Upstream Ag Insights - December 9th 2024

Essential news and analysis for agribusiness leaders.

December 09, 2024 • Read Time: 20 minutes

Welcome to the forefront of agricultural innovation with the 244th edition of Upstream Ag Insights, where over 19,100 agribusiness leaders start their week discovering crucial industry news and learning about the latest must-know information shaping the future of agriculture.

Index:

  1. Q3 2024 Fertilizer Manufacturer Earnings Results Highlights and Analysis

  2. Companies Evolve Industries, Technologies Do Not

  3. Crop Life 100 Unveiled: Largest Ag Retailers in the United States

  4. AgVend Unveils Nexus: Ag Retail’s Gateway to a More Connected, Dynamic Supply Chain

  5. AI in Agriculture: A Threat to Jobs or a Tool for Empowerment?

  6. Thinking Differently To Help Biological Products Perform Better

  7. The truth in the rumor of inevitable startup consolidation

  8. Can You Still Bank On Carbon Opportunities?

  9. Attitude, The Stockdale Paradox, Good Luck? Bad Luck?, What You Don’t See, Christopher Nolan, and The End of the Story

  10. Other Interesting Ag Articles (4 this week)

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

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A dive into the quarterly fertilizer manufacturer results, highlighting the themes, trends, key takeaways and notable executive commentary across the fertilizer manufacturers.

In the article, I share:

  • Eight financial comparison trend charts of major fertilizer manufacturers

  • Overviews from Q3 2024 results

    • Fertilizer Demand Stability

    • Overview of markets:

      • Nitrogen

      • Phosphorous

      • Potash

    • Clean Fertilizer

    • Biostimulants and Specialty Product Insights

    • Noteworthy insights from executive commentary

  • Highlights and key takeaways from five fertilizer manufacturers

    • Mosaic

    • Nutrien

    • Yara

    • CF Industries

    • ICL Group

Upstream Ag Insights Financial Comparison

A few highlights from the full breakdown:

Nutrien CEO Ken Seitz on nutrient margins in the retail business:

North American crop nutrient margins increased by $17 per tonne compared to 2023, supported by a stabilization of fertilizer markets and continued growth of our proprietary crop nutrient and biostimulant product lines.

Nutrien CFO Mark Thompson on retail acquisition initiatives:

Particularly in the retail business that has presented us with opportunities at weaker points in the commodity cycle where we can continue to consolidate in those market conditions. We've been quite disciplined over the last couple of years in stronger market conditions, but we anticipate some of those tuck-in acquisitions, particularly in North America, will come back to us.

CF Industries shared a large number that they are confident in surrounding the 45Q tax credits:

Next year we'll begin generating on an annualized basis, an incremental roughly $100 million of cash through the 45Q tax credit as we start sequestering CO2. We are confident that in 2025 will be one sequestering CO2 and to receiving the 45Q tax benefit.

Dive deep into the fertilizer segment with exclusive access to exclusive insights into the fertilizer industry, including executive-level perspectives shaping the future of the fertilizer market, including on pricing, inventory and demand.

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This week I attended the Agricultural Retailers Association Conference.

Some common questions I heard were “What technologies are you watching?” or “Is there a new technology out there that we should be watching closely?”

The question that I think is more relevant is “Are there specific companies to watch?”

It’s a subtle difference, but an important one.

This week I also read an interview with Regrow CEO Anastasia Volkova:

She was asked the following question:

What emerging technologies do you see as having the potential to disrupt the AgTech industry in the next 5–10 years?

I specifically liked this sentence of her response:

So, in my estimation, it’s not emerging technologies that will make the difference.

Anastasia is right. It’s not the technology. Companies make the difference. People solve problems with technology. Teams find ways to elegantly change human behavior.

Peter Thiel touched on this briefly during an interview at the All-In Summit:

The next sentence of Anastasia’s response is useful to consider:

It’s the availability and use of meaningful data.

In the context of her answer around data — successful companies will use technology to acquire the data, structure the data, understand what data to focus on, and how to apply it to solve a specific problem with a business model that makes sense. That’s the only way change happens.

Companies, full of smart people, with a unique world view, experience and tools to solve a specific needs in a customer set are the ones that change industries.

Often tools are the application of new technologies, usually multiple in a unique combination that gives them an edge in solving an unmet need, or improving the delivery of the solution. Being able to effectively integrate various technologies together is what drives success and change in an industry.

New Technology is Required, But Insufficient

Consider the Haber-Bosch Method— Fritz Haber developed the process at laboratory scale. BASF and Carl Bosch turned it into a scalable, industrial process that could be used to produce nitrogen fertilizer. That’s where the impact came from. We need to technology, but companies effectively deliver it into the market.

Or consider gene editing— the technology itself is compelling. However, the technology will only contribute meaningfully if a company knows the problems they need to solve at commercial scale, have a deep knowledge of plant genomes to understand where to edit and the ability to bring that product to market effectively, navigating regulatory hurdles and distribution hurdles.

It’s not just about cutting-edge technology in agriculture—it’s about ensuring that technology is applied effectively, integrates seamlessly into diverse farming or agribusiness operations and delivers practical value while also being able to capture some of that value from a business model perspective.

Technology alone won’t do that. People can do that. Teams can do that. Companies with the right culture do that.

Therefore the better type of question to ask is, what companies stand out to you and why?

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Highlights from the Report

  • The latter half of the top 10 had some subtle changes, with Greenpoint, CHS and newly merged Keystone (Co-Alliance and Ceres) moving up the rankings, and MFA and Wilbur-Ellis sliding subtly.

  • 63% of ag retailers saw sales increases for their biological offerings. Twenty-seven percent said biologicals revenues for the year were flat compared with 2023. Only 10% of respondents said biologicals sales declined.

  • 58% of ag retailers expect a moderate profitability improvement in 2025, with 31% predicting strong profitability driven by the need to maintain yields in the face of low commodity prices.

  • Sales of ag technology products dropped by 59%, from $815 million in 2023 to $338.1 million in 2024, attributed to tighter grower budgets and reclassification of sales into other categories like custom application.

  • It’s tempting to overemphasize revenue because that’s the data Crop Life gets access too. But that’s not overly important in the grand scheme of a retailers business, particularly on the fertilizer front where volume and margins are of primary importance.

“The fertilizer category saw its overall revenues significantly decline. Sales dropped from $22.4 billion in 2023 to $19.9 billion this year – an 11% decrease, or $2.5 billion. Furthermore, this marked the most significant year-over-year decrease the fertilizer category has experienced since the 2000s began.”

  • However, if we look at the largest retailer, Nutrien, as a proxy we can see from their earnings results two things:

    • Volumes are flat. YTD (End Q3 2024) Nutrien sold a total of 9.7 million tonnes compared to 9.8 million in 2023.

    • Total gross margin and per tonne gross margin for Crop Nutrients is up over 10% YTD in 2024 compared to 2023.

  • 39% of ag retailers with sprayer fleets own John Deere models. Both Fendt/AGCO and Case IH/New Holland saw their share among CropLife 100 drop in 2024. The largest sprayer manufacturers control 90% of the total market among CropLife 100 retailers — but this represents a slight drop from the 2023 percentage.

The full Crop Life report is linked above.

AgVend, the leading provider of digital enablement solutions for ag retailers, announces the launch of Nexus, a powerful suite of tools designed to place retailers at the center of a fully integrated, digitally connected supply chain. As the connective hub between their customers, distributors, and suppliers, Nexus enables ag retailers to maximize their core AgVend platform by eliminating the need to switch between systems, streamlining manual and complicated workflows, and delivering an exceptional customer experience.

Nexus connects retailers to an expansive ecosystem of complementary tools, services, and integrations with their preferred 3rd party partners,” said Alexander Reichert CEO and Co-Founder at AgVend.

Index for the full article:

  1. Overview

  2. Nexus Breakdown

    1. Finance

    2. Procure

    3. Forecast

    4. “Stacking”

    5. Connect

    6. Market

    7. Educate

    8. Future Offerings

  3. Business Models

  4. Control Point Expansion

  5. A Catalyst for Attracting Mega-Retailers?

  6. Final Thoughts

AgVend provides software solutions for agribusinesses to more efficiently operate their organizations and engage with their customers.

Through their white-labeled system of action, more than 28% of North American retailers streamline workflows for field and office staff, and create differentiated experiences for their local farm customers.

The AgVend opportunity extends beyond that, though. AgVend is leaning into that opportunity.

Nexus Breakdown

AgVend has stated an ambition to “Create a more resilient and dynamic agricultural supply chain” and the Nexus suite enables that.

The Nexus product suite includes the following:

Nexus Market: Collaborate to drive grower sales with hyper-focused, multi-channel campaigns.

Nexus Procure: Streamline procurement with online orders, payments, delivery tracking, and centralized billing

Nexus Finance: Embed financing at the point of action to enable easy loan access and utilization.

Nexus Forecast: Improve forecasting logistics and decision-making through real-time inventory sharing and collaborative planning.

Nexus Educate: Centralize digital product assets to equip teams and customers with the most relevant information and data.

Nexus Connect: Enhance data sharing with immediate exchanges to standardize information between parties for seamless insights.

There has already been an unofficial announcement surrounding several of the offerings.

AgVend has partnerships with financial institutions like Compeer and Growers Edge enabling “Finance” to embed financial solutions, or streamlines application workflows for farmers, improving the customer experience and managing the demands on ag retail staff, ultimately leading to increased retailer sales opportunities and faster payment for the retailer.

Next, they announced a partnership on “Procure.”

In August, a collaboration between AgVend and CHS was announced to give CHS wholesale crop protection customers “access to place orders, view transaction and invoice history, and to reorder with one easy click within the AgVend platform.”

Gain comprehensive analysis of Nexus, exploring its value and applicability to retailers, distributors, and input manufacturers. Discover detailed insights into the business model, the critical role of control points, and its potential to become the operating system for the upstream value chain. Plus, learn how Nexus might entice interest from the big four ag retailers and shape the future of the industry. Don’t miss out on these in-depth insights—upgrade to become an Upstream Ag Professional member today:

Mimetic theory, developed by French historian René Girard, explores the role of imitation (mimesis) in human behavior and societal dynamics.

At its core, the theory suggests that human desires are not inherently individual but are learned by imitating the desires of others.

Mimetic theory sheds light on why we often uncritically repeat concepts or ideas we've heard from others. According to René Girard, human desire—and by extension, thought—is mimetic, meaning it is shaped by imitation.

Just as we model our desires on others, we also model our thinking and beliefs.

I think this is something we see within the industry frequently, specifically as it pertains to artificial intelligence. We hear the same platitudes about AI.

Check out this quote from the above article:

Since there is a lot of hype around AI it is understandable that some people may have the fear of AI replacing their job. However, it is necessary to consider another perspective. AI is not a replacement for agronomists; rather, it serves as a powerful tool that mitigates the shortage of labor and agronomists to secure that the work gets done.

I wouldn’t argue with that statement, but I think the important questions to ask are: What does AI change in the jobs we do? What skills become more valuable? What skills become less valuable?

AI will replace jobs AND it will change jobs.

For the full breakdown of what the Lump of Labor Fallacy is, how it applies to agriculture, why automation is unlikely to solve agricultures labor challenges and the Job to Action Framework to help think through what parts of a job will get automated, become an Upstream Ag Professional member:

This article is more technical from a computer science perspective, but I think provides a nice overview of the details that enable Syngenta to offer CropWise AI.

Part of the challenge with living-biologicals is getting an adequate load (colony forming unit) through the value chain and into the field to colonize the plant.

3BarBio was founded with the mission to further the adoption of biologics by designing innovative packaging and delivery solutions for their partners.

So far, they have been quite successful in accomplishing that.

3Bar has been a driving force behind two compelling offerings aiming to solve challenges with living-biological product distribution.

In 2022, they were apart of Meristem Crop Performance and the BIO-CAPSULE. The BIO-CAPSULE TECHNOLOGY™ Planter Box Delivery System, is a packaging system designed to carry, protect, and dispense a multitude of biologicals into a seed lubricant blend plus micronutrients. Meristem had biological products on over 8 million acres in 2024, which suggests the 3Bar supported BIO-CAPSULE design has been used on most of those acres.

Next 3Bar partnered with Indigo Ag to help produce the “Keurig for Biologicals” with the CLIPS product, announced in September. The CLIPS System design allows for application of powder formulated microbe products directly to seed at the time of planting. As an aside, I had multiple conversations with ag retail agronomy leaders this week that emphasized their interest in the CLIPS system, which I thought was notable.

For more on 3Bar as a biological enabling layer (the picks and shovels approach within biologicals), along with their commercial approach and business model, become an Upstream Ag Professional member:

This is a good read from my friend Matthew Pryor of Tenacious Ventures on the AgriProve acquisition of Geora, along with shared insight:

So many startups literally wither on the vine that is the inexorable corporate cycle of death by pilot. It's not unreasonable for big players to want to prove out a solution, but the burden is often unreasonably borne by startups. I don’t think there are silver bullets here, but better awareness of the impact of the size/resource mismatch is certainly a starting point.

This article is timely because 45Z tax credit provisions are scheduled to go into effect in January. The provisions make carbon intensity a measurement parameter for biofuels production, which makes the topic one to watch in the near term.

In the article there are some traction insights by various carbon providers shared:

Nutrien states that is had more than 2 million acres enrolled in 2023.

Yara’s Agoro Carbon Alliance stated that it has 2.4 million across 32 states.

In the past three years, Indigo Ag shared that it has produced $16 million in sustainability program payments to farmers—$10 million of which was from carbon offsets.

In the first three years, Truterra paid over $21 million to farmers for the sequestration and reduction of over 1.1 million metric tons of carbon.

Non-Ag Article

Billy Oppenheimer’s “Six at 6” Newsletter centralizes around one theme and then reinforces with an aggregate of stories from history, successful people or interesting anecdotes and parables. It’s always very good.

Other Interesting Ag Articles

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