Upstream Ag Insights - May 17th
Essential news and analysis for agribusiness leaders for the week of May 17th
|Shane Thomas||May 17|| 3|
This week I opted for a few less main heading postings compared to other editions of Upstreams. There are 4 that are my personal favourites for the week; one being The Shopify of Ag Retail, my bi-weekly blog post, followed by an announcement from AGvisorPRO and some implications their new initiative could have in the market place. Corteva made a seed announcement that interested me too. Lastly, I dive into the technology from Sound Agriculture and I think what they are doing with biologicals might pique everyone’s interest.
There is continual reference towards “The Amazon of Ag” or “Amazon of Crop Inputs” in the ag marketplace. While Amazon has become the “go-to” spot for consumers, agriculture brings different challenges.
This is where a unique service can benefit the ag retail market place, and already has begun to.
Who is the “Shopify of Ag”? What does that model look like? Check out my new post.
Stay tuned for a follow up on this topic.
Related: What Does it Take to Build a Platform? - The Future of Agriculture Podcast
Harry Teicher does a phenomenal job of discussing the structure of innovation (which sounds counter-intuitive), but having a process to manage through the life cycle of product development can ensure a better outcome for customers and fewer resources expended for the organization. The focus of this is in in R&D around biological and synthetic pesticide development, but the concepts can be applied to other areas of agribusiness.
“R&D frontloading is a crucial part of Lean Innovation - which may be defined as both 'doing the right thing' and 'doing it right':
Doing the right thing means ensuring that the outcome of the project targets the customer need
Doing it right entails implementing front loading decisions through a prompt and efficient development process
We can summarize this as: "Creating more value for the customer, with fewer resources."
“The textbook example of the value of identifying customer need in Lean Innovation is that of the redesign of the Toyota Sienna minivan for its primary market - the United States. Rather than relying on surveys, Toyota addressed customer needs by sending an engineer to the US to rent current model Siennas and drive 85,000 km throughout North America, from Canada to Mexico.”
Clay Christensens “Jobs to be done” needs to constantly be applied. I’ve talked about this in Navigating the Next Decade of AgTech.
Part II of this article is located here.
“Corteva Agriscience is introducing Brevant™ seeds in the U.S. for sale exclusively through retail, focused in the Midwest and Eastern Corn Belt”
“In the Southern, Southwestern and Western U.S. Markets, Corteva is moving to a single seed brand - Pioneer® brand seeds - for corn and soybeans”
“In the U.S., Brevant will replace Mycogen® Seeds as Corteva's primary U.S. retail-focused brand, bringing retail customers a new, agile way of doing business with Corteva. Brevant seeds will be available for planting in 2021”
Brevant has been launched in Canada and South America for more than 2 years. Corteva has now opted to launch this product in the USA, their strongest market share geography in the world. My assumption is that this is at least partially due to the strength of their market share vs. less in those other geographies; launch in geographies to find out how it goes and learn from that for your core geography.
This strong market share has been in large part to their Pioneer genetics as well as their unique agency model, selling direct to farmers through their own integrated dealers. Now Brevant offers unique genetics through a different channel: the retailer.
There is continued talk about the large seed and chemistry manufacturers going direct to farmer. This reinforces a commitment to the retail channel. This seemingly will have a larger play in mind, from increased market share in the seed space to a tighter integration of their chemistry from a programming perspective and some ability to leverage Granular, their digital platform, through the retail channel in a more meaningful way. Post 2020 Corteva management expects to grow revenue 1-2% higher than market growth, including 3-5% growth annually in seeds and 5-7% growth annually in crop protection. They have a higher percentage of their business in seed today, so more room to grow in the chemistry space. This strength in seed, with a strategic focus, allows the company to tie in their chemistry more tightly and enable those higher growth prospects (along with a strong pipeline).
Note: This is a 2019 image, so it is out of date, but illustrates their routes to market.
Another factor could be their future reduction in licensing fees thanks to discovering their own gene and traits for herbicide tolerance. These fees stifle margins. With their dealer network they have been able to better manage margins with this in mind. But after the 2023 expiration of licensing agreement with Monsanto/Bayer for their seed tech, Corteva will save millions royalty fees ($800million last year, forecast to hit $1B by 2022) thanks to having developed their own genetics and traits, so their fees will trend down afterwards. That will be a big boost to their operating margins. Corteva will also start generating revenue from licensing Enlist traits.
Corteva as a pure play agriculture company presents many unique opportunities. Observing how this unfolds in the USA, and further other geographies like Canada will be fun to watch.
This article isn’t specific to agriculture, but heavily emphasizes agriculture and the future of it.
“Insights derived from biological data account for more than 50 percent of the economic potential in the next ten years.”
“As technologies rapidly evolve, and biotech and artificial intelligence converge, both larger incumbents and smaller, science-based start-ups will struggle on their own to drive R&D and navigate commercialization.”
Lots of collaboration and cooperation coming our way in the future. I spend time looking at R&D spend, which will remain to be important, but will emphasis on strategic partnerships grow in value in the future? We are already seeing a growing emphasis on M&A and corporate VC. And we will see this grow.
Check out this figure from AgFunder:
Even look at the focus of Novozymes who is also highlighted this week. They do not have exceptional expertise in agricultural market, like market channels, farm customer etc, but they have 1st class technology. Numerous companies in the ag space are partnering with them.
“Sustainable agriculture encourages us to think outside the box. Technologies are already offering powerful tools to help growers optimize farming. GPS-based ones are the most popular because they unlock numerous opportunities. Unfortunately, many of them, like analysis of vegetation indices, are still being missed out. Only 35%-40% of U.S. growers have implemented several technological tools on their farms, according to the precision ag platform EOS Crop Monitoring estimates.”
There is a lot of opportunity to utilize remote sensing tools to manage and monitor crop sustainability. Imagery is just one method of further enabling sustainable farming; other sensors like soil moisture sensors and machine learning and mechanistic crop models being used together to make better decisions (top dress, anticipate nutrient deficiency etc). To top this off there is the ability to CONFIRM sustainable practices remotely, such as tillage and soil surface residues, an important component of “sustainable” AND carbon credit protocols in North America today.
“Sustainable” doesn’t necessarily mean “expensive”. Satellite monitoring is not merely an innovative but also cost-effective means of sustainable ag. According to the study published in Agronomy, “corn farm operating profit of precision agriculture adopters was 163 dollars per hectare higher than for non-adopters.”
The buzz around microbes is significant in ag. As one can see from the investment and acquisition in the space of microbial companies, many of the large agribusinesses do not have a heritage strength in this space.
Another route organizations can go is partnerships. Organizations like Novozymes do not have the expertise of the farmer, the channel, the regulation etc and so it makes a ton of sense for them to look for alternative routes to market with their technology.
They have found numerous routes, depending on their specific microbe. While Novozymes biggest growth prospects aren’t ag, and only 13% of their business is in the ag space, the value their technology can have within the agriculture space for numerous companies is significant.
Syngenta, UPL and Bayer make a lot of sense. Univar Solutions is a unique partner with exclusivity in Canada. Univar focuses specifically on the distribution of crop input products in Canada, but over the last number of years they have acquired nutrient companies and negotiated exclusive rights for Novozymes inoculants, supporting the ~8 million pulse acres in western Canada plus the …soybean acres. This partnership, along with some of their other initiatives (on the digital and nutrient front) has enabled Univar to integrate backwards in their business and build a differentiated offering to ag retails and farmers in western Canada.
Sound Agriculture is an organization that has raised venture capital from the likes of Syngenta’s venture group and Cultivian Sandbox. They are an organization utilizing unique proprietary ingredients to influence plant health and the plants interactions with their environment.
Their primary product offering today is an active ingredient that falls under the category of a strigolactone.
“strigolactones are signaling compounds which serve as endogenous hormones involved in the control of plant development and as components of root exudates which promote symbiotic interactions between plants and soil microbes.”
The active ingredient they have patents on and formulations of in their Source product is maltol lactone.
Their product offering would fall into the category of biostimulant.
Their positioning is interesting to me as if you look at how strigolactone molecules work, they work through interactions with hormones within the plant, stimulating various exudates and excretions from plant roots which increases microbe activity in the rhizosphere, enabling solubalization of nutrients like phosphorous. This would be extended beyond phosphorous too. However, their core emphasis is how the application influences the microbial activity and levels around the plant roots.
Their claim on N fixation is one I need to explore a bit more. I cannot find anything explicit on enabling N fixation from nitrogen in the air like they claim in the video on this page, however, there is some work done on strigolactones increasing N availability in the soil due to increased activation and symbiotic relationships of arbuscular mycorhizzae, shown here.
For pulses I did find some data supporting this:
“The results of the assay indicated that strigolactones are not required for nitrogen to regulate nodule number, although they do promote nodulation”
They do not emphasis this in soybeans yet.
“The company is targeting corn first but will expand to soybean and other row crops over the next couple of seasons”
I haven’t dug deep enough into the influence of strigolactones and related molecules influence on soybean, but knowing that soybeans aren’t as effective at fixing nitrogen as other nitrogen fixing crops like peas and the reliance of soybeans on phosphorous, I see the potential in soybeans.
Their product line is set to expand too:
“We have some exciting projects that are actually increasing the efficiency of a plant in converting sunlight into biomass.” Other projects will focus on drought tolerance and early-season cold stress.”
Related: Top 20 Ag Biotech Deals of 2019 - AgFunder
The announcement of AGvisorPRO offering a subscription based offer for ag organizations I think has a lot of merit for organizations in the industry. Now, with the first sign ups I will be interested to see how the uptake goes. These companies include Taurus, Point Forward Solutions, Keg River Sulfur and Pattison Liquid Systems.
AGvisorPRO is a platform that connects individuals with questions to people with answers, specific to the agriculture industry. When a farmer with a question pulls up their mobile app and types in the topic, they get connected with an individual with expertise (an advisor) in that specific subject or field. The two get connected via the app and the farmer with the question gets charged a flat fee per 10 minutes of conversation, with the majority of those dollars being deposited into the advisor’s account and a small percentage being captured by the AGvisorPRO platform. Think Uber where you have a driver (the “supplier) and a rider (the “demand”) and the Uber app being the platform that enables that value creation. But now you have experts and advisors (“supply”) and farmers with questions (demand). But AGvisorPRO has added an additional feature to attract larger agribusinesses that have products onto the app for a fee. These agribusinesses employees that are on the app could be communicated with by farmers or industry professionals for no charge instead of the fee alluded to earlier.
The “supply” (experts and advisors) within their business has been seemingly built up significantly over the past year and now with the addition of agribusiness clients, it is more robust than ever. But these organizations will have expectations. Part of that expectation will be access to customers - both their current customers and potential new customers. If their customers are on the app, it builds out a direct line for customer support with enhanced features and tools. This capability is a step up from the traditional 1-800 number used to service customers, or a farmer may only have the number of one company employee who is unable to make it to the phone. This can significantly enhance customer experience with a company and with a product.
The new customer is an even more interesting topic to me though.
Reaching new customers for organizations can be futile and expensive, specifically for when they are attempting not to add a significant number of people and keep expenses low. AGvisorPRO presents an opportunity for customer acquisition for these businesses. If Taurus Ag (a company that specializes in plant health and crop nutrition products) is on the app, they now will have the opportunity to get connected with a farmer using the app that has a question about foliar nutrition or biological products for example. This means an opportunity to convey their message and position their product in a way that entices a sale. Today Taurus and many other organizations are optimized for a B2B relationship with the retail. AGvisorPRO disintermediates the flow of information around the retailer and directly to the customer they might not have had access to before. The ability to control their specific message and influence purchase behaviour with a more direct route to attribution for that sale from specific marketing dollars is significant for organizations the size of Taurus.
This brings up the question of how the AGvisorPRO algorithm prioritizes specific Tech Direct customers. Today, they have an algorithm derived from experience, education, ratings from users and more that goes into it, but what might this look like in the future? Does it open up the potential of a Google ads bidding type process to be the prioritized deliverer of information around the topic of “crop nutrition” for example? What about whether farmers want to be able to be accessed by company specific professionals? Can they opt out of that?
It will come down to AGvisorPRO being able to create the habit within farmers of opening their app for information vs. phoning their retailer or equipment dealer. Further to this, it will stem from emphasis from the advisors and agribusinesses, advocating for contacting them through the app.
That’s the biggest challenge for AGvisorPRO today. With all the interest in tools that enable remote communication and informaton flow, AGvisorPRO is one I am looking forward to watching.
Related: Bringing Expert Knowledge to the Digital Grower and Ag Retailer Relationship - Croplife
“Over the past couple of years, our database of digital agtech solution providers has grown to over 3,000 companies. Farm Management Software (FMS) has become the largest category, with over 500 listings”
The Farm Management Software space is huge. However, each platform tends to have strengths and weaknesses. When you break down the segment into more specific categories you can begin to see which platforms are strong and have a niche fit vs. those that may not have long term future prospects. I like the way the categories have been broken out within this article.
Related: Farmer’s Hive Tackles Farm Management and Food Traceability All In One - AgFunder News
The potential with synthetic-aperture radar technology (SAR) and other SAR like technology is significant. Being able to accurately assess the crops and total acres, but also be able to layer that with yield prediction powers farmers, agriculturally based organizations but even well into the supply chain. Rail organizations that need to prepare what it would take to ship, trucking companies, feed companies and more. The implications are significant.
This obviously needs to be nailed down first, but then I think towards the layering of weather data onto the yield prediction to be able to assess quality - protein, visual grade, falling numbers etc. This would take a lot of data to be cleaned, connected and contextualized so it won’t be easy. This would mean those quality parameters would need to be able to be correlatable with weather and soil information. No easy task. But the value would be high. It could change the dynamics of purchasing behaviours from food companies or grain origination companies, and marketing initiatives of cop input companies.
“Members of industry-led AgGateway sit down for an insightful conversation on eConnectivity and where the opportunities and challenges may be for retailers considering it”
The discussion of digital connectivity in retail can go numerous directions. I touched on the digital store fronts in the first heading today, but within this article there is discussion about where to start as a retail organization and how to build out meaningful digital tools for farm customers from leaders in the ag retail industry.
If you are interested in looking at what Fertilizer Canada has been up to, this is a good overview.
According to research by The Sustainability Consortium(TSC), almost half (49%) of the food and beverage companies working with TSC to improve their supply chain’s sustainability could not determine the farm management practices for their in 2019.
Crazy ! Almost half of the major food and beverage companies working with TSC on supply chain sustainability reporting couldn’t determine how the corn, wheat, soybeans and other crops their products are made of were produced on the farm.
Many of these companies have ambitious supply chain sustainability goals to substantially reduce their environmental footprint over the coming years. How can they expect to achieve these goals if they have no visibility into farm-level production, the very foundation of their supply chain?
I think there will be opportunities in the coming years to manage this challenge as we see more digital technologies coalesce and partner to break data silo’s and create data lakes and usable products that benefit all aspects of the supply chain.
Other Ag Articles
Future Crops Could Make Their Own Pesticides - Western Producer
3 Ways COVID-19 Is Pushing Ag Data Transformation - Precision Ag
Making Use of Advanced Drone Imaging Tools - Farm Progress
How Soil Data Can Drive Sustainability - Global Ag Investing
Canadian Farm Equipment Sales Continue to Slide Through the End of April - Real Agriculture
Fertilizers and their Efficient Use - Fertilizer.org
Pick Solutions Over Sales to Become Precision Systems Integrators - Precision Farming Dealer
Non Ag Article
Josh Wolfe is apart of the venture capital firm Lux Capital and is an individual I’ve followed for the last few years because of his unique thinking. An individual that admires Josh’s thinking like myself, took some of his ideas that he tweets about, writes about or discusses on podcasts and compiled them into an article.
One simple mental model he applies has always stood out to me:
“A good way to find new business ideas is to wade into a new industry and ask: What sucks? What is uncomfortable? What is slow? What is painful? When Josh studied nuclear energy, this question led him to waste removal. It was inefficient and expensive. He helped found a company called Kurion, whose mission was to make this process quicker and more effective. Their startup was timely: they led the cleanup of the Fukushima reactor.”