Upstream Ag Insights - December 16th 2024

Essential news and analysis for agribusiness leaders.

December 16, 2024 • Read Time: 24 minutes

Welcome to the forefront of agricultural innovation with the 244th edition of Upstream Ag Insights, where over 19,200 agribusiness leaders start their week discovering critical industry news and absorbing about the latest must-know information shaping the future of agriculture.

Index:

  1. Q3 2024 Equipment Manufacturer Earnings Highlights and Analysis

  2. Five Insights from John Deere's Virtual Agronomy Summit on See & Spray

    1. Agribusiness Guide: Navigating Precision Spraying Impacts on the Crop Input Market

  3. Syngenta and Enko use artificial intelligence to advance safe, sustainable weed control solutions: Does AI really speed up R&D?

  4. Meristem Launches new HOPPER THROTTLE™ MAXSTAX™ Soybean

  5. How Business Model Innovation Changed AgTech in 2024

  6. Transatlantic Business Insights: Exploring Key Business-related Differences between the U.S. and Europe

  7. Nufarm announces a new joint development agreement with bp on biomass oil technology for future bioenergy applications

  8. Against Decorative Statistics

  9. Other Interesting Ag Articles (8 this week)

Scheduling Note: Next week will be the 51st edition and last of 2024, with the first edition scheduled to come out January 13th 2025.

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This week I am breaking down key takeaways from the equipment manufacturers Q3 results and earnings calls, including the sharing of:

  • Upstream Ag Professional Q3 2024 Financial Snapshot

  • Overviews of topical areas:

    • Inventory and Production Cuts

    • Outlook for 2025

    • Technology Insights

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

    • CNH Industrial

    • Titan

    • John Deere

    • AGCO

    • Lindsay

    • Valmont

    • AGI

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

    • Revenue

    • Operating Margin %

    • SG&A to Revenue Ratio

    • R&D Expenditure

    • Inventory

Technology Highlights

Unrelated to precision technology specifically, but good color from CNH Industrial CEO Gerrit Marx on new product launches in down cycles:

If there's something good about a market that is slow is, when you launch a product, you don't want to launch a product into a high-volume market, when the market is high. Because if that happens, you need to go very quickly, very fast to high volumes and that might stress a little your supply base that might stress a little bit your industrial machine too much. And again, I don't like cycle downturns, but if there's something good about it, it's the right time to launch products, very thoughtfully and very carefully as a coordinated effort across the entire company.

AGCO commentary on PTx Sales being lower than expected:

Although sales and margins for PTx Trimble have been lower than we expected this year, given the rapid decline in our industry, we are energized to continue integrating, innovating, and growing the PTx portfolio of products and services.

Deere provided highlights on See & Spray take rates and digitally engaged acres:

On See & Spray we've covered over 1 million acres in 2024 with just a few hundred units in the field. For 2025, across both factory installed options and retrofit precision upgrades, we have currently taken over 1,000 orders for new See & Spray premium and ultimate units. As a result, we expect to see a significant increase in the number of acres covered by See & Spray technology in the 2025 season.

Deere is seeing a much higher take rate on precision systems on its sprayers:

The adoption of Exact Applied Technology on Model year '25 sprayers increased by over 10% year-over-year, reaching a nearly 80% take rate in this year's early order program.

Given the challenges in the market, this take rate might be more suggestive of the type of farms buying at this point in the cycle— larger, more profitable, tech savvy operations.

On business models:

There's been quite a bit of discussion about our pay-per-use model, and if it's the right go-to-market strategy for some of our latest offerings. The reality is that we're seeing higher levels of adoption using this model compared to our traditional upfront pricing approach.

Take our Precision Ag Essentials kit, which includes 3 foundational pieces of technology, guidance, connectivity and onboard compute needed to run any of our other precision technology solutions. We recently changed the pricing model from a onetime cost to a recurring license that allows customers to access the vital technology at a fraction of the traditional upfront investment. In the first year alone, we sold over 8,000 kits. And these kits are being installed on equipment with an average model year vintage of 2012.

The example of the Precision Ag Essentials kit lowering the up front costs is a good one.

I have stated that I think for See & Spray, recurring revenue is the right approach because it aligns incentives of the farmer and Deere to sustain, improve and innovate on the digital models, features and functionality of the system continuously.

Deere continues to grow its digitally engaged acres, just 45 million shy of its 500 million acre target by 2026:

We saw our global engaged acres grow by nearly 20% this past year, reaching 455 million acres with South America up nearly 30%. And growth in highly engaged acres, which currently make up over 25% of our total engaged acres is outpacing the overall growth trend in engaged acres as we see deeper and broader utilization. Global year-over-year growth in highly engaged acres is over 30%, with South America notably up nearly 50%.

For the full deep dive delivering financial chart comparisons, and insights into the executive commentary, the 2025 Outlook, inventory and production cut dynamics, along with summaries of the major equipment manufacturers, become an Upstream Ag Professional member today, including the opportunity to access the largest discount ever offered of 25%:

Next week will have an aggregated crop protection, fertilizer and equipment manufacturers report available.

Last week, John Deere hosted a Virtual Agronomy Summit spotlighting its See & Spray system.

The event offered a glimpse into the lessons learned from real-world usage and the insights driving this product's evolution.

From technical adjustments to practical applications in the field, to the potential of See & Spray in enhancing efficiency, and outcomes for growers, the Summit was a great breakdown of the See & Spray system.

In this summary, I’ll unpack some key takeaways from the summit and what they mean for the future of agronomy and crop protection.

Index

  1. The Need for Speed: Ultimate and 15mph Travel Speed and Rear Facing Nozzle Selection

  2. Sensitivity Settings and Farmer Control: John Deere is Putting the “Egg” Back into the Product

  3. Field Analyzer, Maps and Display: How are they determined?

  4. 71.5% of weed pressure is in the headlands and/or along waterways: Big Picture Implications for Crop Input Companies

  5. Crop Injury Quantified

  6. Final Thoughts

I am only sharing one excerpt from the Summit below. For the full Upstream Ag Professional article, check out the link above.

Sensitivity Settings and Farmer Control: How John Deere is Putting the “Egg” into the See & Spray Product

John Deere shared the ability to set the sensitivity of the system to focus on control or savings along with the ability to control buffer settings around the precision of the nozzle, which plays into control along with potential to manage the amount of herbicide that touches the crop itself:

What I find most interesting about this is this is a perfect application of “adding an egg” into the product.

Humans Love Control

In 1929, a powdered cake mix debuted, allowing home bakers to make cakes by simply adding water. Though the concept gained traction after World War II, with companies like General Mills entering the market, sales plateaued by the 1950s as many preferred baking from scratch.

One issue was that cake mixes needed to deliver perfect results because cakes were seen as a heartfelt gesture, and any imperfection was glaring.

Another key issue was an emotional barrier; baking from a mix felt like cheating. Ernest Dichter, a psychologist and marketing consultant, suggested putting the eggs back into the hands of the baker to increase emotional investment. The egg adjustment was pivotal, marking an inflection point in the acceptance and success of ready-made cake mixes.

This has come to be known as a form of The IKEA effect. The cognitive bias named after the Swedish furniture giant, that describes how people tend to value an object more if they make it themselves. More broadly, the IKEA effect speaks to how we tend to like things more if we’ve extended effort to create them.

I believe this concept is applicable to what John Deere is doing with empowering farmers to adjust sensitivity and nozzle precision— it gives the farmer an increased feeling of control.

When it comes to agtech, like autonomous tractors, irrigation technology or See & Spray for example, there are risks to over automating, not because it isn’t beneficial, but because it has psychological implications for farmers— removing their ability to feel in control or to take pride in an outcome they enabled. Just like apprehensive bakers in the 1950s.

For the full breakdown, including overviews of software features, influence of hardware and software on the speed that See & Spray systems travel, how John Deere gains an information advantage over input manufacturers and more, become an Upstream Ag Professional member today, including access to the largest discount ever offered to Upstream Ag Insights subscribers:

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Syngenta Crop Protection has reached a new milestone in its collaboration with AI-informed crop health company Enko® to discover novel weed control molecules, advancing efforts to bring much-needed innovation in herbicide technology to farmers. The collaboration targets a new Mode of Action (MoA), which is the way the herbicide controls susceptible plants. The discovery of new leads targeting this MoA was made using Enko’s ENKOMPASS™ platform, which reduces time and cost compared to conventional agricultural R&D approaches.

These are the types of press releases that are curious to see— too vague to be useful, and too buzz wordy to be taken serious.

When press releases are vague and buzzwordy, I believe they do the inverse of what they are supposed to do.

Instead of getting groups (investors, employees, customers etc) interested and engaged— a lack of detail makes me wonder what is really driving the rationale for the release and is there actually any substance there?

In this instance, my assumption veers towards Enko likely being in the middle of a capital raise and Syngenta angling to convey themselves as innovative and collaborative. Perfectly fine rationale to want to generate hype around, but not that interesting overall.

Increasing Time To Commercialization?

I acknowledge many press releases will never be incredibly deep, so I like to reach out to get a deeper insight from entities surrounding their releases, and often gain useful insight.

However, what was interesting about this situation were the e-mail responses actually made me question the release further.

For one, here was the answer to my question on what the specific milestone was, from Enko:

R&D projects in crop protection discovery run across years. Milestones recognize the achievement of key performance criteria, clear value creation and de-risking.

We cannot share more at this time.

They defined “milestone,” but did not explain the make up of what made this specific milestone prescient to generate a release about.

A follow-up question from me:

How far away would it be from commercialization with this new milestone?

The Enko answer (emphasis mine):

At least 10 years due to long development times for these products.

Molecule discovery is hard. It’s not surprising to have a long timeline.

But what got me wondering is the answer that comes next. My next question, highlighting a quote from the release:

Can you please explain how "a milestone underscores a crucial intersection of AI, sustainability, and food security"...that doesn't make sense to me.

The Enko answer (emphasis mine):

It’s a proof of principle regarding the impact AI can have on R&D efficiency and creating value in the short period of time.

The first important call out is that there is no context on WHAT the milestone is, so any reader is unable to determine if said “milestone” was hit more rapidly than normal.

The second factor is that the answers do not add up to more efficient R&D. At least not as far as I can reconcile.

For the full breakdown illustrating that this collaboration does not increase the speed to molecule commercialization, along with an application of the theory of constraints to molecule discovery and how AI could actually increase the time it takes molecules to come to market, become an Upstream Ag Professional member today:

HOPPER THROTTLE™ (HT) MAXSTAX™ Soybean, a revolutionary combination of 16 crop inputs delivered seamlessly through an advanced planter box seed fluency system, was officially announced today a limited release in crop year 2025 to select dealers.

Powered by Meristem’s patented BIO-CAPSULE™ Technology, HT MAXSTAX Soybean will provide farmers with an easy-to-use system to replace costly traditional liquid soybean seed treatment, buy naked seed and use seed fluency through the planter box to efficiently deliver fungicides, insecticides, inoculants, biocontrols and micronutrients. With approved co-packing through BIO-CAPSULE Technology, Meristem is the only company that can stack multiple EPA-registered controls in an easy-to-use system. Select dealers will be supplied a limited quantity of MAXSTAX for 2025 planting.

I believe the adoption rate of a new technology among farmers is inversely related to its complexity.

That’s where BIO-CAPSULE stand out— simplicity.

The BIO-CAPSULE system is not adding incremental steps to the farmers application process. Meristem has integrated novel crop protection products that can be effectively applied with the same process farmers take to put talc graphite into their planter.

That’s what makes the next evolution of BIO-CAPSULE compelling, too.

The system is appropriately named as it effectively allows for a “full stack” crop protection system on the acre.

The HOPPER THROTTLE™ MaxStax™ system has 16 crop input components(!) delivered directly to the furrow, including:

Six BIO-CAPSULEs containing a combination of the following:

  1. METALAXYL™

  2. PREPHYTE™

  3. REVLINE®

  4. Nitrogen-Fixing Microbes

  5. Biofertility Microbes

  6. BORNE X™

  7. GUARD M™

  8. GUARD C™

Base Pail:

  1. Talc

  2. Graphite

  3. IONLOCK Zinc™

  4. Iron

  5. Manganese

14-15. ETHER™ Enzyme Technology (lipase and mannanase)

  1. Active Carbon

This is interesting from an agronomic perspective.

Being able to get crop protection and nutrition down with the seed is the optimal time to apply crop inputs— it gets the product into and around the seed effectively. Not to mention, there has long been research illustrating the benefits of in-furrow fungicides and their suppression of foliar disease for extended periods of time (continuous uptake and translocation throughout the season)— FMC emphasizes this most prominently in the United States today with Xyway fungicides.

Competitive Dynamics

What is really interesting is how this influences the retail channel and traditional input companies, too.

Meristem suggests farmers can buy their soybean seed without seed treatment on it because they have full protection in the HOPPER THROTTLE™ MaxStax™ Soybean product. It can enable farmers to eliminate some liquid fertilizer, too.

The farmer purchasing the HOPPER THROTTLE™ MaxStax™ Soybean product from Meristem essentially gets the ultimate bundle of crop protection, reducing demands from the traditional ag retailer or co-operative.

There is a full, proactive crop protection program integrated into the system, enabling the farmer to reduce the on-seed needs according to Meristem.

For a full overview on Meristem, check out:

This podcast with Tenacious Ventures Sarah Nolet and Matthew Pryor, is packed with some of the most imformative takeaways from the entire year of AgTech So What?

The podcast gets into some of my favorite things:

  • Biologicals, Irrigation and Financing Tech

  • Ag Distribution Channels

  • Incentives and Business Models

  • Ron Adner’s The Wide Lens and a look at the concept of Adoption Chain Risk

There is a high density of insights in this podcast, highly recommend checking it out.

This is a fantastic article by Patrick Honcoop of AgTech-Pro that compares and contrasts the differences between Europe and the United States surrounding the agribusiness and start-up side of things

A few key takeaways from the article:

  • Mindset Differences Shape Innovation and Risk-Taking — The U.S. emphasizes optimism, risk-taking, and a "can-do" attitude, which fuels innovation and entrepreneurship. In contrast, Europe often approaches business with caution and skepticism, favoring thorough analysis and risk aversion. Adopting a balanced approach that combines U.S. optimism with European diligence could drive more sustainable innovation.

  • Scalability and Capital Availability — The U.S. benefits from a robust venture capital system that supports rapid growth and scalability, while Europe relies more on grants and subsidies. European companies excel in capital efficiency but often face challenges in scaling. A hybrid approach—combining capital efficiency with access to diversified funding—can unlock growth potential in both regions.

  • Product Development and Quality — U.S. companies often prioritize lean, iterative development, launching products early to gather feedback and adapt. In contrast, Europe’s focus on thorough testing leads to high-quality, durable products but risks delayed market entry. AgTech companies need to strike a balance between speed and reliability to meet market demands without compromising trust.

Nufarm announces an R&D collaboration with bp that aims to accelerate biomass oil technology development for bioenergy applications. This collaboration follows our previous announcement that Nufarm has partnered with a consortium of world-class research partners to further advance the technology that will enable this joint development agreement.

The collaboration aims to develop biomass oil technology for oil production in vegetative parts of crop plants, including leaves and stems. This has the potential to increase the availability of sustainable feedstocks for SAF production. It draws on complementary skillsets of Nufarm’s expertise in crop improvement and bp's processing and fuel technology.

The announcement comes less than a month after Corteva announced an MOU with BP for a JV.

Nufarm’s partnership with BP is an R&D agreement focused on developing innovative biomass oil technology for sustainable aviation fuel (SAF). The collaboration explores extracting oil from the vegetative parts of high-biomass crops like sugar cane and sorghum, moving beyond traditional feedstocks. Nufarm aims to create a novel and oils platform. This approach highlights a forward-looking strategy that emphasizes innovation to expand SAF feedstock sources through non-traditional plant components.

In contrast, Corteva’s collaboration with BP is centered on forming a joint venture (JV) to produce and deliver crop-based biofuel feedstocks at scale. Corteva focuses on traditional oilseed crops such as sunflower, and canola, grown specifically for SAF production. These cropping systems are designed to meet EU RED III criteria and U.S. low-carbon policy incentives. BP’s role in this partnership involves leveraging its refining and trading capabilities to scale SAF production and meet European aviation sustainability mandates through proven oilseed systems.

The two partnerships underscore different strategies: Nufarm’s emphasis on pioneering new technologies and Corteva’s focus on scalable, established crop systems for near-term impact.

Non Ag Articles

Sticking numbers on claims is prestigious. "$11.23bn" sounds more authoritative than "a lot of money," even if, depending on the context, "a lot of money" or some other qualitative claim might be more descriptive. (If we're talking the cost of, say, building a new 3nm fab, $11.23bn is "surprisingly little" since the usual sticker price is $15-20bn.) The popularity of statistical arguments has led to an incredibly frustrating phenomenon that I like to think of as decorative statistics, where the point is to cite a number as an argument rather than to actually quantify the matter at hand.

Seth Godin on Professionals

Professionals make choices.

Including:

Don’t exploit friends and family. Surgeons shouldn’t do surgery on their kids, and investment advisors shouldn’t manage their dad’s retirement fund. It doesn’t matter if you’re sure you’re the best in the world. Swap with the person who’s second best.

Demand that clients ask hard questions. Don’t be offended if they shop around or ask you about your training and performance stats. In fact, that’s precisely what you want.

Say, “I don’t know.” Then find out.

Embrace technology that amplifies your judgment while increasing benefits to your constituents.

Call out the bad actors and the forces that push you to do a lesser job for the people you serve.

Eagerly refer people to someone more specialized than you whenever it makes sense for the client. “I’m not for you,” is a symptom of care and confidence.

Don’t show up because you feel like it. Show up because you said you would.

Other Interesting Ag Articles

Constraints and Resource Scarcity are a Competitive Advantage - The Pacesetter Pod (this is a very good listen from one of my favorite agribusiness focused podcasters!)

We don't need large machines, we need smaller machines. We need an intelligent, smart kind of application. We need some things to live in the fields.