Upstream Ag Insights - December 2nd 2024

Essential news and analysis for agribusiness leaders.

December 02, 2024 • Read Time: 25 minutes

Welcome to the forefront of agricultural strategy and innovation with the 243rd edition of Upstream Ag Insights, where over 19,000 agribusiness leaders start their week discovering crucial 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.

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 systems to seize opportunities and grow in your business and career.

Index

  1. Q3 2024 Crop Protection and Seed Company Earnings Results Highlights and Analysis

  2. 2024 Corteva Investor Day Highlights and Analysis

  3. The Insight is the Edge: How Insights Drive Agribusiness Performance

  4. How Mosaic Biosciences Is ‘Bridging the Knowledge Gap’ for Biologicals: What can be learned from Mosaic?

  5. Dutch grower on Laser Weeding: ‘This is the machine that gives us excellent results’

  6. FBN Direct Adds New Leadership and Renewed Focus on Crop Protection

  7. AI Eats the World

  8. Other Interesting Ag Articles (9 this week)

I hope all in the United States had a wonderful Thanksgiving Holiday, and I hope everyone else has a fantastic week ahead— I am travelling to the ARA Conference in Houston this week so I hope to see many of you there!

This week’s edition of Upstream Ag Insights is brought to you in partnership with Headstorm

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Over the last month, I have read dozens of earnings call transcripts along with quarterly crop protection and seed earnings results, working to synthesize the themes, trends and key takeaways across the crop protection manufacturers segment of the agriculture industry.

The report is an aggregation of those materials and includes:

  • one financial comparison chart of major crop protection and seed companies

  • three macro areas of emphasis from Q3 2024, highlighting executive quotes and insights from earnings calls:

    • LatAm, Pricing, Maintaining Share and Generic Pressure

    • Biological Growth and Differentiated Products

    • Software, Hardware and Digital Initiative Round up

      • Nufarm

      • Syngenta

      • Corteva

      • Bayer

  • five other notable insights and takeaways from Bayer, FMC and Nufarm

  • highlights and key takeaways from ten crop protection and seed manufacturers.

    • Corteva

    • BASF

    • FMC

    • Syngenta Group

    • ADAMA

    • UPL

    • Bayer Crop Science

    • AMVAC

    • Nufarm

    • Bioceres

1. LatAm, Pricing, Maintaining Share and Generic Pressure

Destocking challenges, which have been a theme for more than a year has generally subsided in North America and Europe. However, challenges remain in Brazil for crop protection and seed manufacturers. The issues in Brazil have been experienced across equipment manufacturers, with an exclamation mark of pain for Brazillian ag retailers like Lavoro and AgroGalaxy— from destocking remaining, to weather to commodity volatility. The issues in LatAm have put increased pressure on crop protection companies and further exacerbated the challenges against generics and managing pricing.

The Syngenta Group press release stated the following:

Sustained price pressure, particularly in the commoditized segments of the crop protection portfolio (and notably in Latin America), and reduced grower profitability had an impact on demand.

Robert King, EVP of Crop Protection for Corteva shared more detailed insight:

Specific to Brazil and price we finished up the quarter down 10% on price. Brazil was down about 18% for the quarter. But we're going to finish up the year back to that mid-single digits for the company.

When you think about why, there's a lot of competition going on in Brazil. And in a flat market or a flat to down market. A lot of competition for volume coming from all areas, trying to find growth. And so we play. We're trying to hold share. We do the things we need to do that makes sense for our products.

Pierre Brondeau, CEO of FMC stated similar on pricing action:

We believe we are only a couple of quarters away from a more normal market situation, we decided to take pricing actions to maintain our market position. In fact, about 2/3 of the total company price decline in the quarter came from Brazil and Argentina. The rest of the regions performed at or above expectations. While conditions are improving, it is clear that Latin America has not yet emerged from the down cycle as distributors and growers continue to manage their inventories carefully.

Pierre Brondeau went on to emphasize the following at the end of the earnings call surrounding generics:

Generic pressure is here. It’s always here, but there is nothing which has fundamentally changed the last couple of quarters versus where it was before. It is truly positioning of pricing against our peers, competitors also technology-based where we think we’ve lost ground from a volume standpoint because of a more aggressive pricing strategy, we need to reset.

UPL’s CEO Mike Frank talked about de-stocking nearly complete, which is relatively consistent with the FMC comments of “a couple quarters away”:

With destocking nearly complete, we are now seeing normalized ordering patterns; however, price pressure continues to weigh on the overall market, in part due to overcapacity issues in China and tight grower margins, specifically in global row crops. Finally, we continue to do well in maintaining and growing our market share in most regions. This is demonstrated by the customer preference to our offerings and our higher-than-industry volume growth in our first half of this year.

Corteva CEO Chuck Magro shared similar on crop protection purchasing patterns:

When I think about the CP market, the third quarter, I think, took another positive step towards full stabilization of this industry. We're not out of the woods yet, but we like what we saw in the third quarter. And when you step back and you think about that, North America is actually seeing some strength. I'd say Europe and APAC are operating normally. Brazil is still, I think, one of the most unstable markets that we're operating in right now when it comes to CP.

Nufarm CEO Greg Hunt shared more detail on pricing, and is notably forecasting an improved 2025 (Nufarm does not have much business in LatAm):

We are now saying to you that prices have stabilized over recent trading. The stabilization of prices is an important reason why we're saying that the outlook for ‘25 looks to be better than it was in ‘24. The second issue was that as distributors were reducing inventory, their requirement to reorder was naturally lower than it normally would be.

And there was still stock being held by Nufarm and clearly by our competitors. And that situation led to higher levels of price competition than we would normally experience. And you can see from our inventory result and many in the industry that those legacy inventory balances have now largely been cleared.

Bayer AG CEO Bill Anderson on LatAm:

LatAm is a big business for us, and we expected big contributions from the region in the second half of the year, similar to what we saw last year. Weather challenges and disease pressure have led to corn acreage decline in Argentina and Brazil, compounded by soft commodity prices and generic crop protection pricing pressure.

Bayer Crop Science CEO, Rodrigo Santos went on to state the following, emphasizing generic pressure beyond LatAm:

The factors are well known across the industry. There are weather challenges, reduced commodity prices levels, and generic pressure in crop protection that started in Europe and North America in the first half of the year, and has continued into Latin America now in Q3, where it has been compounded by a material acreage reduction in corn in Argentina and in Brazil. Soybean pressure in Brazil has also accelerated, with lower commodity price. For 2025, we see prolonged soft commodity prices that will continue to challenge on-farm profitability and generic pricing pressures in crop protection will remain.

Much like the Equipment manufacturing companies forecasting a challenging 2025, Bayer is suggesting similar for 2025, which signals that just as de-stocking is easing for CP companies, there is a risk of lower demand for differentiated products and increased competition from generics.

2. Biological Growth and Differentiated Products

Biological growth was consistent for Crop Protection companies in Q3, along with emphasis on differentiated product growth.

UPL’s CEO Mike Frank stated the following on differentiated product growth:

We continue to improve our product mix towards our differentiated and sustainable segment with approximately 37% of the first half revenue in this financial year coming from these higher-value offerings.

For the full breakdown, including more on Crop Protection and Seed Companies biological and differentiated product performance, Digital and Technology initiatives, including in artificial intelligence, along with a look at Bayer Crop Science’s multi-billion dollar write-down and business highlights and key takeaways from all ten of the aforementioned crop protection and seed companies, become an Upstream Ag Professional member today:

Next week’s edition will include the breakdown of the Fertilizer Manufacturers Q3 2024 Results (Nutrien, Mosaic, ICL Group, CF Industries and Yara), followed by the Equipment Manufacturer Report the week afterwards.

Two week’s ago, I attended the Corteva Investor Day, giving me an opportunity to see the company’s macro level strategy and business, as well as participate in the afternoon R&D pipeline event where Corteva walked through new areas of their business including hybrid wheat, biofuel efforts and new digital efforts across their business.

Index:

  1. Integrated Strategy and Differentiation

  2. Business Overview

  3. Growth Drivers out to 2027

    1. Seed and Trait Licensing

    2. Biological Expansion

  4. Future Growth (2027+)

    1. Hybrid Wheat

    2. Biofuels

  5. Short Stature Corn

  6. Decision Science and Pioneer Channel Enablement

  7. Other Interesting Takeaways, Images and Quotes

A few highlights:

  • 65% of US Soybean acres had Enlist E3 Trait in 2024, up from ~55%.

  • Corteva biological revenue was $420 million in 2023, with 81% of that revenue from Brazil. For 2024, they expect revenues to come in at ~$500 million.

  • Corteva announced hybrid wheat, expecting 10-20% yield increases vs. conventional, for 2027.

  • This week, Corteva announced an MOU with BP to develop a JV focused on crop-based biofuel feedstocks for sustainable aviation fuel.

  • Corteva aims to launch short stature corn by 2027 via traditional breeding methods, with a gene edited version currently going through regulatory for the future.

  • Announced the launch of CARL (Corteva Agronomic Resource Library), their LLM co-pilot tool for advisors, and the Pioneer channel.

For the full detailed highlights and analysis, including an overview of hybrid wheat, cover cropping and winter crop initiatives, how the Pioneer Channel can be highly leveraged for the future of Corteva’s business, a look at their digital strategy and much more, become an Upstream Ag Professional member:

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In January of 2024, I wrote The Insight is the Edge: Why CNH Struggles to Keep Up. This wasn’t intended to be a negative take on CNH, but using them as an example to illustrate that a unique insight and point of view is crucial to establish a vision for a thriving business— following the herd, or waiting for your customer to demand something, often means you are too late or that you are competing in a low margin game.

In the article I stated:

World-class companies lead their customers.

These companies lead their customers based on unique insights.

In most industries, the businesses with the insights have the edge.

In the article I didn’t highlight specifically what an insight is, or where they come from which I want to elaborate on.

Overview

Insights are fundamental for the success of any business.

An insight is defined as:

the capacity to gain an accurate and deep intuitive understanding of a person or thing.

This can be into a customer, a technology or a market for example. An insight that is actionable is what differentiates a business. Acting on an insight allows a company to be different and an insight is core to having a unique strategy. As Michael Porter said in Competitive Strategy:

Underlying the concept of generic strategies is that competitive advantage is at the heart of any strategy, and that achieving advantage requires a firm to make choices. If a firm is to gain advantage, it must choose the type of competitive advantage it seeks to attain and a scope within which it can be attained…The worst strategic error is to be stuck in the middle, or to try simultaneously to pursue multiple strategies. This is a recipe for strategic mediocrity and below-average performance, because pursuing all the strategies simultaneously means that a firm is not able to achieve any of them because of their inherent contradictions.

The business needs to see something different than their competitors and lean into it.

I once talked to an agtech founder in software that said to me:

“If I gave our competitors our roadmap today, I’d still be confident we’d win. We know our customers problems and the market better and have a bias for action that will keep us ahead.”

This wasn’t arrogance or ignorance, but an acknowledgement that their internal culture was built on having unique insights into the market and their customers that would allow them to deliver more effectively what was necessary for their customers to thrive.

Insights Need to Be Contrarian and Right

Howard Marks is the founder of Oaktree Capital and is read globally because of his deeply insightful memos that explore how to be successful in investing.

In Dare to be Great, he shares exceptional perspective, like:

“You can’t take the same actions as everyone else and expect to outperform.”

“Only if the behavior is unconventional is your performance likely to be unconventional and only if the judgements are superior is your performance likely to be above average.”

“Being right may be a necessary condition for success, but it won’t be sufficient. You have to be more right than others which by definition means your thinking has to be different.”

He’s talking about investing, but the same is true in business.

Every asymmetric opportunity starts with a contrarian idea. If it doesn’t, there’s no asymmetry.

Asymmetric outcomes are a function of supply and demand. If everyone does something, the reward gets diluted because of large scale participation. This commoditizes the action.

If few groups do something, the reward will get concentrated into the few that took on the risk.

This illustrates the need to invest in capabilities and areas that are unproven. Invest across different time horizons. Invest in areas that are complex. This can mean investing in assets, talent, services or other infrastructure that your competitors aren’t.

These unique investments and strategies need to be informed by insights.

For the full breakdown, going through non-ag examples of novel insights, agtech examples, plus a dive into sources of insight and where to find them, become an Upstream Ag Professional member today:

Related: The Insight is the Edge: Switch Bioworks - Upstream Ag Professional

An insight that is actionable is what differentiates a business. Acting on an insight allows a company to be different and create value, or capture value in unique ways— Switch Bioworks stands out, taking a unique insight surrounding challenges with soil applied microbes and building technology and a business around it— in this instance, specific to maximizing microbe efficacy, specifically starting with precision engineered nitrogen fixing microbes.

Effective communication is essential to demystifying biologicals and bridging the knowledge gap that can exist around these products. Biologicals, unlike traditional inputs, often require more explanation

I agree. I have always had a lot of respect for the Mosaic approach to specialty crop nutrition and think it’s worth expanding on. On Mosaic’s most recent earnings call their CEO stated the following about Mosaic Biosciences growth, reinforcing their strength:

Mosaic Biosciences growth is accelerating, in fact, our biological products are now being used on 9 million acres in key markets around the world this year. Due to our extensive market access and the strength of our brand, the Biosciences operating model is highly leverageable and positioned for long-term growth.

More than 70 products that we're selling are coated on fertilizer granules. And the rest of the 30% are basically being mixed with liquid fertilizer or fungicide or insecticide.

Mosaic is a mining company at its core. But they are no stranger to developing markets for premium products, becoming leaders in crop nutrition and creating immense value for their shareholders and for the industry through their specialty phosphorous and potassium lines, MicroEssentials and Aspire (that also contain micronutrients).

Mosaic built the MicroEssentials business over the past 15+ years— while there are a number of things Mosaic did to establish that market, including strategic distribution partners, the foundation was their focus on science and agronomy to establish themselves as a trusted resource and leader in the crop nutrition space. That approach lead to believability and conviction in their products. Established trust and believability has not been the case, on average, among biological companies.

Poor communications and illustration of data is one of the biggest problems with moving biologicals from “snake oil” to standard practice.

Note: In the June 11th Edition linked above you can see a breakdown of what poorly executed messaging from a biostimulant company looks like.

After the 2024 Biostimulants World Congress I wrote the following:

I continue to hear ROI emphasized. ROI is a very important consideration in any input decision. But, what is not talked about as much is taking that a step further:

How do I increase the believability of my ROI? And how do I get distributors, advisors and farmers to conviction in product use more consistently?

Note: In the 2024 Biostimulant World Congress link, there is an ancillary breakdown of how to increase believability and confidence in biostimulants.

Mosaic does this through a methodical approach that goes beyond just leveraging their current market access, and I wanted to highlight some of the actions I have witnessed from Mosaic that I believe helps them deliver growth and positions them well for the future.

For the full breakdown of what enables Mosaic to grow its Biosciences business and why they are positioned well for the long term, become an Upstream Ag Professional member today:

Notable takeaways from this Future Farming article on using the Carbon Robotics Laser Weeder:

A LaserWeeder costing €1.4 million is “a significant investment, even for us”, says Adrie van den Einden, a Dutch vegetable grower. “But we’ve gained confidence in it, and it’s a good investment.

The farmer cultivates 235 hectares in the Netherlands.

The cost of the LaserWeeder doesn’t stop at the purchase price:

In addition to the machine’s purchase price, there’s an annual cost of €60,000 for licensing, personalized support from Seattle, and maintenance for up to 19 weeks. For year-round use, this cost increases to €122,000.

If we convert that into $/ac price, we get almost $110/ac of additional costs per year (for 19 weeks).

That doesn’t factor labor or fuel either.

The machine operates at speeds of around 1 mph, is ~20 feet wide and weighs almost 4.5 tons, meaning not a lot of acres per hour.

The LaserWeeder can hit up to 80 weeds per second, averaging over 3,000 weeds per minute.

“It’s a changing world and I expect those farmers and suppliers eyeing the future are going to embrace online-platforms that deliver superior experiences.”

Customer experience is crucial to winning in input commerce. I believe it goes beyond online platforms, as I talked about in a customer experience deep dive from February 2023:

Customer experience is the impression your customers have of your brand and your businesses as a whole throughout all aspects of the purchasing and transacting process, including “in-between moments”. It results in their perception of your brand/business and impacts customer loyalty, revenue, margins, and a host of other key performance indicators.

Note: Check out the link for the full overview.

There was another important point emphasized by FBN in The Daily Scoop article though:

“This isn’t just about the cost of goods; we’re focusing on the cost to serve.”

It’s an important balancing act to manage costs without dropping customer experience that comes back to strategic choices and decisions that reinforce one another, and ties into what I emphasized surrounding Landus and Conduit last week:

In ag retail, the main method for retailers to try to lower costs is to work at getting improved pricing or better programming from supplier negotiations, but that doesn’t create a consistently different cost structure upstream or permanent competitive advantage for them so they all end up in the same place— a race to the bottom with eroding margins. Gross margins and whole sale costs are simpler to focus on (sell at a higher price to the farmer, negotiate a lower cost with suppliers), whereas looking at the macro strategy (capital investment in unique assets, partnerships/acquisitions further upstream etc), which drive true competitive advantage, often get overlooked.

Non-Ag Article

AI eats the world - Benedict Evans

Benedict Evans creates a deep dive presentation each year that walks through trends, reinforced by hoards of data, shaping the world. What is interesting about his world view is that he skews towards bearish on LLMs delivering high utility and value to people and industries, so there are unique views and information shared relative to what you might find elsewhere. Plus, the presentation goes beyond AI, which means there is something for every one.

Other Interesting Ag Articles