Upstream Ag Insights - August 19th 2024

Essential news and analysis for agribusiness leaders.

August 19, 2024 • Read Time: 20 minutes

Welcome to the forefront of agricultural innovation and strategy with the 229th edition of Upstream Ag Insights, where over 17,500 agribusiness leaders start their week discovering the latest industry news and learning about the latest innovations and business strategies shaping the future of agriculture.

With curation and analysis from Shane Thomas, each edition delivers insights and analysis crafted for the practical agriculture professional, empowering you to be among the best informed in the industry and make superior business decisions.

Whether you're a new subscriber or this email was forwarded to you, Upstream’s field-tested frameworks and in-depth examinations equip you with the knowledge and foresight to seize opportunities and catalyze growth in your business and career.

Index

  1. Q2 2024 Fertilizer Manufacturer Earnings Themes, Highlights and Analysis

    1. ICYMI: Q2 2024 Crop Protection Business Earnings Themes, Highlights and Analysis

  2. Mosaic’s Message on Biologicals: Treat Them Like Seed

  3. Mosaic Biological Performance and Future Focus

  4. Adoption of ag biologicals on ‘a steep upward trajectory’ among row crop producers but education still needed: study

  5. Phospholutions Announces Commercial Producer of RhizoSorb

  6. Three Final Destinations For Mineral’s Tech And Patents Named

    1. Alphabet Winds Down Mineral: What Went Wrong?

  7. Tom Brady on the Art of Leading Teammates 

  8. Other Interesting Ag Article (6 this week)

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Over the last week I consumed earnings call transcripts and quarterly fertilizer manufacturer results, synthesizing the themes, trends and key takeaways across the crop protection manufacturers segment of the agriculture industry.

Included in the article:

  • eight financial comparison trend charts of major fertilizer manufacturers, including a Financial Snapshot from Q2, Inventory Levels, Return on Invested Capital, EBITDA, EBITDA Margin, and Stock Performance.

  • themes from Q2 2024 Fertilizer Manufacturer Results

  • five notable quotes and images from the

  • highlights and key takeaways from five fertilizer manufacturers.

    • Nutrien

    • Mosaic

    • CF Industries

    • Yara

    • ICL Group

Below is an excerpt from the full Upstream Ag Professional article linked above.

Q2 2024 Upstream Ag Professional Snapshot

Theme #1: Farmer Fertilizer Affordability

Nutrient affordability was emphasized. The main points were that potash and nitrogen remain relatively affordable for the farmer on a per unit basis, whereas phosphate supplies are tight and pricing may remain elevated, putting a pinch on phosphate applications by farmers this fall and into 2025.

Nutrien CEO Ken Seitz on Nitrogen and Potash:

Global nitrogen markets are being supported by steady demand and continued supply challenges in key producing regions, including the extension of Chinese urea export restrictions into the second half of 2024.

US nitrogen inventories were estimated to be below average levels entering the second half, and we have seen strong customer engagement on our summer fill programs in the third quarter. We expect higher year-over-year volumes in both the third and fourth quarter.

Some of this stems back to Chinese exports, or a lack thereof. China has historically exported 5+ million tonnes of urea annually. However, it exported only 140,000 tonnes this year between January and June.

CF Industries on longer term demand for Nitrogen:

We expect a natural tightening in the S&D balance even before you layer on top new sources of demand for decarbonized products. So we absolutely think there's going to be a tightening in the overall S&D balance on the nitrogen side.

Yara similarly stated on the longer term outlook on Nitrogen:

The market outlook is positive with a significant tightening of urea supply in the coming years, combined with supportive demand fundamentals. This indicates a tightening nitrogen market, which will support Yara's margins.

Nutrien anticipates Potash pricing to remain palatable for farmers:

We anticipate good affordability for potash will support fall application rates this year. Our summer fill program in North America has been strong.

We are seeing strong underlying consumption trends in most major potash markets in 2024 and raised our full year global potash shipment forecast to 69 million to 72 million tonnes.

Phosphates are a different story, though.

Phosphate fertilizer prices are being supported by tight global supply due to Chinese export restrictions, low channel inventories in North America and seasonal demand in Brazil and India. The anticipation is for some impact on demand for phosphate fertilizer in the second half of 2024 as affordability levels have declined compared to potash and nitrogen.

Mark Thompson, CFO of Nutrien:

Global supply demand is very tight for phosphate. So that has led to good participation in fill programs because phosphate is needed.

We've got a pretty large price disparity between potash and phosphate currently in the market…there are concerns about affordability and concerns about potential demand destruction in portions of the phosphate market as we get into later in the fall season.

Mosaic phosphate commentary on their call:

In Phosphates, it's just not as clear as what is going to be a catalyst to bring to your point, pricing down.

In terms of the near-term demand, in North America we had a very strong summer filll program. In fact, we have sold out all of our Q3 available phosphate and 80% of our available potash tons in the North American market.

Become an Upstream Ag Professional member to gain full access to a breakdown of all of the financial charts, themes, key insights and quotes along with analysis and breakdown of company results, like Yara’s KPI Challenges, Nutrien’s Adjuvant Gross Margin per Location, the potential of Green Ammonia vs. Blue Ammonia, an overview of Mosaic’s biological business plus more, become an Upstream Ag Professional member:

Don’t miss next week’s edition for the Equipment Manufacturer breakdown of John Deere, CNH Industrial, AGCO, Lindsay Corp, Valmont and Kubota.

Becker suggested to growers and ag retailers make their biologicals selections as they would seed. “The major decision these folks make in the early part of the year is genetics, looking at such things as soil types and population needs,”…“Biologicals are just like seed. Both are living organisms. So, when you are choosing a biological, you should ask the same questions as you would with your seed selection.”

“Treat biologicals like seed” is a very aspirational positioning from Mosaic on biostimulants.

Seed, as Corteva’s Executive Vice-President Tim Glenn stated on Corteva’s Q2 2024 earnings call, is a very “emotional” decision.

Seed is also what I call foundational on the the Hierarchy of Agronomic Needs (full article breaking down the image in link):

Foundational needs are required by farmers to have in row crop scenarios. Functional needs tend to be viewed as defaults each year, though they are not required.

Optimization Options and Elevated Outcomes categories are often viewed as after-thoughts or used if economic outcomes are looking positive.

A row crop farmer cannot farm without seed (obviously), but seed also has four important business implications that drive it’s importance to farmers and make it distinct from biologicals.

For a full breakdown of what makes seed so influential on a farmers business, how it’s different than biologicals, what crop inputs biologicals can learn positioning from, along with charts, templates and considerations for applying that logic including the Funnel of Specificity, and the Sauce Paradox, become an Upstream Ag Professional member today:

3. Mosaic Biological Performance and Future Focus

Mosaic Biosciences achieved 5 million acres of coverage in the 2024 crop year across North America, Brazil, China, India, and nine other Central American markets:

Mosaic does not break out what this means on a revenue basis, today.

I have talked about the two reasons Mosaic is positioned well in the biostimulant segment.

For the full breakdown on what makes Mosaic well positioned in the biostimulant market, along with commentary from their new CEO Bruce Bodine, and their commentary on future initiatives including Nitrogen fixing products and go-to-market approach evolution, become an Upstream Ag Professional member:

Just under half (45%) of US row-crop producers say they currently purchase or use ag biological products, up from 37% in 2022.

The variation in numbers is interesting— in Stratus Ag Research Report: 2023 Tracking Biostimulant Use and Satisfaction Survey it was found that about 28% of US farmers use biostimulants. The Stratovation survey uses the terminology “biologicals” which includes biocontrol, though I find it unlikely that ~17% of US row crop farmers use a biocontrol product.

The terminology reinforces the need for specificity when talking about “biologicals,” as discussed in Biologicals are ‘economically unfeasible’ According to Report: The Shortcomings and Opportunities.

Another takeaway that continues to stand out is around education:

“[We learned] that a significant amount of additional education is still needed to help this market reach its full potential,” notes Camfield. “Biological companies should continue to take the enlightened approach of sharing performance results far and wide with influential farmers as well as their trusted advisors and agronomists.”

Sharing performance data is one component. Bio companies need performance data, but data alone is insufficient to educate or understand biologicals as a farmer, sales person or agronomist.

I look at multiple levels of education and understanding that instil confidence in the user or the advisor. The point of education is delivering confidence around why something should be used and knowing when to use, without concern of negative implications (eg: tank mixability issues).

Education starts in building a base— part of that for a retailer or a biological company is delivering resources that lay a broad foundation: What is a biostimulant? What types of biostimulants are there? How are they applied? The basics.

Then there is the opportunity for companies to build on that foundation and fill the cracks with specific knowledge about a product or segment:

  1. Inform on how the type of product works within the plant and why it works the way it does — I have highlighted the need for omics work, and third party research on what the microbe or natural molecule stimulates in the plant and the implication of that in a field setting. A deep understanding of “how” and “why” goes a long way in increasing confidence.

  2. Elevate the problem the product solves and how it relates to how the product works — There is a need to educate on the in-field problems and conditions that are hindering yield and profitability and connecting the dots between that problem (eg: heat stress) and “how” the product works to alleviate that and increase yield (eg: stimulates abscisic acid response). For more, see the Funnel of Specificity.

For a full breakdown of key points #3 through #5 about education to drive biological confidence and adoption, and why they are crucial for success, become an Upstream Ag Professional member:

John Deere will acquire dozens of patents and a technology suite to support development of its See and Spray platform.

Google Research Africa, The Alliance of Bioversity and CIAT will carry on the work setup by Mineral’s phenotyping methods.

As previously announced in July, Driscoll’s will acquire and embed Mineral’s yield forecasting and quality inspection tools.

John Deere acquiring some Mineral assets is not surprising.

When I covered Mineral’s announcement with Driscoll’s in July, I noted the following:

There is a notable line from a Mineral memo that suggests the Driscoll’s licensing isn’t the only sale story, either (emphasis mine):

Mineral will no longer be an Alphabet company, and our technology will live on inside of leading agribusinesses where they can have maximum impact.”

Along with this line from Mineral CEO Elliott Grant’s blog (emphasis mine):

Driscoll’s is the first agribusiness to receive Mineral technology, and is a first step towards ensuring that our breakthrough technologies achieve the greatest impact.

“Agribusinesses” as plural, not just “Driscoll’s”, and “the first” implies there will be a second, meaning there are other ag companies that acquired/licensed assets, or will acquire/license assets from Mineral.

Mineral had patents in high value berry crops and row crops as well.

Mineral had been talking to equipment organizations, as alluded in their blog, and brought in someone with extensive equipment industry background to lead product, which suggests that an equipment company could be where other patents, data and capabilities may end up.

The article has a positive spin on the divestiture:

This is the fastest way to transfer our technology to other players and for them to pick the baton and go and to take it to the next leg.

Our mission has always been to make a meaningful, positive difference to the global food system - which we knew was an audacious, high-risk undertaking–so we would regularly ask ourselves: “is this the best way to maximize impact?” and “are we reaching the diversity of farmers we want to, worldwide?” We’ve shared before that we’ve been looking for new and innovative partnerships that can transcend traditional approaches.

The reality — No company that has invested hundreds of millions into something is happy selling fragmented assets for pennies on the dollar. I suspect the price John Deere paid was insignificant for them (low 7-figures), after all, there is no commercial offering, staff or customers being acquired, simply patents and data that could augment what John Deere already has.

The reality is what Mineral was doing was very hard. They were trying to create a new type of service, with complex technology (ML), in a non-traditional (for them) industry with oligopolistic structures at every corner. But that doesn’t change the fact this outcome is not anywhere near the desirable state for anyone at Mineral.

To read the full write up on Mineral challenges from last month, check it out here:

Phospholutions Inc, has reached a significant milestone in commercializing its flagship RhizoSorb® technology. The company has partnered with Toros Agri, a leading fertilizer manufacturer and distributor in the European market, as the first commercial-scale producer of RhizoSorb.

Phospholutions RhizoSorb product is built with a technology that helps increase P-use efficiency.

There is a lot of interest in nitrogen technology products— whether through N fixation, protecting nitrogen from losses via coatings or stabilizers applied upstream in the manufacturing process (eg: Super U from Koch) or applied at blending before being put onto the field (eg: Agrotain-based products). The Nitrogen emphasis makes sense: Nitrogen makes up one of the largest single expenses for a farmers inputs every single year, plus inefficient usage of nitrogen fertilizers leads to increased environmental impact.

What gets less attention is phosphorous. But it is typically the third most abundant nutrient needed by crops (after nitrogen and potassium) and the second highest in terms of removal (within the grain harvested after nitrogen). That means it needs to be replaced within the soil in larger amounts.

Phosphorous is fickle, though. It is inefficient at getting taken up by crops— depending on the research you want to cite, ~30% of P applied gets used by crops in the year of application. The availability of phosphorous to crops is highly influenced by other soil ions, such as aluminum or calcium, depending on soil pH. This also leads to situations where P is in the soil, not absorbed by crops and removed via surface water run-off, where it ends up in bodies of water we see problems such as algal blooms.

Phosphorous efficiency presents an opportunity for improvement of agronomic outcomes as well as environmental, and while there is extensive commercial competition frokm the likes of Penicillium bilaiae products or ammonium salt of maleic–itaconic copolymer, Phospholutions strives to take their ion exchange mechanism that is driven by a concentration gradient to govern release and utilization, and integrate it upstream at the phosphorous manufacturing process.

Production

Phospholutions doesn’t manufacturer the product themselves, they use partners upstream. Their investor, Tefken, owns Toros Agri, the largest fertilizer producer in Turkey in terms of total installed production capacity and market share.

Phospholutions completed a commercial pilot in January followed by a full-scale production run in April to illustrate the potential of Rhizosorb. Phospholutions did a life cycle analysis showcasing a reduction in the carbon emissions when compared to monoammonium phosphate (MAP) fertilizers by 45.2%. The analysis compared RhizoSorb produced in Turkey and imported into the United States to domestically manufactured MAP for the use in corn production.

What CEO and founder Hunter Swisher has stated to me previously was that when their product is integrated at manufacturing, they can reduce the cost to manufacture a ton of their 8-39-0 Rhizorb product for their manufacturing partner. 

For a breakdown of where else Phospholutions technology may fit, including an overview of their new patent, become an Upstream Ag Professional member:

Non Ag Article

When our society talks about success, we tend to focus on individual success. We obsess about who is the “greatest of all time,” who is most responsible for a win, or what players or coaches a team might add next season to become even better.

What can get lost in this way of thinking is that leaders don’t accomplish anything by themselves. In fact, nothing of significance in life is achieved alone. To do great things, we rely on teammates. And to win, team leaders must find ways to draw the best physical, mental, and emotional performance from the players working with them.

Other Interesting Ag Articles