Upstream Ag Insights - September 19th, 2021

Essential news and analysis for agribusiness leaders

Welcome to the 85th Edition of Upstream Ag Insights!

Index for the week:

  • Syngenta Group Prospectus

  • AgBiome Raises $116 Million

  • Cargill Announces Carbon Insetting Program

  • Andes Raises $15 Million

  • Yara Acquires Ecolan

  • Google and the Future of Farming

  • Soil Moisture Sensors + Droughts, Water Value and Sustainability

  • Raven Delivers First Automated System

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Syngenta Group Prospectus - Upstream Ag Insights

Typically, when I highlight publicly available agribusiness information there are a few consistencies:

  1. They are domiciled in western countries

  2. Their annual report is in English

After weeks of looking for a copy of the Syngenta Prospectus I had an industry contact send me a copy. The unfortunate part is that given where The Syngenta Group is set to IPO, in Shanghai, it is not written in English. In order to interpret it I had an individual translate parts of it.

Given this, the translations are not perfect and I did not get the entire report translated. This makes it difficult to analyze or dive deep into it.

On top, there is a heavy emphasis towards China in it. Given that, it’s tough to apply my experiences or mental models much of the prospectus. On top I didn’t do the conversion of financials to USD.

The reason for my long pre-amble is to say, due to the above I have primarily just tried to make this full of interesting points and highlights rather than any sort of deep dive.

You will still find how their revenue breaks down by business unit (and within business unit) and geography, employee information, H12021 results along with some other interesting pieces of information.

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AgBiome Raises $116 Million Led By Blue Horizon and Novalis LifeSciences - PR Newswire

AgBiome, the leader in developing innovative products from the Earth's microbial communities,  announced it has raised  $116 million in an oversubscribed Series D round of funding, co-led by Blue Horizon and Novalis Lifesciences and that included multiple new and existing investors. The company will use the capital to expand more rapidly its product portfolio, scale its scientific and commercial teams, and continue to build its global presence and partnerships.

AgBiome continues to make waves with a huge series D investment surrounding their microbial crop protection products.

Many of their products today are actually just off patent synthetics. Their first biological product is HOWLER which has pseudomonas chlororaphis strain AFS009 as the active microbe.

The real unique aspect to AgBiome, and why they have been capable of raising significant funds (in my best assumptions anyways), is their GENESIS platform.

Seeing as many biological based companies that are getting funding have “platform” potential, it’s worth exploring that a bit:

What is a platform in this context?

a group of technologies that are used as a base upon which other applications, processes or technologies are developed. In personal computing, a platform is the basic hardware (computer) and software (operating system) on which software applications can be run.

Since most of a company’s value has historically been derived from its products, discovery companies have had a problem: Why spend resources building a system? It was better to identify an active ingredient/asset that had a shot of being a hit and invest in incubators or strategically where outside their business. So companies have shied away from platforms in order to nurture a specific product that may have been identified in typical R&D at the company. 

For example, in engineering-based platforms, like those that help build apps, investing in the platform itself means benefits accrue and compound over time. This translates into faster and cheaper improvements in process and products. Investment in these platforms can enhance the entire industry with new knowledge and capabilities, leading to more effective launches of products in the future.

What this means is that AgBiome isn’t just a company that has 1 or 2 microbes, but actually has the tools, know-how and capabilities to rapidly identify, vet and understand thousands of microbes and how they might add value to farmers and the industry. These tools might include a database with genome sequencing, biological engineering, machine learning and more.

This ultimately means that platforms create massive value for the entire industry, not just the company alone. The companies that build them can leverage their platform to launch their own products or license access and actives to use it as another revenue stream for their business. This makes them more compelling to investors vs. stand alone one product companies, who even if they have a good product, are challenged to differentiate vs. competitors and gain access to distribution in a timely fashion.

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Cargill Begins Regenerative Agriculture Program - World Grain

More news on the carbon front from one of the most influential agriculture companies around the globe:

Cargill is enrolling farmers in a new regenerative agriculture program that pays them for improved soil health and positive environmental outcomes, including payment per tonne of carbon sequestered. The program, RegenConnect, connects farmers to the growing carbon marketplace and will help scale the voluntary adoption of regenerative agricultural practices.

The most interesting part to me regarding this announcement is this aspect though:

The RegenConnect program connects farmers to Cargill’s downstream customers who are counting on agricultural supply chains to achieve their carbon reduction goals.

Within the carbon realm there is the traditional offset that we talk about most frequently, but there are also insets.

An offset is defined as:

A carbon offset refers to a reduction in GHG emissions – or an increase in carbon storage – that is used to compensate for emissions that occur elsewhere. A carbon offset credit is a transferrable instrument certified by governments or independent certification bodies to represent an emission reduction of one metric tonne of CO2, or an equivalent amount of other GHGs. The purchaser of an offset credit can “retire” it to claim the underlying reduction towards their own GHG reduction goals.

Where as an inset is different:

insetting represents the actions taken by an organization to fight climate change within its own value chain in a manner which generates multiple positive sustainable impacts

This allows companies to manage their scope 3 emissions with their purchase decisions. In the Cargill instance, these are companies like CPG’s (eg: General Mills) who might be purchasing cereals (say oats for General Mills) and wanting to acquire tons of grains for their processing that have specific practices/insets associated with them so they can manage their own emissions targets via strategic purchases in the supply chain.

On top of this it could lead to some interesting marketing in the grocery stores like “reduced carbon Cheerio’s” or “verified environmentally friendly granola bars” (not saying General Mills will do this, just continuing with the General Mills example).

Cargill having the robust supply chain capabilities that they do is uniquely positioned to focus on insetting first vs. offsetting, so I love it as a starting point for them.

I have a bias in liking the natural flow of crop input/agronomic discussions rolling into a carbon discussion, so I wonder how Cargill’s lack of inputs/agronomic touch point in the USA will impact them in their carbon based endeavours. This to me indicates some partnership opportunities.

Cargill aims to have 10 million acres in sustainability programs by 2030. I couldn’t find anything stating current enrolment or year one expectations, but I suspect the demand downstream will drive farmer numbers.

Another noteworthy part is they are working with Regrow for the MRV aspect of the program:

Cargill has partnered with the carbon measurement firm Regrow to make it easy for farmers to Measure, Report and Verify (MRV) carbon outcomes using in-field data, remote sensing and crop and soil health modeling. The Regrow MRV platform ensures easy enrolment, secure data collection and provides farmers with transparent measurement and verification options.

Regrow is a leader in MRV. For more on them, check out my write up on their recent raise here. In their raise, Regrow announced Cargill as a lead investor.

In March I highlighted the fact that Cargill was restructuring and centralizing their venture endeavours and the fact that centralized allocation of capital makes the most sense from a resource management and strategic perspective. The Regrow deals very well could have been in discussions before any restructuring occurred, but regardless highlights the opportunities in having alignment throughout the organization from a venture and commercial perspective.

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Andes Raises USD 15 Million in Series A Funding Co-Led by Leaps by Bayer and Cavallo Ventures - Business Wire

Through its novel seed treatment technology, called ‘Microprime’, Andes is reducing the need for synthetic fertilizers. The California-based company has developed a process for seamlessly integrating seeds with a unique library of microbes that colonize the seed’s root structure. This kick-starts a process known as biological nitrogen fixation, enabling the crop to draw down nitrogen from the air instead of relying on synthetic nitrogen fertilizers.

There has been significant emphasis towards the seed as well as N fixation and this announcement combines both (emphasis mine):

Andes has developed the world’s first true integration of seeds and microbes. We do this with a proprietary seed treatment method called Microprime which produces seeds with embedded beneficial microbes and a shelf life of years.

First generation Microprime™ technology for corn can provide growers with the equivalent of over 40 extra pounds per acre of nitrogen. The company is creating second generation microbes that target doubling the amount of nitrogen provided by the Microprime seeds.

Pretty exciting combination.

What is novel with Andes is the delivery mechanism (emphasis mine):

Microprime seed-bacteria integration is done at an internal level. This ensures the long-term survival of the microbes and also gives a competitive advantage to our microbes in the field, while competing with native soil species.

Andes physically inserts the microbes within the seed. And can go to numerous crops:

Microprime technology is compatible with every kind of seed. Corn, wheat, rye, rice, soybean and even very small seeds

The emphasis from Andes is around how integrating the microbes into the seed itself ensures longer life of the microbes and a higher efficacy once in the soil, which at least logically, makes sense to me. The soil is a hostile environment. Any incremental protection gained is a win for beneficial microbes.

What is also very compelling is that “seed real estate” is one of the most valuable areas of crop inputs to own. Meaning, having your product on or near the seed is a huge target for most crop inputs players. But seeds are small and more products brings more handling issues or reduction in efficacy due to incompatibility. For example, the challenge with many biologicals is that they cannot be applied with other nutrients (eg: zinc) or synthetic fungicides on the seed. The Andes product gets around that problem. Now you can have “40lbs of N in the seed”, and could couple that with a phosphorous solubilizing microbe, or additional fungicidal/nutrition seed treatments.

Two things are of interest for me:

  1. To access Andes proprietary integration of seed and microbe you need to use their seeds. They may have decent genetics, but I would bet they don’t compare to the large corn players for example (eg: Bayer, Corteva). If their genetics aren’t as good that means a farmer is accessing N fixation but forgoing yield potential. Given this, and given the investors (eg: Leaps by Bayer), I suspect there is a strong “platform” play here (or technology licensing) where their tools to integrate microbes into seed are accessible by seed companies to integrate novel microbes into superior genetics.

  2. Microbial stacking for N fixation. For example, if a farmer were to use Microprime in conjunction with a foliar application of Symborg’s Blue N foliar product or a Pivot Bio or Sound Ag seed treatment or in furrow treatment would the farmer get the 40lbs from Microprime + the 20-40lbs from the additional products totalling 60-80lbs of N fixation? My hunch is no and that there would be diminishing N fixation in a stacked scenario, but begins to show room for the opportunity: strategic stacking where there is the ability to get 40lbs from a seed treatment and say another 30 or 40lbs from another product that works well in tandem or via different mode of action to total closer to 100lbs of N.

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Yara Acquires Finnish Ecolan to Expand its Organic Fertilizer Business - Yara

This acquisition happened a couple of weeks ago but I copy and pasted my write up into the wrong document and forgot about it. Apologies about the miss as I think it is a noteworthy acquisition.

Yara announced today the acquisition of Ecolan Oy, a Finnish producer of recycled fertilizers. This is Yara’s first acquisition in the organic fertilizer segment and reflects our commitment to play a bigger role in organic farming and in contributing to the circular economy.

The circular economy is a term gaining steam. What does it mean?

A circular economy is an economic system that tackles global challenges like climate change, biodiversity loss, waste, and pollution. Most linear economy businesses take a natural resource and turn it into a product which is ultimately destined to become waste because of the way it has been designed and made.

Yara has been vocal on the climate change front, even stating they want to see more carbon free fertilizers on farm in the EU by 2024.

Yara even has a circular economy report on their website dating back to 2017.

Not only does this reinforce their circular economy focus, the acquisition allows them to participate in the organic fertilizer segment.

Today, the Ecolan products are more focused on forests, but it begins to show that Yara sees the opportunity in the agricultural fertilizer markets to have more access to environmentally friendly products from a trusted player.

I suspect this is just the start for Yara on more focus of these products as they integrate nicely with their corporate commitments and their strategic endeavours with Agoro Carbon Alliance.

Is This Weed-Spotting, Yield-Predicting Rover the Future of Farming? - Smithsonian

Google’s X, the Moonshot Factory, launched their own agriculture project several years ago:

Project Mineral, one of X’s current efforts, is focused on finding an effective way to address the global food security crisis through “computational agriculture,” a term coined by X to describe new technologies that will further increase understanding about the plant world.

While I am not sure they coined the term “computational agriculture”, Cornell University coined it before Project Mineral was around, I do think Google is uniquely positioned to be able to execute on it better than anyone else.

The next step beyond digitization, is the science of making sense of this very complex plant world by combining multiple technologies such as robotics, sensors, data modeling, machine learning and simulation. The subtle difference is that computational agriculture is the sense making of all the data.

Making sense of data is hard. And Google (Alphabet) is probably better at it than anyone on the planet. They literally make sense of the internet for all of us and have been leaders in the data space for the better part of two decades.

Not only this, they have an entire “moonshot” side of their business with large budgets to rethink and invest in really hard, really impactful problems. Agriculture being at the intersection of food and the environment means Google has an interest and Project Mineral will be a continued focus.

There is significant opportunity to make better sense of ag data, and therefore enable farmers to make better decisions (which ultimately is what Project Mineral is targeting I think). Might we see rover robots with sensors and algorithms from Google roaming fields continuously?

Microsoft has talked about understanding the fields and soil at a centimetre by centimetre basis all over the world and that’s been on the agronomist/farmer wish list for years, but couple that with plant specific and disease understanding like Google is doing for example via plant based sensors/models and you inch closer to novel prediction capability and therefore augmentative decision making tool.

The opportunity doesn’t stop at the farmer, there is ample opportunity for agribusinesses. For example, Project Mineral is looking at tools for plant breeding:

Plant breeders spend many hours manually documenting the physical characteristics of thousands of plants across a field, a process known as phenotyping. But phenotype data collection relies on human perception—and human perception alone is not always accurate. Can we develop a technical set of tools to provide these breeders—to help them see the plant world in a new way, higher fidelity, more frequently, and more easily?

Clemson Research Finds Using Soil Moisture Sensors Can Increase Farmer’s Net Income - Clemson

A Clemson University irrigation specialist has found using soil moisture sensors in fields can increase average net income by almost 20%.

Soil moisture sensors were installed in each sensor field, while no sensors were installed in the companion fields…Based on agronomic and economic data collected, we found the increased net income ranged from $87.30/acre to $641.19/acre or 7.6% to 63.5%. The average increased net income for all the six farms was $202.28/acre or 19.42%.

There are constant push backs to the limitations of moisture probes. However, they are an incremental data point and having access to real time information can significantly impact incomes and yields. Specifically as it pertains to irrigation management.

I think this goes hand in hand with this next topic I wanted to highlight:

Droughts, Water Value and Sustainability

Earlier this year was the launch of the Nasdaq Veles California Water Index which allows investors the ability to bet on the price of water. And the new water market has grown rapidly, thanks to droughts in California.

The Nasdaq Veles Index, which represents the average price of water-rights transactions across California, has risen ~85% this year to over $920 per acre-foot (per 325,851 gallons of water). The Invesco Global Water exchange-traded fund, which tracks groups producing water purification and conservation products, is up 22% this year. There are over 60 water funds globally with a combined $35 billion in assets under management.

Water conservation is rapidly becoming a corporate priority as part of sustainability plans and prices seemingly will continue to go up. Carbon is a hot topic as it pertains to sustainability, but water is even more important in terms of crop production. It seems this is a subject we will continue to hear more about across various geographies, specifically those with irrigation.

For more on water and irrigation technology, check out this report I did with my friends at Agthentic:

The Agtech Adoption Dilemma: Irrigation

Benson Hill to Expand Soybean Business with Acquisition of Indiana Processing Facility - St Louis Business Journal

St. Louis agtech firm Benson Hill said Monday it plans to purchase an Indiana soybean crushing facility as part of its ongoing strategy to strengthen its position in the fast-growing plant-based foods market.

Benson Hill has agreed to acquire the soybean processing facility from Seymour, Indiana-based Rose Acre Farms. Financial terms of the deal, which is anticipated to close this month, were not disclosed. Benson Hill said it will finance its purchase by expanding its debt facility with Western Technology Investment.

This announcement comes on the heels of Benson Hill announcing a partnership with CropTrak two weeks ago. This makes the acquisition an even more interesting vertical integration.

Their core business, CropOS, focuses on developing novel varieties:

The operator of a platform that uses (CropOS) machine learning, simulations and genetics to optimize plant growth. Benson Hill says it can develop breeds of crops like soybeans and yellow peas that mature faster, have higher protein content or taste better, saving growers time and resources.

CropTrak then comes in to do the following:

Our collaboration with CropTrak accelerates in-depth agronomic data collection from our farmer partners, increasing our ability to benchmark and provide verifiable sustainability metrics to our customers and other stakeholders. With this technology infrastructure, we will work to strengthen our CropOS® data library, continue to increase profitability for our partner farmers and build valuable ESG metrics for our food company customers, while also enhancing transparency and traceability across the supply chain.

These two segments alone allow them go downstream direct to processors or food and ingredient companies interested in novel traits and data tied to specific tons of grain.

With this acquisition they add another layer into their business: processing.

And owning the facility allows them to better manage the data flow behind their value added seeds. The acquisition of processing to vertically integrate could be significant for their business, from both being able to better ramp up to meet increasing demands downstream and being able to capture more margin across the value chain.

Being an efficient processor is not easy, specifically for a company focused more on innovation and R&D, moving towards an operational business can pose challenges. However, the opportunity to unlock value for themselves and their farm customers could be extremely beneficial, especially in an oligopolistic value chain.

Why Aren’t Farmers Opting In? - WS

Email addresses may be the most valuable information online. An email address is a gateway to direct communication with your customer. No wonder most sites aimed at consumers are littered with pop-up opt-in forms and lead magnets.

Building an email list is in my (biased) opinion one of the most valuable marketing initiatives a company can under take. It’s a direct line of communication with current and potential customers.

It’s hard to do, but the “how” is conceptually simple:

You must offer something of value in return for someone’s email address. You must communicate the value you offer in clear, easy to understand terms. And you must keep your word.

Related: Digital Maturity Test - BCG/Google

This is an interesting test built by Google and BCG to show how a company scores in their digital marketing capabilities.

Rantizo Drone Spray Demo - Precision Farming Dealer (short video <3 min)

Watch a quick Rantizo demo along with some background from the COO of Rantizo, Joe Riley.

One specific comment stood out:

Three drones in a swarm at 3gal/ac water volume can cover about 40ac per hour.

For context, on a John Deere 412R sprayer with a 1200gal tank, 120ft boom travelling at 14mph, spraying 10gal/ac a farmer can spray approx 120ac in ~60 minutes + ~15 minutes of fill time.

I am pretty impressed with Rantizo’s capability.

The use of a high clearance sprayer in conjunction with a couple of spray drones is what interests me the most in many row crop settings. There are challenging areas for a high clearance sprayer such as around power poles, oil wells, trees or wet areas that could have a flight path drawn for the drone allowing for a more efficient path for the high clearance sprayer, increasing the capacity of the high clearance sprayer itself and getting more acres down per day.

This isn’t to take away from the opportunity in Rantizo services as a stand alone, but for those that see challenges spraying a 300ac field solely with a swarm of drones, I still wouldn’t write off the potential use cases for them as an ancillary approach depending on the area and field.

Energy Crisis Worsens as Rally Hits Europe's Industry Giants - Financial Post

Fertilizer has been on a wild ride this year. It doesn’t look like things will let up either.

Norwegian chemical firm Yara International ASA said Friday it would curtail about 40% of its ammonia production due to high gas prices. CF Industries Holdings Inc. said Wednesday it’s halting operations at its Billingham and Ince manufacturing complexes in Britain after costs of the fuel surged.

Related: For Ag Retail, the Long and Shortage of It - Crop Life

Raven Delivers First Automated System to U.S. Buyer - Farm Progress

The move to fully automated equipment at work in the field is advancing, and the process took a big step during Husker Harvest Days. That's when Frenchman Valley Coop, Imperial, Neb., took delivery of an OmniPower automated machine to put to work for the organization.

What is most noteworthy about this to me is how being an early adopter of technology can be a talent attractor to an organization:

Sauder says his younger employees "just loved it, they were in love with the joystick and the tablet. They were just giddy."

Related: Raven Industries Shareholders Approve Transaction with CNH Industrial - Ag Equipment Intelligence

Non Ag Article

Narratives and Valuations - SSRN

While the significance of narrative thinking has become increasingly recognized by economists, very little empirical research has documented its consequences for economically significant behaviors and outcomes. We address this gap in one important domain: valuations. In two online experiments, participants either told the story of an item they owned or listed its characteristics and were then offered the opportunity to sell it using an incentive-compatible procedure. The narrative treatment led to substantially higher selling prices (20-80% increase) and nearly doubled unwillingness to sell rates. We document one important consequence of narratives: their impact on valuations (or preferences over money and goods). We show that writing a story (as opposed to enumerating a list of attributes) has large, systematic, and statistically significant effects on participants’ WTA (willingness to accept price or pay).

This is empirical evidence of what generally we would assume to be true regarding stories, which ties into the basis of marketing and branding. It also reminds me of the article “Best Story Wins” by Morgan Housel.

The focus of this research was on valuation of goods. I think it can be extrapolated back into venture capital scenarios, positioning of services and companies specific value propositions as well.

Other Ag Articles

Digital Infrastructure for Ag Supply Chains with Bushel - The Future of Agriculture

Emphasizing Your Value Proposition in Ag Sales - Growers

French EU president wants to eliminate chemical crop protection faster - Hort Daily

What gets measured gets monetized - The Regen Deep Dive

Hurricane Ida affects electricity supply of Monsanto’s American factory, what glyphosate market outlook and price trend are expected? - AgroPages

Airbus and Agrimetrics partner in satellite-based crop data - Future Farming

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