area. In fact, we seen an acquisition from John Deere of Harvest Profit in the fall of 2020, a company focused on financial management for farms. With Conservis’ relationship with Climate Fieldview and even John Deere, there is an ability to have precise field level data fed directly into the platform, something that will also be augmented through AgIntegrated, another company of TELUS.
The second aspect this hits on comes along with the Rabobank tag team. Having records of all important farm and financial information can streamline the farmers ability to access credit and simplify the process in accessing credit from Rabobank (or maybe someone else in the future). Making the process easier is important because accessing capital is notoriously tedious, even in developed countries like the USA and Canada for example.
Another aspect that’s compelling is the visibility (if the farmer chooses) into practices used and outcomes derived throughout the season. If we start looking at financial technology, this is a great foundation for Rabobank to move into financial products for farmers who are growing crops with strong practices, such as giving them better rates. In the future, it may also give visibility into sales contracts signed down stream via integration with MuddyBoots, allowing for increased access to higher value opportunities for the farmer and their harvested crops.
Conservis also augments the agribusiness segment of TELUS. Rabobank offers credit via retailers and one of the challenges for retails is accessing the necessary documents. This relationship seems to be beneficial for retailers who have an established relationship with Rabobank who also might be working with TELUS through the Agrian, TKXS etc offering out there. Not to mention, TELUS has talked about their desire to get into crops beyond field crops and Conservis has customers in the permanent crop space in the USA.
Farm Management Platform Valuations
According to Crunchbase, Conservis raised ~$60 million since being founded in 2009. And according to PitchBook, they actually raised money 3 times last year(!):
The extensive 2020 capital raises signals financial challenges.
When I highlighted the Bushel acquisition of FarmLogs I touched on the declining valuation of farm management platforms and this acquisition reinforces that there is a consolidation necessary and likely at decent valuations.
This is for a couple reasons:
The number of farm management systems out there is beyond what’s necessary. Too many actually hinders a farmers and the industries experience with the systems because so much time goes into basic things like integrations and API’s versus building better tools.
There is a need to cohesively tie together other agtech offerings for farmers and a farm management system is a natural spot to do that.
There is also a 3rd point, touched on by Sarah Nolet and Matthew Pryor of Agthentic, highlighting the challenges of the early business models in agtech and a lack of focus in other areas of the value chain (something TELUS has seemingly noticed).
This won’t be the last acquisition of a farm management system we see this year.
Final Comments
It’s become apparent TELUS is nowhere near being done with acquisitions, highlighting their desire to be more engrained in specialty crops and seeing more opportunities in field crops.
Some of the areas specific to field crops they may look at enhancing their offering with acquisitions could be on:
predictive analytics
storage sensors (really, several areas of the remote sensing realm)
agribusiness capabilities - this could be on digital store fronts and customer engagement capabilities or down to better managing relationships from retail to manufacturer. TKXS has some of this today, but TELUS has seemingly opted to acquire assets and expertise vs. internal building.
TELUS has been acquiring for over two years now and have just began integrating all of the pieces together; building their Agricultural Data Exchange (ADX) and Agricultural Services platform (ASX).
These acquisitions won’t be stand alone, they will be integrated together where they take the preferred capabilities of each company/product and create a cohesive product strategy that benefits farmers as well as the value chain. This obviously is the hardest part and an area telecom companies in the past have not been very successful when they have went outside their core business focus.
As an aside comment, Rabobank’s participation in acquiring Conservis is a positive signal to me for the greater agtech and fintech outlook within agriculture. Rabo obviously sees synergy and an opportunity to build out better offerings for farmers and better outcomes for their business through a digital medium like Conservis. When I look at other organizations in North America like Farm Credit Canada (who has been active in the start-up world recently) and Farm Credit groups in the US, I think we will be hearing much more from them looking to build, acquire and access agtech capabilities (eg: integrate into) that enable a new channel for their services. As farmer adoption of digital technology increases it becomes a disruptive point if they stay status quo or becomes an access point for these credit groups.
This weeks edition of Upstream Ag Insights is brought to you in partnership with GeoPard!
GeoPard Agriculture is a cloud-based powerhouse for precisionAg data analysis, prescriptions creation, smart scouting, and soil sampling. GeoPard Variable Rate (VR) prescription maps are used for fertilizing, crop protection, seeding, irrigation, desiccation, optimization of crop inputs, and yield while preserving resources. The GeoPard engine processes satellite imagery, soil sampling, yield, high-density soil scanners (EC/Moisture/Soil compaction), and topography data, building sophisticated multi-layer Field Potential maps and 3d models. GeoPard VR maps are compatible with most existing machinery and terminal brands. Moreover, there is a bi-directional seamless integration with the MyJohnDeere Ops center, which enables John Deere clients to receive GeoPard Rx maps, crop monitoring, and topography analytics wirelessly.
GeoPard produces precisionAg analytics at scale and provides it via API, widgets, web, mobile applications, and White label solutions for crop advisers, ag input companies, dealerships.
The GeoPard team has great experience of launching successful precisionAg software products since 2012 (Zoner.ag(powerZones) acquired by Bayer, then Xarvio).
ClimateAi raises $12m Series A from Robert Downey Jr fund - AgFunder News
ClimateAi is a predictive weather analytics startup that brings a compelling value proposition to numerous agribusinesses:
Using machine learning to make predictions based on a wealth of data points, the startup says this will enable its clients — which range from processors and packers to seed and chemicals inputs companies and agriculture finance to retailers and farmers’ advisors — to better plan for the changing climate. This could include identifying new locations for climate-smart expansions for specific crops and ingredients, better managing inventory to avoid shortages, and forecasting pressures from certain pests or diseases.
Understanding the longer term weather trends can give novel information for many decisions. And while the forecasts are not 100% accurate, if they are incrementally more accurate than using nothing or than previous weather models, then organizations can better play the odds.
I look at this from long term weather forecast opportunities for organizations to short term weather forecast opportunities:
Long Term Opportunities - When it comes to plant breeding and looking at what weather may become more typical 5 or 10 + years out, this can help support trait development or even where to produce seed geographically speaking. This sounds idyllic, but I do think companies like ClimateAi can become part of the decision making process for organizations thinking longer term. This might even be surrounding capital expenditure for organizations where they look at where to put a processing facility (and therefore where grains or crops are purchased from and how their quality parameters are influenced) based on two different geographies that are similar in tax jurisdiction, talent pool etc, but the weather could be variable and one area aligns better with their needs.
Medium Term Opportunities - For crop input companies looking at planning their product forecasting 12-18 months out, if there is a better indication of dry conditions or wet conditions you can improve forecasting of active ingredients needed and the same goes for large retails looking to manage their inventory and sales opportunity.
Short Term Opportunities - 7-21 days advanced in-season forecasting could support distribution decisions of crop input products, getting product where the highest likelihood of demand is, or even prime communication functions for organizations. Using weather data has become standard practice in traditional consumer retail and I believe it is an untapped opportunity in agriculture. Heck, there may even be an opportunity to offer access to better forecasting for farm customer via retails.
How ClimateAi prioritizes various sub-verticals within agriculture will determine their UX/UI development and that’s where a lot of the value can be unlocked based on how the data gets aggregated, viewed and leveraged within the decision making process.
There is a need to integrate this with other data (see data refinery article later on), but when I look out the next decade I think groups using better weather data and forecasting in agriculture will be the norm in decision making (it already is, it just isn’t proactive…it’s reactive and gut feel driven). Weather influences all.
ClimateAi aims to be deployed across half a billion acres of farmlands around the globe within the next three years
FinTech vs. AgTech - Leaf Agriculture
This is a great post from my friends at Leaf Agriculture highlighting lessons that can be applied from fintech over to agtech.
The one point that stood out to me was this: UX as a competitive advantage.
From the article:
Forbes reported that one way Fintech is outcompeting traditional banking is by viewing design as a methodology, not a package. Keeping customer experience as the focus helps Fintech to think about banking services as a whole, user-friendly ecosystem. Apps such as Venmo have turned a mundane process of money transfer into a fun way to pay your friend or family member.
UX and UI in agriculture have been inconsistent and lacking across a lot of product segments. There has been poor experiences across many, from poorly loading apps, to too many clicks and a disengaging interface to lacking gamification to get users wanting more.
Check out this article, it has some great take aways.
Lessons From Building an Agricultural Data Refinery - Mark Johnson Medium
I have long been a fan of Mark’s data refinery concept, reading about it before he was at Grainbridge through his Medium page. Now that he is building a data refinery within Grainbridge, he highlights some of the lessons from that endeavour.
What is a data refinery?
The idea behind a data refinery is to ingest multiple datasets, clean them up, and put them in an environment where the data is easy to access by everyone in the company, whether it’s a PM who needs user data or a data scientist building a predictive model. We also needed to build the tools to serve that refined data back to our farmers.
Through adding transactional data, grain pricing, yield forecasts and more they can help inform decisions.
Ultimately our goal is to use data to become a personalized AI consultant, giving the farmer suggestions to help maximize profit and reduce risk.
I have talked about this concept (here) where a farmer could have the equivalent to a Wealthsimple roboadvisor for retirement investment decisions for their grain selling decisions. Through augmented decision support a farmer could better manage their risk, hitting their breakeven selling price or even capturing upside.
What Mark highlights at the end is noteworthy too:
Even more exciting is that we can start asking questions from our data: what makes a farmer really good at selling his grain? What are the habits of farmers who aren’t as profitable? Based on your past habits and the market, do we recommend that you sell today or hold off until the future? How does your average price compare to other farmers like you?
In the above Fintech vs. AgTech article I highlight gamification along with the UX comment from the article and when looking at the last question Mark posed, one can see how you might create a value added experience for the farmer through a slick UX/UI and some gamificiation of anonymized, aggregated data.
Corteva Agriscience Among First to Leverage Agile Mobile Robots to Walk Row Crops - PR Web
Corteva Agriscience is working to take agricultural robotics to new heights using a Spot robot from Boston Dynamics. The company is among the first in agriculture to use this agile and cutting-edge platform to ‘walk’ between rows of corn, sunflowers and more. The robot has potential applications in field testing of both new seed and crop protection solutions with its ability to autonomously collect copious amounts of data, support the application of new crop protection discovery molecules, and inspect operations. Spot’s many capabilities can help Corteva more fully understand complex phenotypes to support its research and development selection processes.
This is a cool use of robotics and begins to integrate a novel approach to robotics and IoT in agriculture in the research space.
Related: Farming is finally ready for robots - Venture Beat
Animal Agriculture
I have been getting numerous requests to cover animal agriculture the last few weeks. When it comes to animal agriculture, it gets well outside my circle of competence so it’s an area I have no intention of covering (it would be painful for me and everybody reading!).
To everyone that has reached out I have suggested subscribing to Prime Future from my friend Janette Barnard. Janette does an exceptional job bringing unique thinking and novel perspectives into animal agriculture and how it intersects with current trends and technology. So if you have been looking for some strong content in other agriculture areas, I highly recommend checking Prime Future out.
I suggest subscribing even if you aren’t in animal agriculture. Every week I find a concept or story she highlights relevant to row crop farming or agribusiness in general!
Here is one of my favourite articles from Prime Future along with the link and the ability to subscribe:
The Defensive Get Disrupted - Prime Future
Catch Up with the Latest & Greatest at AgSmart 2021
One of the event groups I volunteer with is the AgSmart group out of Olds College. I am proud to support them and wanted to highlight the upcoming event:
Olds College is excited to welcome you back to AgSmart on August 10 & 11 for the follow-up to the successful launch in 2019! The Event Management Team has been building the evolved event since last fall, with health and safety as the top priority. The team will continually be updating the event plan based on the Government of Alberta’s and Alberta Health Services requirements.
Industry engagement in the event has been remarkable with many exciting features being offered at AgSmart 2021. Around 100 exhibitors will be onsite to profile the latest and greatest in the ag tech segment of the industry. With the mix of returning and new exhibitors there is a lot of new products and services being showcased at the expo.
New this year, the expo will be offering their plenary sessions digitally on the evening of August 9. The Opening Plenary, by AgExpert will focus on the future of farming and how to boost your bottom line with data and digital tech. Additional plenary sessions include content from TELUS Agriculture, ATB, THRIVE and Olds College Smart Farm. Digital content will be free to access.
AgSmart is a unique opportunity to check out the projects and research at Olds College Smart Farm and Technology Access Centre for Livestock Production, including special project tour on campus.
Attendees have the opportunity to engage in the learning expo through live demos, interactive exhibits and over 50 educational session options.
Tickets are available at AgSmartOlds.ca, starting at $20 for students and $60 for producers and industry.
Non Ag Article
How to Be Great? Just Be Good, Repeatably - Steph Smith
This was a great article written on the concept of being great and one that was more thoroughly done than most others on this topic I’ve read in the past.
Other Ag Articles
Learning to Love G.M.O.s - The New York Times
Just as Technology Transformed Agriculture, Harvesting Data Could Reveal Details Down to the Row - AgWeb
Increased Efficiency and Experience with FieldAlytics-AgVend Integration - AgVend
FieldAlytics Farm Planning Integrates with Bushel - EFC Systems
Genetically Engineered Crops Are Key to Lower-Carbon Agriculture - The Breakthrough
Glyphosate price hit 10-year new high, expected to continue in the short term - AgroPages
Which Crops Can Survive Drought? Nanosensors May Offer Clues - Wired
nurture.farm – a Digital Platform for Sustainable Agriculture Scales up to Become Part of the OpenAg™ Network - UPL
A buyer’s guide to soil carbon offsets - Carbon Plan