Upstream Ag Insights - Nov 22nd
Essential news and analysis for agribusiness leaders
Welcome back to Upstream Ag Insights!
This weeks index is as follows:
AgriFood Tech Investment Continues to Climb
Precision Agriculture Data Ownership May Be a Moot Point (*my favourite)
Utility vs Control Curve in Data
Agrochemical Trends in R&D
Lindsay Creates the Smart Pivot
Bayer and Blockchain Technology
Mobile Phones and Precision Technology Adoption
Modern Seed Technology
De-Commoditizing the Farm of the Future
More investment and company news
I hope everyone has a great week!
This year has already been a record-breaker for the AgriFood Tech sector -as of the end of Q3, AgriFood tech startups raised $11.6B in funding in 2020, bringing the investment total from 2010 through Q3 2020 up to $46.4B.
Large numbers showing up in the space.
As the AgTech investment ecosystem continues to mature in 2020, we again see Later Stage VC deals capturing the majority of capital deployed into the sector.
The later stage deals are driving some of that continued investment growth in the space.
Two sub segments, Indoor Ag and Crop Protection Inputs Management emerged as category leaders.
Crop inputs management provides a unique opportunity to investors and the industry in that it is a large total addressable market that is also aligned with other macro trends: sustainability and carbon specific focuses.
The first wave of public exits, and the strong interest from the markets for exposure to sustainability in particular are likely to see a much greater level of IPO and SPAC activity over the coming years, notwithstanding in AgTech the likely exit mode is still principally in M&A.
Exits in ag tech have not been strong. I do think this will change in the coming few years where we will see the need for consolidation of point solutions and incumbent organizations will continually be looking to acquire to augment their innovation strategies and their product portfolio’s. There are not many companies ready for an IPO in the space: revenue and unit economics being shaky is one thing, but with execution being hit and miss many of the companies have not matured enough to be strong publicly traded companies.
Precision Ag Data Ownership May Well be a Moot Point - Grain News
Data is an often talked about subject in ag. It is important, but also very misunderstood.
There are often comments that “data is valuable” and data ownership is important. While I do not want to downplay the importance of being cognizant of who farmers entrust with their data, understanding the nuance of it is necessary.
In this article a quote from Devin Dubois, CEO of FieldAlytics:
I would say ownership is a poor term because it’s entirely about control and disclosure, and once information is disclosed you can’t un-disclose it…if farmers use any outside parties in the process, there will always be a clause in user contracts that allows the companies or services to aggregate, analyze and retain copies of that data.
This is important. Specifically talking about farmer field data in this instance, once data is within an organization a farmer can still own it and pull it out anytime, but the reality is that that data has already been used to train models, inform an aggregate data set and supported future functionality that is being developed. Hopefully, while the farmer was using the tools from that company they were able to derive value out of it, such as increase yields through various models or tools.
The company can never sell or share this data, unless that was disclosed and approved, but the real value in the data is not the “selling of the data” that we so often hear anyways. It’s in the processing and understanding of the data that leads to better tools, models and ultimately better decisions for farmers. This could also show in the form of increased value and decommoditization of their grains, or land. The incentive is clear: This makes the farmer more money because of optimized outcomes on their farms and the organization itself should continuously improve their models, recommendations and tools meaning better retention of customers, more useful tools and easier customer acquisition (at least in theory) for the company.
Not to mention the data that is out there and accessible for almost free today is massive. Satellite data, soils data, cropping data, farm practices and more. Even yield data can be derived as we see so many organizations using satellites to do so.
Farmers’ farm and production information does not decline in value when they allow it to go into an aggregate pool
The value actually increases because you can then do something with it. Data to me is like an idea; everywhere, but much more valuable if you actually do something with it.
There are ways for farmers to monetize their data itself today, such as through Farmobile. Jason Tatge, CEO of Farmobile has a different perspective around data that I have a healthy amount of respect for and he talks about it often via Linkedin or the Farmobile blog. I come from a default that companies are working in the best interest of farmers and their customer (right or wrong that’s where I start from). Here is a post Jason wrote where he comes from a different default, one quote stands out to me:
Customers pay a company to use their personal data for the company’s monetary gain. There is no return for the customer other than, well, nothing. I have seen time and time again this exact abuse by Big Ag.
There may be organizations that offer very little to the farmer. But a farmer should prioritize companies that are doing more than simply offering cloud storage for their data; they should be identifying the companies looking to add value to their data and offer them tools because their data is informing a larger aggregated set that they can derive utility from. An example could be around yield prediction and nitrogen modelling tools - a company can create accurate models that help to show likely outcomes that inform top dress or fungicide decisions better than a gut feel. I am more specifically talking about field data in this example, but there can be challenges with data when it comes to things like grain marketing, which can shift the conversation (I’ll leave that for another day).
Data today has many challenges such as being uncalibrated or uncontextualized. As we see companies get better at cleaning the data (less garbage), contextualizing the data (understanding the nuance of it and where it fits) and connecting the data (to outcomes) along with creating ways for it to be collected passively. As this happens, data will become even more prolific (estimations that by 2050 there will be > 4 million data points per day collected from the farm) and that much more necessary to use effectively. It’s evident that using data better than other farms or businesses will be even more of a competitive advantage in the future.
There are organizations like Ag Data Transparent around to help as well. The one thing that stands out to me about is that a company can be “ADT Certified”, however, that doesn’t mean companies are using that data any more ethically or differently than other organizations, it simply means they are being open and transparent about how they are using it as disclosed in the terms. This ensures that if a farmer is more concerned with control of their data (check out the next story for more on this), they can choose a provider or organization to work with accordingly.
We will continue to hear more on this for years to come. Data privacy is important, however I do believe the industry is better off in the long term if there is more focus around how to better collect data, derive insights from the data and extrapolate that into actions to enhance yields, quality, traceability etc to increase profitability of farmers.
Utility vs Control Curve - Linkedin, Belinda Lay
I stumbled on this post via Linkedin and found the insight to be applicable (especially in conjunction with the above thoughts), specifically the image Belinda shared:
Her thinking was applied to animal agriculture, but it is widely applicable. As the data set becomes more useful, one typically has to give up control of the data (to a 3rd party, manufacturer etc) because it is the insights derived from the analysis, aggregation, visuals, cross referencing that give the data utility. As you maintain control, the utility declines. I often hear comments from farmers and industry professional alike that data is worth something. But when you ask how much specific data is worth, there isn’t an answer (maybe that’s because there isn’t much of an "open market” today). I don’t think there is a specific answer either (data quality varies). As mentioned above, the data is worth the insights you can extract and apply consistently within a business or farm operation whether to inform decisions, manage risk, predict outcomes etc. The value varies, sometimes in the $2-$4/ac is stated from options out there (like Farmobile mentioned above), but what is the value if you can increase your yield by 2, 3 or even 5 bushels? Manage quality? Eliminate inefficient top dress scenario’s? Significantly more.
Belinda shows on her chart that there is a sweet spot in the middle by pushing out the “belly” of the curve. She highlighted it with the orange diamond. However, I think that “sweet spot” will vary by business.
This is an excellent overview of the chem discovery landscape globally.
Reasoning we are seeing significant increases in costs to bring products to market:
Rising costs and requirements of regulatory bodies.
Resistance development and the opportunity for replacement chemistry.
Industry consolidation and number of companies involved.
Portfolio management, balancing replacement of older off‐patent chemistry against R&D of novel chemistry.
Novel formulations as a means of patent protection for older products.
Shift in focus to GM crop solutions, particularly in the Americas.
- Insect resistance and herbicide tolerance (genetic manipulation).
- Gene silencing RNA interference (RNAi).
- Gene deletion Clustered Regularly Interspaced Short Palindromic Repeats (CRISPR).
Influence of alternative technologies and integrated pest management (IPM).
The fastest growing crop protection cohorts include the following:
It can be seen clearly that succinate dehydrogenase inhibiting (SDHI) fungicides (mostly pyrazole carboxamides), biological fungicides and insecticides, diamide insecticides (Rynaxypyr and Cyazapyr) and ketoenol insecticides (spirotetramat) have recorded the greatest growth.
Of the 4 fastest growing cohorts, 2 are biological (insecticides and fungicides) and one is diamide insecticide (Rynaxypyr and Cyazypyr branded actives in North America) which is known for it’s environmental safety.
One other interesting note, of the top 10 fastest growing crop protection cohorts, 5 (50%) are insecticides!
One last comment from the report:
Digital agriculture is providing big data and market intelligence to companies, potentially altering how they interact with conventional agrochemical distribution. New companies have emerged to support farmers and provide a new route for agrochemical supply, further challenging conventional distribution. Against this background, a fragile farm economy results in farmers seeking the lowest cost options with the best service, opening the door to different distribution models. This could have a significant impact on agrochemical market value.
Lindsay Combines Advanced Agronomy with Predictive Machine Diagnostics to Create the First Smart Pivot - Lindsay
Lindsay’s smart pivot comes to life through two smart streams – FieldNET™ advanced agronomics and Zimmatic™ machine health – designed to support healthier crops and more sustainable farming practices while reducing risk and operational downtime, significantly expanding what the traditional pivot is capable of. Several of the smart pivot features are the outcome of collaboration and joint development with strategic partners, including Taranis.
Smart irrigation is a big opportunity for farmers and therefore for irrigation companies. There has been a lot of technology around for years, yet we have still seen relatively low adoption numbers even while over irrigation has been shown to happen on 30% of irrigated acres! Will Lindsay’s initiative be apart of what moves technology adoption ahead? I’ve been collaborating on an exciting project with my friends at Tenacious Ventures in this space….more on that in the coming weeks.
Bayer and Blockapps Launch TraceHarvest Blockchain Platform - Unlock Blockchain
Blockapps an enterprise blockchain platform provider, has launched TraceHarvest Network which is transforming the way agricultural products are managed. The new blockchain-powered business network was developed in collaboration with Bayer, the leading technology innovator in the agriculture industry, which served as a founding member and active user of the network for live, customer-facing operations over the past two years in regions including the United States and Brazil, with further plans to expand globally. This platform will set new standards in sustainability, driving digital transformation and food system resiliency that will shape the future of the agriculture industry.
Bayer continues to be the most interesting agrochemical and seed company by far. They have an aggressive corporate VC arm (Leaps), JV in biologicals (Joyn Bio), entered into the vertical farming space (Unfold), own platform based tech companies in LatAm (Orbia), own one of the largest digital ag platforms (Climate Fieldview), have announced carbon initiatives and now are directly participating in blockchain technology.
this flexible, scalable and global platform will help farmers of all sizes access new markets and services, increasing their livelihoods through the ability to offer new premium products.
Between Climate having the data collection, their experience in platform based businesses (FarmLead and Orbia for example), they are laying an interesting foundation to streamline business experience and product use upstream, but then also connecting farmers and their data further downstream.
Agriculturalists Use of Precision Agriculture Technology and Reliance on Mobile Devices - Ag Manager
Smart phone penetration in farmers has grown rapidly and that’s important because smart phones are a real key to adoption of and value derived out of digital and precision technologies. The benefits of these technologies can be significant:
By 2018, 70 percent of farmers had downloaded agricultural apps to their mobile devices (Farm Journal, 2018), and increased utilization of mobile apps by farmers in the subsequent two years is likely to mirror their explosive growth in society as a whole over the same period
This allows for app usage which means enhanced controls, access to information and alerts for example:
These apps generally fall into two broad categories: standalone apps and apps that support precision agriculture systems that use external devices. Standalone apps include things like weather trackers, commodity-price checkers, and smart camera software that can identify plants and weeds in real time. They also include apps - covering key issues like pest identification, variety selection, drill calibration and field scouting. Still other apps tap into the availability of “big data” on farms by allowing farmers, for example, to analyze the historical yield of their land at a highly granular level, which helps them efficiently allocate inputs like seed and fertilizer during growing season.
This doesn’t even get into the purchasing or transacting aspects agriculture. The ability to get onto a farmers phone is obviously extremely influential. This will continue to be the case and ever increasingly we will see phones be the key to unlocking and implementing the power of agricultural technology in North America and beyond.
Modern Seed Technology: Seed Coating Delivery Systems for Enhancing Seed and Crop Performance - MDPI
Seed technology is going to be one of the growing areas of emphasis we will see in the space. Coddling the seed from the start lays a strong foundation for the entire season.
Crop input companies have recognized this and have seen opportunity in enhancing seed technology and coating for years. Margins aren’t bad on these products either for manufacturers and they fit nice into programs and less non-discretional use by farmer (less weather dependent)! The challenge is that the seed is limited real estate. And not all products play nicely together on the seed. Utilizing certain nutrients on the same seed as a biological can cause a decline in biological load or you have challenges with handling due to excessive moisture on the seed. There will be more focus on in furrow applications and even more granular fertilizer impregnation.
Here is my post on the future of agriculture in 2020 where I highlight a bit more on seed technology:
“De-Commoditizing” the Farm of the Future - Precision Farm Dealer
This article had some great points surrounding carbon and land sales, rental agreements and even how production type and insurance could play into premiums in the future:
Elevating the discussion on the value of carbon can affect land sales. “I talked to a realtor about this and he thinks in the next decade, we might be able to have a soil health score that can be part of the marketing of farm land,” Fredericks says. “This could reflect very well, economically, on these improved, more resilient farms and add some true value to that work and effort.”
Reimagining rental agreements. “Imagine if all of our landowners understood the value of carbon and soil organic matter,” Fredericks says. “The simple question that they would ask of their tenant would be, ‘Is the organic matter level going up or down on my farm?’ If it's going up, you're doing something right. If it's going down, we need to have a talk and maybe I need to be part of this.”
Broadening crop insurance discounts. “You can take two farms — a very resilient operation like ours with a 200 bushel actual production history (APH),” Fredericks says. “And you can take a fully conventional farm with a 200 bushel APH. And that bell curve, that conventional farm is going to be more of a risk for the crop insurance industry because those operations are less tolerant of events like drought or excessive moisture.”
There is an opportunity for how agribusinesses play a role within this as well.
Smarter Machines Could Change Farming - FarmProgress
But autonomy is just one factor. These machines are smart. When a combine can take your idea of a perfect grain sample and keep improving it throughout the day with no intervention from you — that’s a winner.
Chinese Drone Maker XAG Nets $182m Funding from Baidu, SoftBank - AgFunder News
Ag drone maker XAG has raised ¥1.2 billion ($182 million) in a funding round co-led by Baidu Ventures — the VC arm of Beijing-based internet search company Baidu — and SoftBank Vision Fund II, the Japanese tech giant’s new AI-focused mega-fund.
Softbank and Baidu are behemoths.
XAG is impressive when it comes to the acre penetration as well:
XAG says its products and ancillary services are available in 42 countries worldwide, and claims they operate across more than 100 million acres of farmland. Its customer base includes almost 5 million smallholder farmers.
For more on drones, I covered why I am more bullish on what they bring to the agriculture landscape here.
IN10T Expands to Canada - IN10T
IN10T is an independent, farmer-centric, data driven company focused on partnering with farmers to test and learn the benefits of innovative agricultural products and solutions. IN10T helps innovative clients accelerate the time from scientific discovery to successful farmer adoption by leveraging farmer feedback, data and technology.
Understanding what works, what doesn’t and the “why” behind it in farming has always been pivotal. But as new products, practices and technologies on the market expand it has never been more important to effectively trial and understand how to implement these new products/technologies.
As Pat Comte, VP of IN10T Canada puts it:
It’s important to maximize a product investment by combining grower engagement – using advocacy and customer experience – with technology and analytics that tell the real story. And that’s what we do at IN10T.
I’ve followed IN10T for a while and having them in Canada is a win for both farmers and the industry overall.
Why Gene Editing Is A Climate Change Solution - Innovature
Gene editing-enabled changes in plants that allow them to capture and store more carbon could reduce up to 46% of the excess carbon emitted annually worldwide.
This is a fascinating stat. Genetic modification is a powerful tool to help solve so many of the challenges in the environment and in agriculture.
Herbicide resistance one of the largest concerns in agriculture. The first occurrence of resistance was observed in wild carrot in the 1950’s. Since then, ~365 weed cases of resistance have been reported in more than 180 species (source) across 23 herbicide groups. The problem is significant in many parts of the world, for example in Australia herbicide-resistant weeds are increasing costs by about 27 percent per acre because of increased management costs and yield loss.
WeedOUT has built a platform to create biological herbicides that imitate pollen, allowing them to be applied while weeds are flowering and overcoming the problem of herbicide resistance by using the weeds’ own natural reproductive system against them.
WeedOUT is focusing on palmer amaranth first, one of the most prolific weeds in the USA.
The announcement nor the website state much about the application approach, however I would anticipate there is some synergy between Rantizo and WeedOUT as one example.
The round was led by Syngenta Ventures and the funds will be used for product development, scaling operations, and regulatory advancements.
CommoditAg, an online retailer of high-quality farm products, has added Topcon as its newest supplier offering precision management tools to bring efficiency and productivity to nearly every phase of the farming operation. CommoditAg offers three precision feed management hardware and software tools, including Digi-Star Connected TMR, Digi-Star Pro Feeder TMR, and Digi-Star Expert TMR.
This is the first time I have seen an online marketplace in agriculture include software and hardware and even gets them exposed beyond the crops side of things and into the feed/ranch. This reinforces CommoditAg wants to be an agriculture marketplace, not just a crop input marketplace. Their product segments will continue to expand I suspect. I’ve talked about CommoditAg before here.
Other Ag Articles
How the Ag Data Landscape has Changed in 5 Years - Precision Farming Dealer
John Deere Boosts Wireless Networks with 5G Licenses - Successful Farm
Meristem and Axis Seed Direct Announce Agreement - Daily Scoop
Russian Company Wants to Automate US Ag Equipment - Successful Farm
Changing Human Behavior - Matt Crozier - AgTech So What
Farmers Edge, Farmers National Co. Team Up - Ag Daily
Glyphosate Going Forward - Crop Life
Non Ag Article
Do Good Things - Josh Wolf of Lux Capital
This post has a heavy amount of investment focus within it, but there is also a lot of great approaches to thinking, considering the world, the future and everything in between. I enjoyed reading this one from one of my favourite venture capitalists.
We say when investing that 100% of the information we have is based on the past and 100% of the value of the decisions we make is in the future, which is inherently probabilistic.