Upstream Ag Insights - March 28th 2021

Essential news and analysis for agribusiness leaders

Mar 28, 2021

Welcome back to Upstream Ag Insights!

Index for the week:

Bundling and Unbundling in Ag Retail
BASF 2020 Annual Report Analysis
The Opportunity of the Digitally Enabled Ag Retailer
The AgTech Adoption Dilemma
Chinese Price Index for Active Ingredients
Pinduoduo in Agriculture
Is there a Future for the Crop Protection Industry?
Ag Retail Consolidation
The Digital Age of Agri Marketing
Mosaic and AgBiome Partnership
Incentives for Farmer Financing
Indigo Slims Down

Join thousands of agribusiness leaders and subscribe to Upstream Ag Insights today:

The Bundling and Unbundling of Ag Retail - Upstream Ag Insights

There is a famous line from Jim Barksdale, CEO & co-founder of Netscape, said that there are only two ways to make money: bundling and unbundling.

This is the case in ag retail too. I break out how the “bundles” have been evolving.

BASF 2020 Annual Report Highlights and Analysis - Upstream Ag Insights

BASF is the 4th largest seed and chemistry manufacturer globally. I went through their financials and strategy from several investor reports, including their 2020 annual report.

Within this is a chart I created overviewing the how six of the largest seed and chemistry manufacturers compare on revenue, and R&D expenditure.

The Opportunity of a Digitally Enabled Ag Retailer - Crop Life

This is a well written article with a lot of great take-aways for how retailers can benefit from becoming digital enabled.

To me, Ag retail isn’t online or offline, it’s everywhere. The organizations that embrace digital and integrate it effectively will deliver better experiences and outcomes for their customers, creating a competitive advantage for these organizations.

In my 2020 Nutrien Annual Report Analysis, I begin to touch on something that I believe Nutrien will do in leveraging their customer engagement to better understand their customers and inform their business decisions and support their carbon business as an example.

This leads to the next opportunity: the intersection of e-commerce and agronomy. This is not only for the xarvio’s and Agrofy’s like I’ve talked about before; it’s for retails with digital engagement and agronomic understanding of their geography and customer. Integrating them. There will be an evolution, where organizations that have the agronomic system and modelling systems for alert based sales in-season along with tools like seed recommendation engines to ensure a seamless, differentiated experience for the farmer, plus the support of an expert individual to ensure the best possible outcome. This isn’t possible if there isn't a starting point today to begin launching an online aspect to your business creating customer habits.

For information regarding advertising in Upstream please send an email to upstreamaginsights@gmail.com and we can discuss the opportunity plus I will send you some background, stats and packages available.

Podcast: The Agtech Adoption Dilemma: Irrigation - AgTech So What?

Two weeks ago the AgThentic Group and I launched a report on the adoption of irrigation technology. This week the podcast came out. There are a number of takeaways surrounding the lack of adoption in irrigation technology, but one quote I want to highlight is from Matt Pryor of the AgThentic Group on a reason for the lack of adoption:

Technology has not yet cleared the bar as the trusted advisor

Trust in the technology to either be accurate, turn on etc. This is a very real psychological barrier hindering adoption of many pieces of technology in agriculture. Heck, even for me. I used to send Upstream out manually at 4:00amMT even though there was an auto send function…but I got up every Sunday morning at 4:00am because I wanted to be consistent and I had reservations about whether the auto send would work. A free newsletter being sent to only <500 people by a semi-tech savvy person! Now, when I think of the stakes for a farmer needing their irrigation to turn on? Infinitely higher. The apprehension may not always be rational, but it’s a reality. This is why there needs to be considerations for the psychology behind a product: humans aren’t always rational, so how will that be managed?

Check out the podcast and download the report, I think there are some valuable take aways for irrigation technology and ag technology as a whole.

China Price Index: Strong Demand and Low Inventories Continue to Drive Prices for Major Pesticides - Agribusiness Global

In March 2021, the fundamental raw material prices rose significantly, which brought huge pressure on agrochemical production in China.

The majority of the major active ingredients in this layout are trending up, well up.

The good news is consumption of agrochemical portfolios would be strong due to the demand from farmers based on the previous analysis of global demand logic.

Pinduoduo in Agriculture - Pinduoduo

PinDuoDuo is a social commerce company I have been following from China for several months. Generally, commerce interests me especially in China, where the dynamics are so different than in North America. What caught me off guard was their emphasis on agriculture.

They are one of the largest agriculture platforms in China and have a vision to expand beyond:

One such change sweeping the world is agriculture and grocery. Pinduoduo started with agricultural products, with the vision of offering consumers the Costco + Disney experience of more savings and more fun. We are now the largest agriculture platform in China and we hope that Pinduoduo can one day become the largest grocer in the world.

Their integration from farm to grocery is extremely unique and something to watch as they connect the supply chain tighter. The more reactive they can be to consumer demand, specifically if they have the data and understanding of how to produce a strawberry for optimum taste for example, and then reinforce that with feedback later down the line.

This is a group I am going to continue to look a bit more into in the future.

Is There a Future for the Crop Protection Industry? - Harry Teicher

I always learn something new when reading anything written by Harry Teicher. This is a really good piece on the future of crop protection.

Increasingly, innovation is taking place within delivery technologies that address the two orders of magnitude loss from active ingredient uptake into the leaf, translocation throughout the plant and target site delivery

On this point he goes into non-carriers, targeted delivery, adjuvants & formulations inducing crop defense responses, and biopesticide formulations.

We have seen an increase in the interest around delivery of crop protection products over the last numbers of years due to:

efficacy enhancements
environmental benefits
differentiation and enhanced margin opportunities for various groups
secondary plant health benefits

The crop protection industry’s most significant innovations are taking place at the interface between crop protection products (chemicals and biologicals), precision technology, and plant biology.

The intersection of these is much of what excites me about the future of agriculture, so it will be fun to follow along.

Here’s Why There’s Excitement in the Agricultural Adjuvants Market - Crop Life

Ag Retail Consolidation Math: 1+1=1 - Crop Life

Ag Retail consolidation has been for years now and I think many see it the same as me, it will continue to be that way.

The below points were pulled from the article linked above, attributable to Shelly Kruse, Executive Director, Strategic Relationships for GROWMARK:

The ability to have the size, scope, and scale to deal with so few manufacturers.
The continued consolidation at the grower-customer level.
Larger growers wanting to spread their business between retailers to control supply risks that pop in the market and the reliability of custom application if/when needed. Growers, however, want to deal with dominate retailers.
Overall growers are shifting to an educated/business approach and this takes top talent at the retailer to demonstrate value to the growers. Consolidation allows for sorting out of talent and securing top talent.
The need for people resources in business areas that can’t be supported within smaller cooperative structures. Examples of key positions needed that help drive consolidations are human resource manager, technology lead, CFO (instead of bookkeepers), experienced management level positions, and top salespeople.
Costs that have increased within the past few years — pension (retirement plans), health insurance, overall insurance costs, and application equipment are driving the need for efficiency improvements to do more with less where consolidations can provide positive impact.
Doing business in multiple states is common and requires additional resources.
The recent volatility of markets speeding up the urgency of consolidation for leveraged and financially-stressed cooperatives.
Growers have experienced financially challenging years within the past five to seven years. This has impacted credit and retail cooperatives quality of aging. The lingering impact of credit and collections will continue as another factor influencing some mergers.
The increase in the use of technology tools requires scope and scale to implement and fund. This includes digital sales and other technology-forward solutions.

The ability to have in house talent/expertise along with ability to differentiate on their own in house products falls into this too.

The Digital Age of AgriMarketing: Is Your Brand Ready? - WS

Digital marketing is getting increased attention in agriculture. That’s why I found this stat about how farmers still rely on physical media to be of interest:

Around 80% of farmers still read agricultural newspapers and magazines on a weekly basis, with around 50% stating they also read printed newsletters regularly. Close to 50% also read direct mail pieces.

I would be interested in seeing what percentage of time is spent online versus reading physical magazines, newspapers as well.

The power of digital lies within the data it brings, allowing brands to provide exceptional experiences both online and off.

Just like with retailing, in marketing there is opportunity to leverage not just one or the other, but increasingly view online and offline as one cohesive unit, to feed and support one another into a strong marketing strategy.

The opportunity to have physical and digital touch points is increasingly important.

Mosaic and AgBiome Announce Collaboration - AccesWire

The collaboration will leverage AgBiome's proprietary GENESIS™ platform that comprises the world's largest, most diverse, fully-sequenced collection of microbes coupled with innovative product discovery technology. Mosaic will lend its industry-leading expertise in soil health and product development, as well as its global distribution and sales network. Together the companies expect to find solutions that can be added to Mosaic's soil health portfolio.

Mosaic has been had a soil health focus since late 2020 and it continues to show with their investments and partnerships.

For more on Mosaic’s initiative, I covered their partnership with Sound Ag more hereand their larger strategy in an analysis of their investor presentations here.

Incentives for Farmer Financing

Adrienne Ivey @adrienneivey

Should financial institutions have a say in what sustainability & climate change mitigation methods we are using on our farms? I just did a survey for a major ag lender that asked how they can use their lending decisions to fight climate change for the best interest of society.

This tweet received a lot of interaction on Twitter this week. There were a numerous comments from farmers against a financial lender that would take a stance to influence lending based on climate change or sustainability initiatives.

There is some legitimacy to this concern: if lenders do not understand the dynamics of crop production it could lead to frustrations and poor outcomes for farmers.

That’s why I think we will see organizations, whether it be groups that deploy the 4R’s, or retails for example, partner with these leading institutions to ensure the action expected is aligned with the farmers best interest as well as the environmental side. We are likely to see lending institutions influencing the adoption of various practices, or reinforcing the current strong practices through better terms for the farmer on their financing. Eg: Doing no-till with variable rate fertilizer enables access to a lower financing rate. This will take some alignment, but I believe there are wheels moving on this and it could act as a differentiator for the organizations looking to work with the farmer on it, because there is a financial incentive for it.

Share Upstream Ag Insights

Early Farmer Insights Can Accelerate Product Adoption - IN10T

One of the start-up companies I am most bullish on is IN10T. One of my biases is towards customer centric focus: What is in the best interest of the farmer? What will enhance their experience with the product? Where can the product be improved? Where is the products best fit? How can you easily get that information into a useable form for farmers or re-sellers of the product?

These are all very real questions that need answers, IN10T works to deliver answers on them to companies.

Many organizations are strong at the development of product, but miss accurately assessing how the product should be deployed, positioned, utilized and supported, all of which needs to fit with the specific segment of farmers that are being targeted, or identified to target.

One of the crux’s of the ag industry is seeing farmers as homogenous. They aren’t. Farmers each have unique pain points, needs, desires etc and it doesn’t necessarily vary just from western Canada to the mid-west USA, but even in tighter geographies. Supporting organizations understanding of what a farmer likes, doesn’t like

Accelerating product adoption comes down to understanding farmers. A simple enough concept, but one often overshadowed by great innovation.

If we think about two major hurdles to adoption of ag technology, these are three major culprits:

Up Front Risk and Misaligned Inventives
Poor user experiences

Of course, ROI consistency and others are in here as well, but these two begin to take away the major challenges for farmers to get to the better ROI.

IN10T can begin to eliminate the poor experience and positioning of products and then there are also other companies, like Global Ag Risk Solutions, Growers Edge or certain manufacturers that are working on up-front risk and aligning the incentives. Part of the opportunity in agtech is in giving other ag technology an opportunity at adoption.

Ag-Tech Startup Indigo Slims Down as CEO Gears for Green Future - Bloomberg

The last official words from Indigo were that they were reducing headcount. They have now came out and stated:

Very, very clearly, we’re going to focus on two problems: one, helping the market become more efficient and more effective at buying, selling and moving grain…Problem two that we’re focused on is really around climate change and sustainability.”
Indigo has cut its service offerings to four from eight and is putting more emphasis on its digital platform, which seeks to connect farmers directly with buyers.

To go from 8, including microbials, digital imagery and more, down to effectively two of focus is a big change for Indigo. The question is, is a grain and carbon market necessary?

Everyone is after carbon and Indigo was one of the first to drive messaging around it.

Even on the grain front, should they be focused on corn and soybean? Or should they focus first and foremost on the smaller grains in the USA where there may be less liquidity for farmers? I know we often see market places in agriculture and ask “why?”…We say “the relationship is the important part”. And that’s true. But, there is always going to be a portion of the market that may be looking for a more seamless option.

Think of the consumer space with eBay. Not everyone uses eBay, but the group that does created a viable business. People still want to buy some things in person, but some things are easier to purchase online. This could, at least in part, be the same with Indigo and their grain market. But for farmers locations and service does matter, so there are differences.

The question to me is, will the large incumbents watch this happen? Is there enough revenue in the Indigo model to make a viable business based on the money they’ve raised?

There has been numerous grain market players in North America and many have pivoted and the major grain handling organizations have began looking at different ways to service their customer.

Many companies in the agtech space will need flawless execution to be successful, but Indigo is at a point where I am uncertain they will be able to drive a successful business, in grain or carbon.

This weeks edition of Upstream Ag Insights was brought to you in partnership with Aberhart Ag Solutions!

Aberhart Ag Solutions is truly a family run business with an extraordinary background in agriculture. We understand our customers on a whole new level, allowing us to create solutions for farmers by farmers. We want to help farmers grow their best crops to date! By using Bio-Sul Premium Plus, Super KS, and ZMC Grow you can significantly improve your yield by ensuring nutrient availability and intensifying your fertilizer program. Visit our site to view our list of Trusted Applicators, and find one near you. Check out our website here!

‘Everyone’s either ag or tech’: Firms Seek to Merge Skills - Farm Progress

You go to fancy tech conferences and there are a bunch of startups patting themselves on the back, but there are no farmers around, or there are a few who tend to be in the same areas and they tell us they’re doing great.

When you go to agronomist conferences, there are a lot of incredibly smart Ph.D.’s and master’s students, but you look around and there’s no tech…Everyone’s presenting on poster board. And there’s minimal interaction between these two.

My friend Liron Brish nailed this comment. There tends to be conferences for either/or. I even notice it on Clubhouse. It creates a disconnect. Even from an educational perspective, only now are we beginning to see institutions like Olds College combine agronomy and technology. In order to optimize farmer and industry success, there needs to be a unified approach. You won’t have good technology for farmers without good agronomics as a foundation, and moving ahead you won’t provide good agronomics without a strong grasp of the technology out there.

We are just beginning the shift where analog first businesses integrate digital. I talk about the need to focus on digital initiatives, but one thing I probably under emphasize is digital literacy within organizational culture. This will be a driving force in the future.

Top Technology Investments Farmers Want to Make - The Daily Scoop

I found this to be an intriguing survey of farmers. While not many farmers are going to win the lottery, there has been some positive price swing upwards in the market which means farmers may be interested in testing some new technology.

Non Ag Article

What is Amazon? - Zack Kanter

Agriculture is a passion of mine, but two other areas I am continuously enthralled by is digital strategy and consumer retail. This has lead me to a continuous interest in Amazon, especially as they have evolved well beyond retail into something else entirely. But what is that? This is a great article highlighting the evolution of Amazon.

Upstream Ag Insights