Upstream Ag Insights - August 5th 2024

Essential news and analysis for agribusiness leaders.

August 05, 2024 • Read Time: 22 minutes

Welcome to the forefront of agricultural innovation and strategy with the 227th edition of Upstream Ag Insights, where over 17,300 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. AgVend Unveils ‘Goose’: The first AI co-pilot built for ag retail

  2. Innovation Theatre: Shackles to Progress in Agribusiness

  3. Leaf Agriculture raises $11.3M in Series A Funding

  4. CNH Industrial Q2 2024 Results and Changes to Global Leadership Team

  5. ICL Continues Expanding Its Specialty Plant Nutrition Footprint in North America

  6. Serious Doubts About Alternatives to Nitrogen Fertilizer

  7. Defining biostimulants in the next farm bill and the importance of nomenclature

  8. Hyper-Focus as an AgTech Startup with Lumo’s Founder & CEO, Devon Wright

  9. Regenerative Agriculture Corner

    1. Don’t Mimic Nature on the Farm, Improve it

    2. What is Regenerative Agriculture

    3. Regenerative Agriculture Doesn't Have to Be Contentious

  10. Nike: An Epic Saga of Value Destruction

  11. Other Interesting Ag Articles (4 this week)

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AgVend, the leading provider of digital enablement solutions for agribusiness, announces the launch of Goose, an innovative AI co-pilot designed to transform the way ag retail teams go to market. This latest addition serves as a free enhancement to their existing platform underscores AgVend’s commitment to deliver technology that enables agronomy sellers, grain merchandisers, and energy sales reps to do their best work.

The genAI space is continuing to grow within the agriculture industry, with dozens of companies having announced a product or launched a product to the market:

Note: I think in the future an image likes this will be irrelevant because every entity will offer their own, or white-label a system in the future. It’s almost like making an image in 1998 of all the ag companies that have websites— not all had at the time, but today every single company has one. Thanks to Bailey Stockdale of Leaf Agriculture for his help in identifying other companies to add to the image.

Control Points, Agribusiness Software and GenAi Interfaces

Businesses want a single point of action across their company. They don’t want ten different softwares; they want one.

The way to become the “one” is to own a control point.

If a software company doesn’t own the control point, they will struggle with adoption, stickiness and value creation over time making them more prone to being displaced.

A Control Point is the most important application in a software customer’s feature suite. It is the last software users turn off at the end of the day or the first one they look at in the morning. Some might refer to this as a core operating system.

There are typically only one or two control points in any segment: one in the front office that touches the customer and drives sales, and one in the back office for operations and management.

In the world of large-scale row crop farming in North America, the most influential groups tend to be the retail input providers and the grain originators— these are also the entities where transactions occur either to purchase inputs or services or for a farmer to be paid for their grain.  

From the early 2010’s into the early 2020’s, many in the industry thought the control point was agronomic software— but it’s not.

In the value chain, farmers work closely with grain origination companies, retailers and dealers, and the control point for those entities is not agronomic software or farm management software— it is the transactional and financial software driving the day-to-day commerce functions of the ordering, invoicing, CRM, contracting grain etc.

On top, those entities back office needs/management needs, aren’t typically connected to agronomic software, but they are to the transactional softwares, like grain merchandising software or ERPs for example.

The organizational workflow builds around the control point.

The company that owns the control point can layer on other software, more functionality, and is best positioned to win and accrue value. A control point software is difficult to displace and is the point where value for the customers and returns for the investor, stem from.

AgVend owns the transactional control point and therefore the workflow of ag retail staff.

Control Points are important to consider in the context of generativeAI interfaces and functionality.

Owning a control point and adding incremental functionality ties into the GenAI co-pilot teaser AgVend released, too: Goose.

For the full breakdown on pricing dynamics of genAI in software, why the pricing approach taken makes sense for AgVend, technical breakdown of what makes AgVend unique, what efforts might come next from AgVend, and where genAI is on the hype cycle, become an Upstream Ag Professional member:

Now more than ever, large agricultural companies have realized that in order to thrive for the long term they need to innovate. However, it’s not always obvious how to do that.

It has become a common practice to resort to “innovation activities” that seem to have worked for other companies or in other industries.

Not all companies were built the same and often practices from other entities don’t address the real barriers for innovation in yours. This is where innovation theatre begins to rear its ugly head without anybody even noticing.

Innovation is hard. Creating the illusion of innovation is easy. I want to go through what Innovation Theatre is, why it shows up and discuss how to overcome it in agribusiness.

What the Heck is Innovation Theatre?

First, we need to understand innovation.

To innovate is defined as:

make changes in something established, especially by introducing new methods, ideas, or products.

Essentially, “new” means innovating. But for innovation to be successful in a corporate context, that’s not enough. It needs to deliver a unique value and be implemented effectively to ever take a business to another level.

What makes corporate innovation so difficult is that it requires a different mindset than the one prevalent in most large organizations. Once an organization is established it creates inertia and efficiency in one direction, it creates a culture of de-risking vs. risk taking and creates accountabilities around specific and predictable revenues, margins, costs, or hurdle rates for capital investments with hundreds of people in numerous departments (bureaucracy) that create barriers to innovation.

Some organizations that try to innovate don’t even have the right foundation for it. Usually, the quick and easy solution is to try and adopt what other innovators do. However, if we approach innovation the same way as other organizations, say Google with their famous 20% of time allocation to new projects, it is not feasible for many companies with less resources and misses other aspects of their culture and business that make it work for them.

A quote from economist John Maynard Keynes stands out in this regard:

“Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally.”

For the full article going through box checking mentalities, how to spot innovation theatre, what it looks like in agribusinesses, and how to avoid it, become an Upstream Ag Professional member:

 Leaf, the unified farm data API and largest farm data processing platform, announced today the close of a $11.3 million Series A round, led by Spero Ventures. The funding round included participation from all existing investors. Andrew Parker has joined Leaf's Board of Directors.

Leaf has now raised more than $18 million in venture capital.

One challenge in growing digital agriculture has been speed and quality of API development (application programming interfaces) to achieve interoperability between software and seamless flow of data. Leaf aims to alleviate this challenge.

In the words of Rhishi Pethe at Software is Feeding the World regarding Leaf:

Leaf Ag’s team is building the hub and the spokes for different digital agriculture solutions in the (agtech) ecosystem.

Leaf seeks to support the agtech landscape by focusing on creating APIs:

Leaf’s unified farm data API allows anyone to send and receive user-permissioned data across platforms in a consistent, standardized way, eliminating the need to build and maintain multiple integrations and related backend infrastructure. 

In other industries, API-as-a-service businesses are common. Take this graphic from Grace Isford:

What makes a lot of these companies successful is their ability to focus on a specific product offering and access large numbers of customers. API companies win by creating and being the best in a specific area and then leveraging the high usage and/or high customer base (industry scale and demand) to monetize the usage of that API.

For the full breakdown on the challenges and opportunities of Leaf and where they are focusing today, become an Upstream Ag Professional member today:

In 2024 both CEO of CNH Industrial Scott Wine and agriculture President Derek Neilson announced their departures from CNH Industrial. This week, CNH Industrial shared additional leadership changes.

A few notable aspects:

  1. Gerrit Marx assumes direct responsibility for the Agriculture segment as CEO of CNH, encompassing the previous role of President, Agriculture. Mr. Marx recently rejoined CNH succeeding Scott Wine. During their recent Q2 earnings call he stated the following:

The Board and I agreed to further streamline our governance by designating agriculture as CNH core business and my primary focus…we need to recognize that agriculture is and will remain our home turf.

Gerrit Marx has not worked within the agriculture side of the business before.

  1. Additionally, there were numerous promotions, with no external hires. One promotion that stood out was Jay Schroeder appointed as Chief Technology Officer. He has over 30 years of experience with CNH, covering roles in R&D, most recently as Head of Agriculture Product Development, bringing engineering and digital efforts under one role in the C-Suite. They also announced a new role, an Agriculture Chief Commercial Officer with global responsibility for the Agriculture segment’s commercial strategy, brand and aftermarket activities. Stefano Pampalone will hold this role and has worked extensively in the agriculture side of the business previously.

I mentioned that the new CEO doesn’t have agriculture experience, but it stands out that he is surrounding himself with extensive agriculture experience.

  1. Chief Digital Officer Marc Kermisch has left CNH. The notable aspect of this is that CNH marketing and communications had seemingly been trying to elevate him as a thought leader in agriculture, positioning him on various agriculture podcasts and on stages at events. I have questioned their technology efforts previously and how they adjust their approach moving forward will be interesting to watch.

In the next two weeks I will share the Q2 2024 Agribusiness Earnings Highlights and Analysis for all companies, including CNH Industrial.

As a a few quick highlights:

  • Net sales were down 20% in the quarter, with lower volumes in all regions.

  • Agricultural adjusted EBIT margin ended at 13.7%, down 310 basis points compared to Q2 of last year.

  • “As we focus on agriculture, as our core business, our brands, Case IH, New Holland, Raven and STEYR to name only the largest will claim their rightful turf and leave an enduring mark in their respective fields. We do not aim to follow anyone, but we will break our new ground every day with every step we take.” - Gerrit Marx on earnings call

Q2 2024 Agribusiness Earnings

Agribusiness earnings for Q2 have begun to be released, including from CNH Industrial, AGCO, FMC, BASF and Corteva. Next week Bayer, Mosaic, Nutrien and others will be released so expect the Upstream Ag Professional Q2 2024 Agribusiness Earnings Themes, Highlights and Analysis to be released next week.

The Q1 2024 edition has been the most read Upstream article of 2024.

ICL, a leading global specialty minerals company, today announced it has acquired Custom Ag Formulators (CAF), a North American provider of customized agriculture formulations and products for growers, for approximately $60 million.

Custom Ag Formulators offers a diverse array of adjuvants, nutrients, insect attractants, as well as other specialty products. They have offered private labeling for their line of products or can develop a custom formulation along with a custom package.

For the full impact and rationale of ICLs acquisition on their business and North American agriculture, become an Upstream Ag Professional member:

Last week, I shared The Insight is the Edge: Switch Bioworks highlighting how Switch Bioworks thinks about nitrogen fixing microbes.

A reader reached out and shared the above article from 2023 as a suggestion to read. It has some very blunt criticism from experts in the field about the potential of many nitrogen fixing products on the market.

There are specific points on Corteva’s Methylobacterium symbioticum (Utrisha-N) product along with Syngenta’s azotobacter (Vixeran).

According to molecular biologist Julie Ardley, Corteva’s product is NOT capable of fixing nitrogen:

In the case of BlueN, the bacteria used cannot fix nitrogen at all. Julie Ardley is a lecturer in molecular microbiology at Murdoch University in Perth, Australia, and one of the world’s leading experts on biological nitrogen fixation. By email, she reveals that claims of biological nitrogen fixation by Methylobacterium symbioticum, the active ingredient in BlueN, cannot be true, because the bacterium does not possess the necessary nif genes.

For the full Upstream Ag Professional breakdown that goes into nitrogen fixation genes, Journal article highlights illustrating Methylobacterium symbioticum abilities and what Corteva needs to consider to move the product along, become an Upstream Ag Professional member:

They should be handled at the state level, but it’s important for us to get that federal definition so everyone can point to that definition and say that’s what we mean when we say biostimulant, but then specifically exclude biostimulants from FIFRA because we don’t want these products to be regulated as pesticides.

I believe definitions and nomenclature are important.

In any industry, especially in emerging segments, a well-defined nomenclature and definition is crucial for fostering a shared understanding among all stakeholders. When a new segment arises, clear and consistent terminology ensures that everyone, from researchers to practitioners, has the same base understanding. This shared language enhances communication, streamlines educational efforts, and increases trust and confidence among all stakeholders in a value chain.

A well-defined nomenclature is not just about terminology; it's about building a foundation for collective understanding and trust. I believe this is the foundation for growing any new segment.

I think this is applicable to the Farm Progress article on defining a biostimulant to ensure that regulatory is understood, but

I also think it is important to know how to classify subcategories within a segment, along with have an understanding of where to position something that doesn’t qualify as a biostimulant, but categorize it as something else.

This week serial entrepreneur and leader in the space of biologicals Pam Marrone shared an image from Dunham Trimmer regarding the categorization of biologicals that I think is well done as a resource. There was comments on Pam’s post that there was “nothing new” presented, which may be true to industry veterans, but that sort of understanding is not readily available to those who need it most— crop advisors and farmers.

Biostimulants are incredibly complex, as Layne Harris at Foresight Agronomics has thoughtfully written about, which makes a nice box for them difficult to accomplish. However, I still believe there is a need to draw inspiration from the synthetic chemical segment of agriculture to try and provide a roadmap for farmers and agribusiness professionals to learn from.

Take herbicides or fungicides— there is an ability to seamlessly look up herbicide groups, the modes of action and then the subfamilies within each group, along with the active ingredients themselves. From there it becomes relatively simple to understand strengths and weaknesses of active ingredients by crop type, weed family, limitation of environmental conditions etc.

If a 22 year old recent graduate is wanting to get up to speed on herbicides or fungicides, the resources are vast and there are standards that enable them to gain foundational knowledge.

However, if you look up biostimulants, it becomes overwhelming and confusing very quickly.

Part of this is the complexity— there are endless microbes and molecules that do multiple things in plants that are also protected by trade secret (not publicly available) vs. patent (publicly available).

Getting definitions outlined, and having resources with consistent nomenclature is key to ensuring the industry has a foundation to build from to understand and question what they are using and how to best use products that are being distributed and marketed to them.

In April, I highlighted the unique approaches the co-founders of Lumo Ag have taken to build their business in Four Business Building Takeaways Everyone Can Learn from Lumo Ag.

This week, The Modern Acre podcast interviewed CEO Devon Wright, and it’s worth the listen because hearing directly from Devon reinforces and illustrates his unique thinking, along with his enthusiasm and passion for building Lumo and helping farmers.

9. Regenerative Agriculture Corner

There has been an increasing number of mentions of regenerative ag over the last few years, including Regenerative Agriculture Report’s from the likes of ADM.

I read several articles lately related to the topic that are worth sharing:

This article is 10 years old, but just as relevant today as it was 10 years ago. While not specific to regenerative agriculture, I think the concepts are worth considering in the context of regenerative agriculture:

In Darwinian Agriculture, Denison concludes that because “evolution has improved trees much more consistently than it has improved forests,” we will find ‘nature’s wisdom’ not in natural ecosystems, but in individual species, where natural selection has improved survival and reproduction. And by looking at adaptations in individual plants and animals, “we may be able to improve on nature.

Regenerative agriculture is an alternative means of producing food that, its advocates claim, may have lower environmental and/or social impacts. Regenerative agriculture has recently received significant attention from producers, retailers, researchers, and consumers, as well as politicians and the mainstream media. Despite widespread interest in regenerative agriculture, no legal or regulatory definition of the term “regenerative agriculture” exists nor has a widely accepted definition emerged in common usage. This paper answers the research question: How have different scholars and practitioners defined regenerative agriculture? We reviewed 229 journal articles and 25 practitioner websites to characterize the term “regenerative agriculture.

This journal article focuses on it specifically from an agronomic perspective:

I have written more basic commentary on regenerative agriculture as well:

Regenerative ag needs to be broken down into its component parts and seek to better understand each components along with where a farmer can implement small changes by field or farm and why vs. wholesale telling farmers to “be regenerative” when what regenerative is a bundled system of practices.

Non Ag Article

This is a great breakdown of what is currently happening with Nike and what decisions led it in that direction.

I think there are some compelling learnings when it comes to the importance of distribution and understanding the need behind specific types of marketing.

Other Interesting Ag Articles