Upstream Ag Insights - August 26th 2024

Essential news and analysis for agribusiness leaders.

August 26, 2024 • Read Time: 20 minutes

Welcome to the forefront of agricultural innovation and strategy with the 230th edition of Upstream Ag Insights, where over 17,600 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 Equipment Manufacturer Results Themes, Highlights and Analysis

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

    2. Q2 2024 Crop Protection Business Results Themes, Highlights and Analysis

  2. ADM and FBN® Launch Gradable Joint Venture to Accelerate Adoption of Regenerative and Sustainable Ag Practices

  3. Provivi Raises over $10.4M + Semiochemicals Overview

  4. InnerPlant Launches CropVoice™ Insights Platform that “Listens” to Plants Engineered to Signal Fungal Stress

  5. “Living in the Field”: Autonomous Filling by Solinftec Demonstrated

  6. Weeding Out Herbicide Inefficiency with Sentera

    1. Sentera to Launch Precision Weed Management Service: Is it a See and Spray Killer?

  7. Sound Agriculture Launches New Solutions to Optimize Nutrient Efficiency

  8. Starbucks' Digital Dilemma

  9. Other Interesting Ag Articles (7 this week)

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Over the last week I consumed earnings call transcripts and quarterly equipment manufacturer results, synthesizing the themes, trends and key takeaways across the equipment manufacturers segment of the agriculture industry. This week, check out the most important themes, quotes and takeaways from ag equipment manufacturers Q2 results, including John Deere, CNH Industrial, AGCO, Kubota, Lindsay Corp., Valmont and Titan Machinery.

The breakdown includes the following:

  • eight financial comparison trend charts of major equipment manufacturers including:

    • Stock Performance

    • Revenue

    • Operating Income

    • Operating Margin %

    • Inventory Levels

    • SG&A to Revenue Ratio

    • R&D Expenditure

  • four macro takeaways from Q2 2024 results:

    • Macro Environment Overview from Equipment Manufacturer Executives

    • Revenue Declines by Company

    • Job Cuts Explained

    • New Technology Not Enough, Yet.

  • eight notable insights, quotes and images from manufacturer executive teams, including:and more.

    • Inventory Trends

    • Production Hours Cut

    • Quality Influencing Warranty and Profitability

    • Bayer and Lindsay AI Collaboration

    • John Deere See and Spray Insights

  • highlights and key takeaways from seven equipment manufacturers earnings results.

For the full Upstream Ag Professional Equipment Manufacturer Q2 Breakdown, become an Upstream Ag Professional member:

In case you missed them:

Today, in partnership with ADM, we announced the launch of a new joint venture, Gradable, creating a new company to expand the Gradable technology platform and enable more farmers and buyers to confidently pursue and derive value from grain produced using sustainable and regenerative practices.

The Gradable platform was first introduced in 2020.

It is used to track sustainable and regenerative agricultural practices and outcomes, making it easier for farmers to earn financial rewards. For grain buyers, Gradable provides farm-level data, helping them to purchase grain. Grain buyers can use Gradable to validate farmers’ sustainability claims by accessing farm-level data about how the crop was produced. The platform also provides ISCC credentials and support for Scope 3 scoring and biodiversity programs, among other things.

It has been used for more than 200 million bushels of corn and soybeans, and facilitates over $30 million in financial incentives for sustainable practices each year. FBN states that more than 20,000 farmers currently use the Gradable platform across more than 12 million acres in North America. Major users currently include ADM, POET, and Attebury Grains.

The new 50-50 joint venture will enable Gradable to expand and reach new partners and customers at every stage of the grain supply chain— from growers to grain buyers.

I questioned whether a closer relationship between FBN and ADM would make sense in January:

Might we see an even tighter relationship between ADM and FBN? Or, even more, does ADM acquire FBN or a segment at some point in the future (well below previous valuations)?

The benefits seem apparent for both groups with this JV, including.

For the full rationale behind FBN and ADM beginning a JV on Gradable, become an Upstream Ag Professional member:

3. Provivi Raises over $10.4M + Semiochemicals Overview - Provivi

Provivi Inc., the world’s leading producer of pheromone-based insect control solutions for both row crops as well as specialty high-value crops, has closed its latest round of financing having raised over $10.4M for a total of over $230M raised to-date. The round was led by Kairos Ventures with participation from other institutional investors including BASF Venture Capital, Lanx Capital, and Spruce Capital.   

Provivi states that the funds will be used for sustained business development, the development of next-generation products, and to respond to the needs of growers and the environment.

Provivi was founded more than a decade ago and offers commercial products for mating disruption.

Pheromone Background

Semiochemicals are chemicals that convey information between organisms, influencing their behavior or physiology. Pheromones are a subgroup used for signalling, including for reproduction/mating purposes.

For crop protection purposes, pheromones are primarily utilized to monitor or manipulate insect behavior— such as monitoring pest populations (eg: in traps) or for mating disruption to mitigate pest populations.

By releasing these pheromones into the environment, male insects are lured away from females, which can confuse them and disrupt the mating process. This helps reduce pest populations without directly killing the target insects, or any other organisms.

Pheromones are typically species-specific, meaning they can be used to target particular pests without affecting other organisms. This specificity makes them appealing in reducing the reliance on traditional insecticides while still effectively managing pest populations.

There are several options for applying these pheromones:

  • they can be sprayed over crops

  • dispensed intermittently through specialized devices

  • or used as bait in traps.

These pheromones can be synthetically produced, such as by Provivi and others and used to attract and manage pest populations:

For a full overview of the growth of the segment, what companies like FMC have in their pheromone pipeline, new business model initiatives, challenges for pheromone based crop protection beyond cost of goods, and an overview of Provivi patents, become an Upstream Ag Professional member:

InnerPlant, the seed technology company enabling the earliest detection of stress in crops to make farming more efficient and sustainable, today announces the launch of CropVoice™. The first-of-its-kind insights platform is powered by a network of plots featuring InnerSoy™ – a soybean engineered to signal when under attack from fungus – and gives farmers and agronomists access to stress signals directly from plants, unlocking crop protection strategies with the highest return on investment. 

CropVoice™ is rolling out for the 2025 growing season in selected areas of Illinois. Subscribers will receive spray recommendations in response to fungal pressure in a particular coverage area based on signals from InnerSoy™ plants planted in sentinel fields.

CropVoice is InnerPlant’s new insights platform that integrates data from its network of sentinel plots (more on them below) featuring the InnerSoy trait.

Data from the sentinel plots is collected and analyzed using models to provide definitive detection of fungal infection, allowing for more informed fungicide applications.

InnerPlant has already shown that the InnerSoy signals can be observed from space, and CropVoice provides an initial product offering and an opportunity to get mid-western farmers and agronomists comfortable with the InnerPlant technology. InnerPlant shared with me the following from this year’s trials:

There’s still a lot of data to pour over but we saw very clear evidence that InnerSoy is not triggered by off-target stresses. The plants experienced many stressors this year including Japanese beetle infestations, bacteria blight, dicamba herbicide injury, and mechanical wounding. None of these produced a false signal. 

For InnerPlant, CropVoice provides valuable field experience in a commercial setting prior to having their traits commercially available in the market.

Sentinels

The CropVoice approach is grounded in sentinel efforts from the USDA (The Value of Plant Disease Early-Warning Systems), where “sentinel” plots were planted across the United States and inspected regularly to provide early detection of soybean rust infection and then uploaded to a website to disperse the information, done in 2005:

We estimate that the information provided by the framework increased U.S. soybean producers’ profits by a total of $11-$299 million in 2005, or between 16 cents and $4.12 per acre.

InnerPlant aims to amplify the sentinel concept by removing human error, increasing the speed of insight delivered and offering a way to understand the risk of infection before visual symptoms arise via the CropVoice platform.

Any retailer, one of the natural customers of the CropVoice service, leveraging CropVoice provides an information advantage, enabling its agronomists and sales team to have informed conversations with farmers and become more efficient with scouting, crop protection logistics, and marketing tactics.

For more on the InnerPlant business model along with the potential revenue streams and business model initiatives possible for an ag retailer leveraging CropVoice, and what other businesses might be interested in leveraging CropVoice, become an Upstream Ag Professional member today:

*Disclosure: Upstream Ag Ventures Inc. is an investor in InnerPlant.

5. “Living in the Field”: Autonomous Filling by Solinftec Demonstrated - Britaldo Hernandez

In the link above is a video shared by Solinftec CEO Britaldo Hernandez of their Solix platform and its enhanced ability to autonomously fill in the field.

“Living in the Field”

The promises of digital agriculture have been immense. From traceable food to fully autonomous equipment, de-commoditized grains and reduced fertilizer costs, there is no shortage of potential with digital technologies powering agriculture.

Yet, despite all of this digital technology, yields have gone up at about the same 1.3% annually as they have for decades and the profitability of the farmer sways based on the commodity cycle and interest rates.

Much like the famous Peter Thiel line describing a slowdown of innovation and societal progress, “We wanted flying cars and all we got was 140 characters, the digital agriculture equivalent could be “We wanted autonomous farms and traceable food, but all we got was was a lot of siloed data, hoards of colorful NDVI images and press releases about carbon farming.”

There is some satire in that line, but also some truth.

There has been a gap between what farmers have been promised and what has been delivered in digital agriculture.

The current expectation to reality gap stems from many reasons, including:

  • farm internet connectivity

  • lack of technology interoperability

  • regionalized nature of farming

  • poor incentive structures

But two other big ones are often ignored:

  • cost of insights/actions

  • timeliness of actions

Given the commoditized nature of large-scale farming along with the significant expenses of farms and the high influence of fast-changing weather and quick-moving insects and disease, cost-effective and timely actions are critical.

Sensing, Diagnoses and Action

Digital agriculture began with sensing. This started as basic as weather information, to soil sampling, then progressing to things like NDVI satellite imagery and drones or tractors with cameras on them.

For a the full deep dive on Solinftec, including applicable “Sense, Diagnose, Act” frameworks that can drive insight for precision ag investment decisions and b partnership initiatives, along with images/videos of the Solinftec system working in the field, become an Upstream Ag Professional member:

Related to the above on Solinftec, I listened to this S2G Ventures podcast that featured Sentera CEO Brian Wenngatz and CTO Eric Taipale.

I thought they did a good job conveying the value proposition of their new Aerial WeedScout service.

Aerial WeedScout is a selective herbicide application service that enables a lower total use of herbicides for farmers who do not have actual precision spraying systems on their sprayers.

Sentera uses aerial imaging (drone flight) and artificial intelligence to detect weeds and create a map to generate sprayer prescriptions for herbicide applications, with capabilities to do this with less than a 24 hour turn around time from drone flight to prescription creation, which then gives traditional sprayers precision spraying capabilities. 

In fact, everything they said on the podcast I fundamentally agree with, whether challenges with current methods of weed control, to downsides with alternative methods such as See and Spray, to benefits of their new service.

However, when I think through the end implications I weigh the significance of those shortcomings differently than I weigh the shortcomings of their service, leading to a different conclusion in how the market will play out.

For the full breakdown of Aerial WeedScout shortcomings, Precision Spraying challenges, plus an overview of what Precision Spraying companies are doing to improve their systems, become an Upstream Ag Professional member:

Sound Agriculture, has announced new solutions for the 2025 growing season. Grower incentives for synthetic fertilizer replacement and a new beneficial fungi product that enhances nutrient and water uptake will help growers optimize their nutrients and boost crop yields. Combining these solutions with Sound’s existing cash-back product guarantees and 0% financing options makes for a compelling and no-risk nutrient efficiency package.

This week Sound Agriculture launched a new solution offering called Sound Agriculture’s Maximum Acre Solution. Part of that solution is a new product launch:

“We are dedicated to discovering new methods to help growers maintain productive agricultural systems in ways that are more profitable and better for the land,” said Adam Litle, CEO, Sound Agriculture. ​“This includes the launch of a new product, BLUEPRINT, that synergizes perfectly with our flagship product, SOURCE. By pairing these products with financial incentives that reward growers for adopting practices that are better for the planet, growers can save money while eliminating risk.”

BLUEPRINT is a product comprised of arbuscular mycorrhizal fungi (AMF), including Rhizophagus intraradices and Funneliformis mosseae— common mycorrhizal fungi in products on the market currently.

AMF are a type of symbiotic fungi that form a symbiotic relationship with the roots of plants. Their primary benefits include:

  1. Nutrient Uptake Enhancement — AMF essentially extend the root system of plants through their hyphal networks. These hyphae increase the surface area for nutrient absorption, particularly phosphorus, and other micronutrients like zinc.

  2. Increased Water Use Efficiency — The increase root surface area increase a roots ability absorb water.

  3. Soil Structure Improvement — The hyphae of AMF help to improve soil structure by binding soil particles together, creating stable soil aggregates and in some instances illustrating increased soil carbon sequestration.

In a conversation with Sound CEO Adam Litle, he said they have shown increased colonization of plant roots when SOURCE and BLUEPRINT are used together and have seen the yield increase jump almost 2x when used together in corn. The price for both on the same acre comes in around $25.

The launch of a new product has two interesting aspects:

  1. Portfolio Expansion — Sound has been selling one product only: SOURCE. One growth avenue for any company is adding products to their portfolio. AMF are a natural extension because the nutrient use messaging aligns and the active in SOURCE is maltol lactone, known for amplifying specific microbes in the soil, including AMF. Two products is a small portfolio still, so one could expect more product launches or small acquisitions (capital dependent) to further build out a portfolio with microbial products that show synergy with SOURCE. In the literature there are many including various PGPR’s (eg: Azospirillum and Bacillus species) known for nutrient use efficiency.

  2. Timing — The timing is notable given market dynamics.

    1. I expect P efficiency messaging to be the focus of their messaging with BLUEPRINT. P prices are expected to remain high, especially considering grain prices, which means it might be a time when farmers are more willing to invest in microbial products that give them confidence to cut P rates.

    2. Farm income is expected to drop which means willingness to invest in what non-foundational input products is much lower.

    3. The way Sound has laid out their programs gives their sales teams the tools to lean into the high price P story, while being able to provide an angle to a farmer concerned about spending on inputs.

As a final aside— new products and programming are exciting for a company, but they can also be difficult to effectively communicate into the market. One thing that has stood out in Stratus Ag Research Biostimulant Survey data is that SOURCE has had the lowest overall Satisfaction rating of all comparable biostimulants for the last two years prompting me to state the following:

Farmer perception is a big concern— products can be improved and new products can be launched, but if the Sound Agriculture brand is not viewed positively, or the company is not consistent in establishing expectations and supporting customers in the successful usage of a product, that’s a bigger concern for the long term viability of the organization.

Capital is scarce. Farm income is falling. The coming year will be important for all nutrient efficiency product companies, like Sound Agriculture, to show there is a viable business behind the tens of millions of dollars of invested capital.

For more on biostimulant perceptions in North America, become an Upstream Ag Professional member and get full access to the following:

Non Ag Article

Starbucks has been in the news a lot lately given the change at the helm to bring in Brian Niccol, known for his stockholder value creation at Taco Bell and most recently Chipotle.

This overview from Trung Phan is one of the best I have read on Starbucks and provides some context on the challenges they have had.

Other Interesting Ag Articles

The retreat of tech giants (from AgTech) - Software is Feeding the World (very good read!)

The Hockey Stick of agricultural development - Feroz Sheikh, CDO & CIO Syngenta Group