Upstream Ag Insights - Mar 15th

March 15th, 2020

I decided I should create a logo, so this week is the launch of the new logo for Upstream Ag Insights.

2019 Ag Technology M&A Annual Review

The Verdant Partners have done a great job summarizing the 2019 Ag M&A market, but have now released an excellent reference image highlighting key acquisitions in the agtech space really since it started to take off, from 2012 to 2019.

Taking a good look at the image below sent me down a trail looking into various companies. Highly recommend digging into the image.

Related: I’ve highlighted this report before, but it’s worth sharing again Verdant Global Food and Agribusiness M&A Review 2019

5 Ways Digital Tech Powers Farms

In my bi-weekly post I cover the ways in which digital technology can enable success on farms. While increased revenue and decreased cost are obvious, the other 3 (plus a bonus) begin to touch on the less obvious benefits to utilization of digital tools on farms.

Land O’Lakes Report 2019

In 2019 Land O’Lakes sold more than $5billion USD through 989 retail outlets.

Omnichannel is a focus for Land O’Lakes with about 8% of their retails deploying a digital e-business journey. The verbiage is a bit vague, but it appears that they associated $1.3 billion thanks to their digital initiatives, which includes marketing tools.

What that commentary reinforces is that it’s necessary to be utilizing all mediums possible to support sales in the ag retail sector. Websites and portals integrated into the offer while being aligned with the desired experience and focus at the location level needs to be a tactic deployed in the ag retail space to make any omnichannel offering successful.

They have 1.5 million acres of USA corn on their Truterra sustainability platform. Their “insights engine” has acres for Campbells Soup and Nestle on it as well.

It is tough derive much else as their financial statements aren’t broken out by business unit.

Related: CommoditAg Launches App for Simplified, Accessible Product Purchasing

Raven Drive for Autonomous

Autonomous tractors are a continual topic of interest. While no one knows for certain what the adoption rate will look like over the coming decade; publicly traded companies have shareholders to appease and targets to hit. With that in mind they make forecasts and plans. Through the Raven investor decks and annual reports we can begin to see some of their vision.

With Raven’s majority stake ownership of DOT and purchase of SmartAg, we get a glimpse into what Raven sees in the future of autonomous. If you look at the below image you can see that by 2025 there is a target of expanded product offerings for all applications/implements, a strategic dealership network and a “fully autonomous solution” - presumptively enabling entire fields/operations be seeded to harvested with machines, tools and technology that is with minimal human intervention.

Enabling technology (eg: connectivity and speed of connectivity in rural areas) and regulation are the question marks, but you can bet Raven, and the major OEM’s are focused on working to overcome these challenges.

One of the ways to ensure technology isn’t a limiting factor is strategic investment. You can see that their “ATD” division (Ag division) is getting a disproportionate boost in investment because of the high margin potential opportunity that comes from agricultural machinery, the retrofit components from their SmartAg acquisition and digital systems (Slingshot, AgSync).

John Deere sees similar on the margin front with growth opportunities in aftermarket/retrofit sensors and technology products:

For more see the 2019 Raven Annual Report.

Related: Broadband Connectivity Essential to Autonomous Ag Equipment

John Deere: ‘We believe in electric tractors 100%’

John Deere’s future vision for their tractors (and beyond) is centered around three technology fields:

  1. Electrification

  2. Artificial Intelligence (AI)

  3. Automation and autonomy

Mosaic Upbeat on Brazil

This article emphasizes some of the positives and challenges in Brazil specific to fertilizer and Mosaic, but it can be extrapolated out beyond fertilizer.

“Mosaic is already receiving orders for fertilizer deliveries in the first quarter 2021,” Bielders said on Monday. “This normally never happens a year out. Farmers will only do it if they have good margins.”

In the AgFunder 2019 Report Brazil and Latin America as a whole was shown to be more of a bright spot (although much was in the downstream area).

“Deal activity dropped in most countries, confirming the general trend for a pullback in funding to the sector. India, Brazil, Ireland, Australia, Singapore, Indonesia, and Argentina were among the exceptions to that rule.”

The other area this article highlights is in mitigating risk to financiers and to farmers in Brazil. With challenge brings opportunity, another aspect as to why we have seen more investment in the agtech space, and agribusinesses as a whole into Brazil attempting to alleviate those concerns on a go forward basis:

“Challenges to operating in Brazil remain, however, including unfavorable tax rules that make it uneconomical to produce fertilizers locally and recent efforts in congress to change rules governing farmer bankruptcies, which have increased risks for input suppliers selling on credit”

Brazil is a ~$20billion crop protection market alone, and has over 150 million acres of cultivated land, so the opportunity is large.

Related: Brazil Farm Sector Frets Over Possible China Pesticide Supply Disruptions

Input Marketplace InstaAgro Raises Funding to Target Brazil’s Underserved Small Farmers

Keeping with Brazilian news, another “marketplace” has obtained funding, focusing on the niche of small farmers. While that’s notable, I found the interesting part to be the background on some of the ag retail dynamics in Brazil. One being more focus on stocking just one key supplier with ancillary generics vs. a full portfolio of products from numerous companies like see in North America.

One other interesting note was this:

“Brazil also requires an agronomist to write a prescription for a crop protection product”

Similar to how we buy pharmaceutical products in North America. Is that something we may see in the future come to North America? With the shifts we are seeing in consumer demands, it’s worth noting.

If that was to change, what types of technology does that give rise to?

“InstaAgro is connected to third-party agronomists through an Uber-like platform called ConnectAgro that sends an agronomist to the user’s farm to write a prescription tailored to their problems. If the farmer purchases through InstaAgro, the agronomist shares in some of the profit. It costs the farmer nothing to have the agronomist make the prescription.”

There are already digital tools like AGVisorPRO and AgraLinks and even though these tools are modeled slightly different than ConnectAgro, they could deliver a similar offering down the road.

This doesn’t have legs today in North America, but what shifts in the industry could make this more relevant further into the decade? From a retail perspective it is worth noting.

Airbus Extends into Precision Ag with AgNeo

Airbus has launched AgNeo, it’s new integrated precision farming solution for crops. Delivering in-season actionable information based on satellite imagery and agronomic analytics.

Arable Launches a New Generation of IoT Tools for Data-Driven Farming

Arable is a sensor tech company that derives some powerful information from one sensor (below). They have built out some strong partnerships over the last 6 months, BASF / xarvio being a notable one. Their CEO Jim Ethington actually was at Climate FieldView before they were acquired by Monsanto in 2013.

Having raised $18 million in venture capital, their Mark 2 sensor now collects:

Related: Sensors at the Intersection of Agriculture and Technology

Netafim Integrates FluroSat's Remote Sensing Technology Into Its Digital Irrigation Management Platform NetBeat™

“Netafim, a global leader in precision irrigation, and FluroSat, a leading company in remote field sensing and analytics, have announced their collaboration on integrating FluroSat's data into Netafim's automated irrigation and fertigation cloud-based platform, NetBeat™. FluroSat's unique remote sensing and plant metrics combines with Netafim's NetBeat™ platform to enable easier, more precise, and more reliable irrigation, fertigation and crop management decisions”

With FarmBeats, Microsoft Makes a Play for the Agriculture Market

This article is a few months old, but worth recirculating in that we have a technology powerhouse looking to be in the ag space in a meaningful way. I’d suggest from a data collection perspective, Microsoft is behind the big industry players in terms of data to draw upon and train their cloud based algorithms. They lack a robust data set today.

With that said, they are looking at a unique way to connect the farm that I think is of interest.

Related: LoRaWAN Helps Ride the Smart-Farming Wave

AgriFoodTech Startups — Here’s How to Partner with Equipment Dealers

A path to market is key for any start up. Direct? Partner? Combination? The gate way to the customer in many instances is the equipment dealer or crop input retailer, but everyone is knocking on their doors continually meaning effectiveness is key.

“For an average dealership making $11M/year, you want to show them a vision and clear path for them to generate $1-2M/year in revenue within 3 years.”

I love the overview of how to address the incentive structure of sales reps within the organization. The sales reps make thousands from a tractor sale, while the incremental gain from selling an add on service tends to be minor in comparison. The desire to push hard for an additional add on isn’t always there, specifically if the rep isn’t comfortable with the product. I’d suggest there needs to be a distinct plan that ensures the sales staff aren’t just comfortable in the product, but confident in it. If there is any hesitation, the view will come back as the small incentive gained from one sale isn’t worth compromising the entirety of that relationship with the customer. With this in mind, showing the ways that this tool will strengthen the relationship between the customer and sales rep to the sales person is important as well.

How Well is Your Precision Business Built for the Future?

Building out a precision business and more importantly, a service offering is difficult for any company or organization. But it can be even more difficult to successfully build out for organizations that historically aren’t “pay for service” product companies. Service is a core part of most ag organizations, whether it be retails or equipment dealers, but they are services that support a product. Building out a service that IS the product and growing that profitably brings a different dynamic.

Precision Ag does a good job of laying out some articles and considerations to think about when building out a precision service offering.

Related: 5 Keys to Achieving Recurring Precision Revenue

How Ag Retailers Drive Conservation Ag Adoption

An analysis of primary research highlighting ways in which innovative ag retail companies are successfully integrating products and services related to conservation agriculture and the sustainability of agriculture into their business portfolios.

The one thing that seems sure is that the products and practices that increase “conservation ag” (eg: nitrogen stabilizers and soil testing/crop planning) will help make retails more successful along with their customers.

This report is worth skimming to see the commentary from some prominent American retailers.

Related to the above report is an overview on some of the R&D and product launches going on in the Soil Amendment category. This space aligns closely with microbials, but is more focused on influencing soil health than plant health: Soil Amendment Technologies and Future Trends for R&D and What No One Tells You About Soil Conservation and Long-Term Sustainability?

Retailers Sort Through the Myriad of Technologies to Better Serve Growers

“Several “very interesting” platforms, sensors, imaging, and crop nutrition solutions will start to find scale. “Adoption is very low for the most innovative solutions, and 2020 should be a year where we start to see separation in the ranks of various technologies.”

The above quote is from Toby Goodroad with Yara and I couldn’t agree more. While the adoption is slower, we have the technology currently that will evolve soil testing.

I have talked about some of those views recently that can be found here.

2020 Product Innovation Update

Product updates on the seed, chemical, microbial and digital front from Bayer, BASF and Corteva.

A few highlights:

“Bayer has a library of 170,000 microbes that it screens for potential crop-production benefits”

“These days, inter connectivity between crop protection, seed treatments, seed, traits, and digital tools is the best way to serve BASF’s customers”

“Pioneer officials say corn-breeding tools like double haploids and predictive modeling have sped hybrid development. It enables Pioneer breeders to form a homozygous inbred used in hybrid development in one cycle compared with eight cycles“

Not from the same article, but from Successful Farming again to round out the big 4 news, an article over viewing the new integrations of Syngenta’s AgriEdge tool located here:

“Syngenta  is updating its sustainability measurement tools to expand the capabilities of AgriEdge, the Syngenta whole-farm management program that the firm says helps customers maximize and sustain their return on investment. The new integrations will include”

Cool Farm Alliance’s Cool Farm Tool is now integrated with Land.db, the cloud-based software included with AgriEdge. This comes on the heels of an announcement I highlighted recently in Syngenta collaborating with the Land O’Lakes Truterra platform. Syngenta talks heavily about their focus on sustainability, as all of the big 4 do, and is backing it up with some action.

Syngenta today has one of the most fragmented strategies in the digital space; having AgriEdge, Land.db, Strider, Cropio, plus pending seed selection tool NK Seed Analyzer. I don’t say fragmented in that it is poor. I say it in that they have acquired some strong assets and teams globally and have an opportunity to integrate these in a way that fits their longer term strategy. In reading their annual report, you can see significant cost increases at least partially attributed to increased expenditure on “digital programs and capabilities” and “in IT and digital platforms”. This reinforces their emphasis on digital tools moving forward with spending on acquisitions, internal digital development other resources.

10 Disruptive Trends for Crop Protection

This is a few month old article and from Asia, but still very relevant, specifically the conclusion paragraph.

“Crop protection companies throughout the chain no longer work in a silo and convergent technologies impact agronomics and economics at every level. Progressive companies are following the trend and transforming into digital farming companies, and long-term players will need to develop a strategy to follow suit. Transactional companies who compete solely on price and volume will be replaced by those willing to invest in the success of their clients and other companies upstream and downstream in the channel”

Analysis of China’s Pesticide Export

“In terms of product availability and its price, the unstable supply chains and more cost on environmental compliance will increase the price of agrochemicals in general.”

This report zeroes in on China export to Europe, but the costs associated with obtaining product from China will increase globally.

Corteva Responding to Changes in Agriculture Supply Chain

“The ag supply chain is being reversed engineered with the consumer not at the end of that chain but right up front,” Collins said during the Canadian Crops Convention in Vancouver, British Columbia, Canada. “We call it table to farm. It’s all about closing that gap between what consumers want and what farmers can deliver in an economically and environmentally sustainable way.” 

“The concept is framed around four key concerns: consumer expectations, mounting economic pressure on farms, escalating trade tensions and a growing call to action to address climate change”

Other Ag News

COVID 19 And Global Agriculture: 5 Data Sets To Watch - Ag Professional

Bayer Opens Innovative $100M Corn Breeding Facility in AZ - Global Ag Investing

Chinese Drone Maker Sees Sales Rise Amid Coronavirus - CNBC

Medici Ventures Leads $8.2M Funding Round For Grainchain - Global Ag Investing

Gro Data Shows US Soil Moisture Levels - Gro Intelligence

For Canadians: Les Henry Prairie Soil Moisture Map 2020

Non-Ag Article

One Big Idea by David Perell

“Consuming as many books as possible has become a competitive sport for knowledge workers who want to show off their intellectual curiosity. To do so, they race through books like they’re collecting mushrooms in Super Mario Kart.” 

I have been guilty of the above, finishing a book just to finish, and that’s why I think this article is such a good one; it puts into context the power of taking the time to dive deeper into an idea vs. continuous information acquisition.