Upstream Ag Insights - September 5th 2021
Essential news and analysis for agribusiness leaders
Welcome to the 83rd Edition of Upstream Ag Insights!
This week had a lot happening and I actually had a few more topics I wanted to cover that would have made this week much too long. In next week’s edition of Upstream Ag Insights expect some coverage of NFT’s in agriculture, an overview of water as a commodity and highlights from the Syngenta IPO prospectus.
Index for the week:
Amazon Retail Launches Agronomy Services to Empower Farmers with Technology (In India) + Pinduoduo in China
Corteva and parametrics.ag Launch Innovative Partnership
The Analytical Value of Data
Defining the Value of the Retail Relationship in the Farm Buyer Journey
Market Demand for OMNiDRIVE™ Accelerates Raven Commitment to Prove Autonomous Solutions
Benson Hill and CropTrak Collaborate for Sustainability and Innovation
Herbicide Resistance and Human Psychology
Sollio Agriculture and Pursell Partner to Build Innovative Fertilizer Coating Plant
Fieldin Raises $30m Series B
Thanks for reading and sharing Upstream Ag Insights! Have a great week!
Developing World Agriculture and Tech Giants: Amazon and Pinduoduo
Within Upstream Ag Insights I will continue to prioritize North American row crops week in and week out. With that said, over the last couple weeks there has been some extremely compelling events outside North America with major organizations that I think will interest Upstream readers.
I lack the market understanding to go in depth, but want to provide some high level perspective.
Amazon Retail Launches Agronomy Services to Empower Farmers with Technology(In India) - Business Standard
Amazon has launched its agronomy services to empower farmers through an initiative that gives them timely advice and enables them to make accurate decisions on actions required for their crops. This includes introducing machine learning technology for better produce and build a robust supply chain infrastructure.
As part of the agronomy service launch, Amazon Retail has built an ecosystem through a combination of Agronomist driven field interventions, and farm management tool to track the impact of interventions. Each enrolled farmer partner is onboarded on the farm management tool to provide timely intervention that farmers need and value. The team of qualified Agronomists offer Agritech expertise to registered farmer partners for better farm yield and improved product quality. Along with it, the Agronomists provide a comprehensive scientific and precise advisory to the farmers.
I wouldn’t have guessed this would occur if you asked me a year ago. But as I read the announcement surrounding this, it began to make more sense to me based on the Amazon business and some realities of the Indian supply chain.
To back up a bit, India’s e-grocery business is forecast to hit almost $25 billion by 2025, and that’s accounting for just 3% of the grocery market. A massive market with huge growth potential. So the competition between e-commerce businesses like Flipkart (Wal-Mart), Tata Digital (large conglomerate in India) and Amazon is on.
There are three important factors in my mind with grocery and with India:
The supply chain for produce is fragmented and less reliable.
Quality is important in produce.
Grocery is a coveted segment not just because of the dollars spent, but because of the frequency of purchases.
Amazon being able to go upstream and support informed decisions on farm helps to ensure a more consistent production throughout the year. This understanding and consistency of supply goes a long way to establishing an e grocery habit in Indian consumers along with better experience and products when they use Amazon for grocery.
Not to mention, supporting the farmers that make Amazon successful; in India over half of India’s population works in agriculture plus ag makes up about one fifth of the country’s GDP.
Amazon can also stay well ahead of supply or quality problems arising through engagement with the farmers. A quote from an Amazon agronomy customer:
I also get a growing plan in my app and can raise alerts whenever I notice something unusual in the farm
A button to signal something “unusual”. If certain areas begin to see more challenges arising, plus they have their agronomists in the area, they can better manage supply.
(I’ll come back to the on farm agronomy in India in a bit)
The ultimate aim of Amazon through these endeavours is this: If you are Amazon in e-grocery and winning share of mind and wallet with the consumer in a high frequency purchasing category like grocery, that opens many doors to your greater retail business as well.
It’s been commonly noted that Amazon has struggled in India for years, but a focus towards farmers and grocery might be the push Amazon needs to move the needle.
We are seeing a progression upstream from tech companies occur in China too. Another country with similar challenges to India in the supply chain. And we are seeing the same dynamic play out: a company focused on consumer grocery is moving upstream to support the decisions of farmers to ensure a stronger and consistent value chain and quality of product, which ultimately helps farmer profitability too. That company? Pinduoduo.
Pinduoduo recently had their quarterly announcement where they pledged billions of dollars to agriculture because “agriculture remains our strategic priority, and we are committed to patient and continued investment in agriculture”, plus a release that they are partnering with Bayer Crop Science in China surrounding “one click planting models”.
This stems from the same reasons I listed with grocery above and likely the fact that in China supporting food infrastructure can help keep Pinduoduo on the better side of the Chinese government, which hasn’t been kind to tech companies as of late.
What may interest everyone unfamiliar with the Chinese market is the way a known player to all of us has began evolving in that geography: Syngenta
They have launched their Modern Agriculture Platform in partnership with Alibaba:
MAP Centers are a network and platform to guide and supply farmers through the process of modernizing their farms sustainably and connecting them to premium buyers – increasing the quality of their crops and their profitability. A key part is MAP beSide: A program that helps farmers grow very high quality, traceable crops in a climate-smart way and sell to commercial buyers at premium prices. The crops end up in China’s Hema (or Freshippo) fresh grocery chain operated by Alibaba, the country’s top online retailer.
Syngenta has about 900 demonstration farms in China showing growers what produces the best yields in a given location. Farmers get free management services, and Syngenta expects farmers to buy their products recommended by agronomists. In their most recent 2021 H1 release they stated this:
MAP sales more than tripled to $0.9 billion in the first half by providing farmers with products and services that enable them to grow more sustainably and produce higher quality crops that can be sold at higher prices. This farmer-focused ecosystem continued to expand in China, adding 87 new centers since the beginning of the year. At the end of June, there are 413 MAP centers, with over 200 partner organizations and 37 MAP beSide™ products that connect consumers to the farms where their food is grown.
Pinduoduo is partnering with ag companies and Syngenta is partnering with tech companies (Alibaba as noted in above quote) to compliment core competencies.
It seems the approach of Pinduoduo and Syngenta appears to be working as both are rapidly growing in China. Pinduoduo has been one of the fastest growing companies globally and Syngenta has been rapidly growing in China, with their H1 2021 growing 24% year over year, a significant portion from China.
Back to India
There is a big opportunity here for Amazon leveraging agriculture to make serious in roads in one of the most coveted countries to penetrate in the world.
What is interesting to me, bringing it back to upstream agriculture is that if Amazon has the trust and utilization of agronomic decision making apps, the natural progression for them becomes to sell the farmer the input product to close the loop.
They have the data and app usage, they have the relationship and they have the expertise. This combination would allow them to now expand their offering into crop input products, specifically the ones they see benefitting the quality of their produce going to their consumers with their label on it.
I lack depth of understanding around the market dynamics to go any deeper but look forward to commentary from Venky Ramachandran at Agribusiness Matters who writes about and analyzes agribusiness in India.
What about North America?
My assumption is that Amazon won’t do the same in developed countries (adding agronomists) in the short term because the supply chain infrastructure and farmer support is already here so the benefit to them is lessened.
However, the desire to vertically integrate back to the farm and control quality and consistency into grocery is likely to continue within North America this decade, which may be an area we see Amazon explore as Whole Foods (and their ambitions in grocery overall) grows.
When it comes to other giant tech companies, the desire to get into agriculture has been mounting.
It’s apparent that Microsoft has had an emphasis on developing better backend infrastructure for agribusinesses (Farm Beats) and Google’s X has launched Mineral, which has been secretive, but has given a glimpse into their projects focused on capturing data which signals an effort to make sense of plant and field data and move towards decision support capabilities. Both of these behemoths have seemingly taken aspects of their core competencies and brought them to agriculture.
Amazon has become a conglomerate of sorts, but one of their most lucrative businesses is Amazon Web Services, an offering they have began to emphasize more to agriculture companies. I would anticipate this to continue, but with Amazon’s vast reach it seems inevitable that they will looking to participate in agriculture more meaningfully in the coming years.
Related: The Amazon Web Services of Agriculture - Upstream Ag Insights
This week’s edition of Upstream Ag Insights is brought to you in partnership with GeoPard!
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The GeoPard team has great experience of launching successful precisionAg software products since 2012 (Zoner.ag(powerZones) acquired by Bayer, then Xarvio).
Corteva Canada and GARS Announce Innovative Insurance Partnership - Global Ag Risk Solutions
Industry leaders, Global Ag Risk Solutions Corp. (GARS) and Corteva Agriscience™ have come together to offer first-of-its-kind insurance protection for Canadian canola farmers.
Through this collaboration The Heat Advantage™ insurance will now be exclusively included with every purchase of Brevant™ seeds Nexera® canola for farmers in Saskatchewan, Manitoba and Alberta. This collaboration will provide automatic coverage for canola farmers across Western Canada to protect themselves from what has traditionally been considered acceptable yield losses on canola.
This announcement is an exciting one to me. I covered this in May surrounding the implications of parametric insurance on agribusiness and highlighted bundling parametric insurance and seed as an opportunity in a differentiated product bundling:
Today we see seed and chemistry companies packaging a rebate program with a seed or chemistry purchase. What if you could differentiate a bag of seed with parametric insurance? This insurance has implications for agribusinesses understanding their customer and their products better as well.
There is a popular quote from Jim Barksdale:
There are only two ways to make money in business: One is to bundle; the other is to unbundle.
Traditionally the “bundle” in canola seed has been a program with rebate dollars and with the Nexera canola it has also been a premium price for grain. Now, the bundle is evolving beyond rebates, or premiums, to risk mitigation.
“Shallow losses” are actually major profit robbers of farmers; heat stress or cold stress for example are abiotic stresses causing shallow losses, stealing bushels from farmers every year. Unless a farmer has an outright catastrophic frost event for example, it was impossible to protect downside from those small losses. Parametric insurance changes that.
The unique thing about parametric insurance is that, at least from a signing up perspective for the farmer, it is simple. Essentially, a farm name and a land location allows a farmer to access heat blast insurance where once a predetermined amount of heat units accrue in your fields geography, a payment is automatically triggered.
There are interesting implications at all three levels of participants:
crop input manufacturer level
insurance company level
First the farmer:
Risk is one of the biggest factors for a farmer to manage every year. There are plenty of products that support significant losses, such as drought, but in seasons where the crop is doing well but gets hit with a week of heat there are still several bushels lost that cannot be protected.
Packaging that protection with the seed itself is a natural, simple benefit for the farmer to have loss protection of upwards of $100/ac included with the bag of seed.
The crop input manufacturer:
This is even more interesting. Differentiating seed can be a challenge. A manufacturer basically has four main strings to pull on:
Product performance (eg: yield, novel traits)
Relationships with farmers/retail (eg: distribution, loyalty)
Cost (eg: low cost)
Programming (eg: rebates, early book etc)
Product performance can vary by year, relationships are important but can take a while to make headway, and cost/programming end up becoming a race to the bottom.
Bundling in risk management becomes a novel conversation between farmer and Corteva staff and it becomes a differentiated product. Corteva now adds value to the bag of seed, and the farmer in a novel way with a real pain point that eats at farmers profits each year.
But there is more.
Information. Understanding customers is of the utmost importance, it is core to the concept of influence erosion we have seen on the retail sector, but also competitive decisions between manufacturers. When a typical bag of seed is sold there is an understanding of who purchased the seed, but not where specifically they seed it. In order to qualify for the insurance, a land location will be needed.
This can go further: an integration between the GARS parametrics app, a system with some gamified aspects to it (see accumulation of heat blast units), and Granular, could drive use of the Granular system, and feed their financial tools within Granular.
I assume this is just the start with Nexera, a premium oil canola which has more margin in it for Corteva to see how it goes. So while the insurance differentiates the canola, Nexera is already differentiated and this offer likely does little to sell more Nexera seed (it’s a constrained supply canola).
If the project goes well, then I would bet Corteva will look at launching bundled parametric insurance into commodity canola as a tactic to gain market share over competitors (and if they do, will they choose all their avenues to market, or augment their direct route to market, Pioneer? After all, control and timeliness to have everything underwritten appropriately lends itself to focusing on their own distribution channel being a starting point).
The parametric insurance company
Customer acquisition will be the biggest challenge for upstart parametric insurance companies in agriculture. On top, competing parametric products themselves will likely bring in similar coverage and costs, within a small variability anyways, indicating a low level of differentiation.
This means that distribution becomes the biggest differentiator. Getting on more acres, faster, via a partnership with established agribusinesses means a natural opportunity to expand with customers and also become the first insurance company for other distribution angles, such as through digital portal or agronomic platforms.
We will see more products like this come to market but distribution will be a differentiator. And this partnership would expose GARS to probably around ~1 million acres alone. The other aspect for GARS is that this parametrics insurance bundling can act as a customer acquisition medium for their margin insurance business.
Coming off the extreme heat in western Canada in 2021, and the fact that in 2020 over 90% of townships would have qualified for some form of payout, it seems there will be a big appetite for parametric heat insurance and if it can be had when buying the bag of seed, that seems even better for the farmer.
More Corteva News:
Corteva, Planet Labs to Advance Collection of Big Data on Farms - BNN Bloomberg
Corteva Inc. will use Planet Labs Inc.’s satellite imaging products to get more data that’s key to boosting crop health and productivity. The companies signed a three-year agreement that advances a four-year-old partnership
Corteva is already monitoring about 600,000 fields with Planet in their Granular platform.
I wrote about Planet Labs in agriculture in July as they announced their plans to go public.
Corteva Expands Agreement with Elemental Enzymes to Deliver Farmers Proven, Innovative Fungicide - Corteva
Last year I created the Upstream Ag Insights Digitized Acres Chart which has been shared around the world, however, the part of me that understands it’s shortcomings has issues with how it gets referenced in many instances: for marketing purposes.
Pretty charts have their pro’s because they are simple to interpret and bring easy sharability. However, they are akin to a map. Maps are a reduction of what they represent for ease, which by definition means they are imperfect. And representing digital success in agriculture via just acres is an imperfect metric, however, just like a map, acts as an excellent starting point to discover and build an understanding of an area from; in this case, digital agriculture systems.
We cannot understand a model or map unless we understand and respect its limitations. There is a need to step back and understand the context in which a “map” is useful, and where the danger might lie.
That’s why I really liked this thoughtful and insightful article from Theo Marinos of Proagrica that referenced the digitized acres image.
The analytical value of a dataset is defined by its ability to provide insights and solve real-life problems.
In this article he goes through several useful metaphors that do an exceptional job illustrating why big numbers aren’t necessarily indicative of ability to provide value and shares some interesting examples.
I encourage you to check it out.
This week my thoughts were included in an article from WS on the farm buyer journey. This article covers off some of my thoughts on influence erosion in ag retail, insight from industry expert Maurice Allin on loyalty and gets into ag retail persona’s.
Market Demand for OMNiDRIVE™ Accelerates Raven Commitment to Prove Autonomous Solutions for Ag Professionals - Raven Industries
OMNiDRIVE was launched by Raven on May 12, 2021, with a year one limited release of 75 aftermarket systems. Today, all systems have been committed to by founding dealers.
What is OMNiDRIVE?
OMNiDRIVE™ is Raven’s aftermarket technology solution that transforms existing tractors into driverless machines. The technology connects, manages, and safely operates autonomous agricultural machinery and is compatible with:
Case IH Magnum CVT (2014-2020 models): M250 / 280 / 310 / 340 / 380 (available in October 2021)
New Holland CVT (2014-2020 models): T8.320 / 350 / 380 / 410 / 435 (available in October 2021)
John Deere 8Rs Powershift and IVT (2010-current models)
OMNiDRIVE is different than the fully autonomy platform OMNiPOWER which is a self-propelled power platform that can interchange farm implements like a sprayer or spreader.
I wrote on autonomy from Raven in August here.
I think the exposure to OMNiDRIVE is good for the industry. Autonomy can be intimidating. But it doesn’t have to be. Showcasing the natural evolution of autonomy by plugging autonomous functionality into the current practices with familiar equipment can establish trust and pique interest in farmers and agribusiness professionals. It shifts the thoughts away from “I want to be in the tractor, not somewhere else” to “I can still be in the tractor, but have more brain capacity to think about other aspects of my farm”.
This mind set is when autonomy can begin to deliver significant ROI to the farm because it frees up attention.
On another autonomy note:
John Deere was supposed to have their Investor Autonomy Day this month, but have postponed it until Spring 2022, apparently due to COVID restrictions.
Benson Hill, Inc. today announced a relationship with CropTrak that allows them to accelerate collection of agronomic data to improve product performance and farm sustainability.
Benson Hill has a platform that uses machine learning, simulations and genetics to optimize plant growth and develop crops like soybeans and yellow peas that mature faster, have higher protein content or taste better, saving growers time and resources.
I wrote about them when their SPAC was announced here.
CropTrak, according to their website is:
a no-code enterprise solution covers every aspect of your (ag) business – from grower contracting, field monitoring, product delivery, QA, and payments – and everything in between while seamlessly weaving together the story of the crop, contract, ESG, and agronomic practices.
The key rationale behind this partnership I think comes out nicely from this quote:
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.
In June we seen Bushel acquire Farmlogs and while Benson Hill isn’t a grain origination organization, they want to be able to connect their varieties grown and their data connected downstream. CropTrak helps enable this, just like FarmLogs can act as the field level information acquisition and integration point for Bushel.
There is also the potential for the CropTrak platform to inform Benson Hill as well on product performance in the field.
Vivent Announces Partnership with Bayer for Technology Geared to Help Growers Secure Yields - Phytl Signs
Swiss-based technology company Vivent announced today a new partnership with Bayer which grants the ag leader access to the pioneering technology system, PhytlSigns. PhytlSigns provides real-time detection of crop stressors such as fungal diseases, insect infestations and nutrient deficiencies, well before a plant shows visual signs. Bayer researchers will use the technology in their development of new crop protection chemistry.
This announcement reminds me a bit of what I wrote about last week about InnerPlant.
I remember being in university when it was announced that kochia resistance to glyphosate had been confirmed in western Canada. With my minimal understanding of weeds and chemistry I also remember thinking to myself: this is manageable, tank mixing plus herbicide group rotation and it’ll be under control. Fast forward 10 years and resistance has continued to grow across North America. Weeds are dynamic and while I am optimistic that technology coming out in the future like smart spraying or biologicals will help slow and manage resistance, it will continue to be a challenge for the rest of all of our careers.
Herbicide resistance is a wicked problem:
the occurrence does not stay contained in a single location, it is mobile.
the problem starts small and unrecognizable until it compounds into an uncontrollable beast.
the ways in which resistance can occur are not infinite, but come in many different adaptive fashions, sometimes with little to no fitness penalties.
combined with the fact incentives to manage at the farm level are upside down (more below).
The article linked is well done and compiles opinions and experiences of experts in weed science. It also indicates to me one thing: the need to change incentives.
Part of the opportunity with resistance is in reframing the challenge. Herbicide resistance is not an agronomic problem, it is a human behaviour problem. This means there is a need for psychological and behavioural economics thinking in conjunction with traditional deep science understanding.
Incentives are misaligned for farmers to spend more per acre now to manage a future or potential problem and no matter what a retail or manufacturing company does to incentivize tank mixing, there is still an incremental cost to the farmer.
With new computational and digital technology, biological tech, real-time herbicide resistance testing and herbicide technology itself, not to mention how carbon/sustainability incentives could support, I am optimistic over time we will have more avenues to change incentives and manage resistance.
The best article I have read on the subject is several years old now, but can be found here:
Sollio Agriculture and Pursell Partner to Build Innovative Fertilizer Coating Plant - Sollio Agriculture
Sollio Agriculture, the agribusiness division of 100-year-old Sollio Cooperative Group, along with partners from its retail networks and Pursell, a leading coating technology innovator based in Sylacauga, AL, announced today that they are forming a joint venture to build and operate a fertilizer coating plant in St. Thomas, ON dedicated to the production of advanced controlled-release fertilizers (CRFs). The project represents an investment over $20 million CAN.
These are the types of announcements I expect to see more of from crop input retailers.
It will produce CRFs leveraging Pursell’s innovative coating materials and proprietary processing techniques, as well its patented technology that enables the addition of micronutrients and temperature-sensitive additives, such as biologicals, growth enhancers and soil health promoters. These controlled-release coatings improve the uptake of nutrients by plants, with the potential to significantly improve yield and quality while lowering greenhouse gas emissions from volatilization and reducing the risk of nutrient leaching and runoff.
FieldIn is aiming to bring “transparency and efficiencies to spraying, harvesting, and cultural practices” in commercial orchards, vinyards, and other specialty crop operations – a market which is on track to reach an estimated $1.7 trillion in value by 2027, according to research from StrategyR. With this objective in mind, Fieldin has built an “operating system” for farming, AgOS, uses real-time data analytics and machine learning to provide specialty crop growers with recommendations about the management of their entire operations. This includes boosting efficiency and profits, supporting crop health, increasing yields, and increasing sustainability. AgOS evaluates the entire growing cycle from planning to execution and embraces a range of factors like workers, equipment, and materials.
The platform gathers data from the farm via sensors that are installed on tractors, implements, and other machinery. This data is then processed through AgOS and the recommendations are made available to users through a dashboard.
This is a timely announcement given one of the largest digital companies in permanent crops, Semios, just spent $100 million acquiring AgWorld, which is an organization large in row crops but also prominent in permanent crops.
Non Ag Article
This is a topic I am passionate about. Data literacy is not a technical skill. It is a professional skill.
Thinking critically about the data you’re collecting and how you’re using it needs to be everyone’s job
I often encounter the mindset that “digital” and “tech” and “data” related roles are the only people focusing in on technology and data.
The reality is that it should be an expectation from leadership that everyone thinks about how data can be leveraged, used, or how it will impact their job and the business at large. It can’t just be the technical leads. They should be a go-to resource for others, but not the sole brain in an organization thinking about the how and the implications.
For example, marketing managers or product managers are making annual forecasts and three years or five year forecasts for sales or products needs all the time. They need to be considering how technology will impact them and how data can be used: how will the adoption of smart spraying impact those needs? Over what timeline? Which products are more at risk? Which companies are leading in the space? How can we position our future products to fit that reality? How can you access and leverage data more precisely to grow market share with your new product in a specific geography? How can we turn our sales staff into a data acquisition engine? This is just one basic example for marketing, but can be extrapolated to other roles within organizations.
The organizations that can convey to their farm customers why data can benefit them will continually have an edge as well. This below quote again reinforces why there should be a focus on educating staff from C-suite to farmer focused in the organization on the power of, and shortcomings, of data:
Building up data literacy in an organization can also help diversify the data teams who are at the forefront of making critical decisions about how data will be collected, processed, and deployed. By investing in data literacy across the enterprise, businesses can bring more divergent and creative perspectives to bear on both mitigating the risk of algorithmic bias — and identifying other efficiencies and opportunities that data can often reveal.
We will see more data scientists being hired in ag to build out better data systems, but it will be the organizations that integrate this mind set throughout their entire culture that will continue to win out.
I think this article is a must read for all leaders in agribusiness.
Other Ag Articles
Again! When will glyphosate prices fall? - AgroPages