Upstream Ag Insights - February 26th 2024

Essential news and analysis for agribusiness leaders.

February 26, 2024 • Read Time: 22 minutes

Welcome to the 205th Edition of Upstream Ag Insights!

Index for the week:

  1. Evogene in Agriculture: Subsidiaries AgPlenus and Lavie Bio Announce Partnerships with Syngenta and Bayer Crop Science

    1. Syngenta and Lavie Bio Announce Partnership to Discover and Develop Novel Bio-Insecticide

    2. AgPlenus Announces Licensing & Collaboration Agreement with Bayer to Develop a New Sustainable Weed Control Solution

  2. Dynamic Shared Ownership and the Bayer Transition: What is it and Can it work?

  3. Trace Genomics Raises Oversubscribed $10.5 Million Series B

  4. FBN Appoints Diego Casanello as CEO

  5. Ag-tech Start-Up WeedOUT Raises USD8.1 Million to Fight Weed Resistance

  6. Syngenta Partners with CropX

  7. CNH Industrial News

    1. CNH takes minority stake in drone imaging AI company Bem Agro, a Brazilian startup

    2. Intelinair and CNH Industrial Expand Integration

    3. ICYMI: Carlo Lambro, President of New Holland Commentary

  8. Other Ag Articles

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

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Audio Summary for the Week

Upstream Ag Professional Members get access to weekly audio summaries as part of their membership to increase their flexibility for staying informed about the world of agtech and agribusiness.

This week I am sharing an audio summary with all Upstream Ag Insights subscribers.

On top of audio summaries, Professional members also gain access to premium features that make them more efficient and effective agribusiness leaders:

  • Earlier insights (published articles earlier in week and email delivery on Sunday mornings (Eastern Time).

  • Search and LLM functionality to enhance their ability to create a competitive analysis, complete company due diligence, prepare for a business development call, or help create a best-in-class presentation.

  • Key takeaways for each section.

Evogene is a public entity, founded in 1999 as a division of Compugen and then spun off in 2002.

Today, Evogene has five subsidiaries and three artificial intelligence engines driven by what they call a “computational predictive biology” platform, or CPB Platform.

The CPB platform is used for product discovery and development, utilizing comprehensive computational biology to increase the effectiveness of finding suitable molecules while reducing the time and cost of product development.

Evogene tailored the platform to have three separate focuses:

  1. Microboost AI - supports the discovery and development of microbe-based products.

  2. ChemPass AI - supports products based on genetic elements

  3. GeneRator AI - supports genomic understanding and gene identification

Evogene's approach is to establish a product development ecosystem around each tech engine, through two business structures:

  1. Create independent subsidiaries, focusing on specific life science market segments with a license to use Evogene’s tech engines for product development, or;

  2. Joint development with leading companies for defined products utilizing Evogene’s tech-engines. Typically, the partner leads later-stage development and product commercialization.

Of Evogene’s five subsidiaries, four are agriculture-related (with the first two being of the most interest for North American agribusiness professionals and especially of note this week with their partnership announcements, more below):

  1. Lavie Bio: Lavie Bio is dedicated to developing next-generation ag-biological products. It uses Evogene’s MicroBoost AI tech engine for its developments.

  2. AgPlenus: This subsidiary is focused on discovering innovative crop protection products, such as herbicides, insecticides, and fungicides. AgPlenus leverages the ChemPass AI tech engine to identify small molecules and novel target proteins for the development of new pesticides.

  3. Casterra: Casterra is developing solutions for the industrialized cultivation of castor beans, aiming to meet the global demand for castor oil supply, primarily for the biodiesel industry and more prominent in Africa.

  4. Canonic: Focused on medical cannabis, Canonic aims to develop best-in-class products using Evogene’s GeneRator AI tech engine.

Revenues across all entities are small, and losses are still in the millions each quarter. What is notable is that they continue to gain traction with prominent agribusiness players, leading to investments, partnerships, and exclusive agreements.

To gain a deeper understanding of Evogene and its subsidicaries, including an overview of the Syngenta/Lavie Bio announcement and the AgPlenus/Bayer announcement, business models, areas of focus, and how the Evogene subsidiary product works, check out the article above.

Bayer plans to cut its dividend by 95% (to the legal minimum in Germany) in an effort to manage the debt created by the acquisition of Monsanto that has impacted the company because of the extensive litigation surrounding glyphosate.

Even beyond the glyphosate challenges, Bayer is having struggles across its business units.

New CEO Bill Anderson has initiated operational changes designed to speed up decision-making, cutting layers of management and eliminating thousands of jobs. The job cuts will be implemented over the coming months and completed by the end of 2025 at the latest.

Anderson is also reviewing the company strategy, which currently includes three divisions focused on crop science, pharmaceuticals, and consumer health products. We will find out what the go-forward plan is during the company Capital Markets Day on March 5th, so I will cover that in the March 10th edition of Upstream.

Regarding the operational changes, Anderson has been emphasizing what he calls “Dynamic Shared Ownership,” or DSO, based on the book Humanocracy by Gary Hamel.

Humanocracy

I read the book this past week to better understand what it entails, and also watched the public webinar from Bayer (it’s quite good, particularly the first 20 minutes for anyone interested).

The essential premise of the book is that our businesses and workplaces are plagued with bureaucracy thanks to an increase in managers and desperately need an overhaul.

  1. The book contrasts the rigidity, inefficiency, and disempowerment inherent in bureaucratic systems, typical of most organizations, with the agility, innovation, and engagement found in “human-centric” organizations.

  2. One of the central tenets of humanocracy is empowering individuals within the organization to make decisions, innovate, and take initiative without being stifled by layers of management. Anderson has talked about how organizations talk about empowerment but fail to recognize that when an organization has once-a-year budgets handed down from above with no questions asked, that isn’t empowerment.

  3. The authors advocate for decentralizing decision-making to those closest to the work, customer or the problem, which contrasts with traditional top-down management approaches.

  4. The book promotes a merit-based culture where ideas and contributions are valued based on their merit, not the rank of the idea's originator aka decisions do not default to the highest-paid-persons-opinion (HiPPO).

  5. Finally, it emphasizes creating a sense of community and belonging where organizational success is driven by collective effort and shared values rather than individual competition.

Using the book as a foundation for shared language and perspective, Bayer created the principles of DSO:

  1. Mission-firstFocus everything on Health for all, Hunger for none.

  2. Collaborative mindsetsFoster a community that enables creative mindsets and behaviors.

  3. Customer-centricDeliver faster, more impactful innovations to the customers who depend on us.

  4. Employee empowermentThose doing the work also make the decisions. We’re shifting 95% of decision-making from management to the people doing the work.

  5. Nimble working cyclesEmbrace continual improvement, with a bias for action, in 90-day cycles.

If I was to summarize it simply, humanocracy advocates for a large organization to operate similarly to that of a start-up— less management, faster decisions, people have ownership of those decisions, tighter with the customers, and feel the pain/joy from outcomes and market forces.

Can Bayer Make the Transition Work?

It is difficult to argue with the concepts laid out in the book. They make sense, and I think most building a business from the ground up could find practices to utilize in their organization.

However, the pain felt by a massive organization to get to the effective utilization and cultural change to reap the benefits is likely to take time.

Bill Anderson has been on record on a Q2 2023 investor call stating the following goal surrounding speed and agility:

Our benchmark isn't other large companies, our benchmark is a sole proprietor a startup and we need to convince ourselves that the structure that we adopt is something that is supporting that goal of speed of innovation of quality and so basically that's what we're taking on

It is worth recognizing what incumbents have that start-ups don’t, aside from deeper pockets: something to lose.

To see the full article on the challenges and opportunities and to access the full analysis in Sunday, March 10th 2024’s edition breaking down the Bayer news surrounding the future of the business units, become an Upstream Ag Professional member today:

Trace Genomics (Trace), the industry leader in DNA-based soil intelligence, today announced its successful Series B funding round at $10.5 million led by existing investors S2G Ventures and Ajax Strategies, as well as new investor Rabo Ventures. The round exceeded expectations and demonstrated strong investor confidence in Trace's trajectory and growth strategy. With this additional funding, Trace plans to expand its commercial growth, making its offerings available to more farmers and agronomists.

Trace Genomics has now raised just over $50 million, according to Crunchbase and has public partnerships with companies like CHS and Taurus Agriculture.

Trace uses genomics to develop an understanding of the physical, chemical, and biological aspects of soil, including pathogen (disease) dynamics, helping to inform farmer and agronomist decisions surrounding fertilizer, crop protection products, or seed varieties.

Some of the diseases and pathogens tested for include Bacterial Leaf Streak, Common Smut, Fusarium Stalk Rot, Goss' Wilt, Pythium Root Rot, Root Rot, Seedling Blight and Root Rot, and Stewart's Wilt.

Trace enables a rounding out of soil understanding that meshes the biological into the physical and chemical:

TraceCOMPLETE package test aims to take the guesswork out of crop input decisions, delivering a decision advantage to farmers.

Trace has primarily gone to market through retail partners, including CHS. When it comes to the distribution channel, such as retailers, input providers, or distributors, they also deliver an information advantage— an incremental layer of understanding to trusted advisors and companies working to support farmers over those that do not leverage the test capability.

I believe deeper soil insight can deliver better outcomes to farmers. However, the cost to deliver that is important to consider.

Today, I suspect many retailers that use the test subsidize it for their customer base as a means of gaining a better understanding of their customers fields and therefore an ability to find the best product fit to solve the customers problem. The MSRP of a TraceCOMPLETE sample (pathogen and nutrient management) is ~$255. The sample is relevant for ~40 acres, which makes the cost per acre $6.50. This would be positioned as something to do every 2-4 years vs. every year.

For an overview of the business economics, a comparison to A&L Labs, and what future product offerings could look like become an Upstream Ag Professional member today:

FBN® today announced the naming of Diego Casanello as its Chief Executive Officer. The appointment, which was a unanimous decision by the Board of Directors, follows an extensive, global search process. Casanello begins as CEO on March 1, 2024, replacing interim CEO Devin Lammers who served in that role since November 2023. 

Diego Casanello becomes the fourth CEO of FBN since its founding and third in 12 months. The most notable aspect of this appointment is his legacy crop protection company experience. FBN was founded on the culture of “disrupting” legacy organizations, but Casanello comes from extensive industry experience at UPL/Arysta and BASF.

Since co-founder Amol Deshpande left the helm, the organization has seemed increasingly open to more industry collaboration, something that has been more recently emphasized by the company.

FBN has, from the outside looking in, floundered in terms of gaining a meaningful, profitable foothold within the industry. They haven’t exploited a niche and expanded successfully, as I highlighted last year in One (Three) Upping Indigo Ag: New Initiatives from Farmers Business Network.

How the organization shifts its points of emphasis moving forward will be interesting to watch under a new CEO with extensive industry experience.

Ag-tech start-up WeedOUT, Ltd., announces it has secured USD8.1 million in A-round funding. Leading the round is Fulcrum Global Capital, a prominent US agri- focused VC with ties to a vast network of farmers across the US. The infusion of new capital will advance the company's mission to combat weed resistance through its breakthrough green solution.

WeedOUT's solution is the application of pollen to herbicide-resistant weeds at flowering timing to impact the viability of the seeds that the weed produces.

The company has created a novel approach to mitigating the proliferation of weeds that are no longer impacted by herbicides.

The company's first target is the Palmer amaranth weed (Amaranthus palmeri).

There are two major challenges with commercially using pollen for any effect in farming:

  1. Harvesting high-quality pollen and keeping it viable throughout the supply chain.

  2. The effective application of pollen to the appropriate area of the field.

WeedOUT claims they are creating a product that covers off both of these challenges: a wet pollen product.

A wet product would enable the application through a drone or sprayer. Given the nature, it seems likely a drone spot spray application may be a fit for this product.

The biggest challenge after overcoming the above two factors is timing. Weeds germinate at various times, leaving them at various stages within a field and even a plant itself will pollinate over a week or more time period. Timing being challenges means many resistant weeds can still pollinate with viable pollen from the environment, leaving a much less than 100% effectiveness. Just because it isn’t 100% effective doesn’t mean it is not useful, but depending on price and challenges to even hit a point of 70% or 80% effectiveness, it could be challenged to see uptake. The company claims they are working on an optimal treatment regiment program to help with timing.

WeedOUT’s first market will be the United States, where it does require approval of the EPA (Environmental Protection Agency) under the biochemical active ingredient track.

More tools to fight resistant weeds are always good. While there are challenges to overcome, there may be a niche for this product when there are no other alternatives.

CropX Technologies, a global leader in digital farm management, and Syngenta, a global leader in seeds and crop protection products, are teaming up to improve the sustainability and yield strength of Syngenta’s seed suppliers in the American Midwest.

I reached out for comment and didn’t receive any concrete comments to ground this release in more tangible impacts.

The core takeaway is that some percentage of Syngenta corn seed growers in the Midwest United States will receive CropX hardware and software under irrigation for their farm, paid for by Syngenta.

6. CNH Industrial News

Equipment and services company CNH’s investment arm, CNH Ventures, took a minority stake in Bem Agro, a Brazilian startup that uses artificial intelligence to convert aerial field images — including those taken from machines, drones and satellites — into agronomic mapping reports.

Bem Agro uses AI to convert any type of aerial field image, including those taken from machines, drones and satellites into Agronomic Mapping Reports. These reports provide vital data that enables farmers to make better decision about optimizing field operations, allocating resources and increasing yield while driving improved machine performance, greater productivity and reduced running costs.

Intelinair, the makers of AGMRI and a leading ag data analytics company, announced today it has extended its digital connectivity options for farmers by integrating its digital platform, AGMRI, with CNH‘s global operating platform.

Through this integration, farmer customers can easily export field boundary data, as-applied, and yield data to AGMRI. Platform users that will have access include CNH brands Case IH, through its AFS Connect platform andNew Holland, with its MyPLM Connect platform

Last month, I shared The Insight is the Edge: Why CNH Industrial Struggles to Keep Up and received an immense amount of feedback in numerous directions. Recently Margy Eckelkamp talked to Carlo Lambro and asked the question, “How is New Holland approaching technology?”

The response is as follows:

Our mission is to make farming easier, more efficient and more sustainable… As for its application in North America, we will keep pushing to get the farmer the best technology possible.

There is nothing inherently bad about this response. But, it reminded me of a quote from Roger Martin, the individual whose views on strategy have disproportionately shaped mine:

One of my core premises is that in strategy, if the opposite of your strategy (e.g. we are customer centric) is stupid on its face (I.e. we ignore our customers entirely), then it isn't a strategy choice. It is a choice to simply be non-stupid.

The opposite of “making farming easier, more efficient, and more sustainable” becomes making farming harder, less efficient, and less sustainable. This is emphasized as a mission statement rather than a strategy, to be fair to CNH.

However, it raises the point that there is rarely a specific strategy painted, an elaboration of how CNH Industrial will do this or what they are doing that is unique from any of their major competitors. Ironically, what it is is that CNH Industrial's executive statements lack is precision. In the aforementioned article, I highlight that the insight is the edge— insights are precise world views that shape actions. Strategy is an integrated set of choices that fit together and reinforce one another to give an edge— aka specific actions.

CNH Industrial has said that “core to the new CNH Industrial strategy is its focus on technology leadership in automation and its commitment to delivering a fully autonomous farming cycle.”

This lacks precision— Autonomous by when? What crops? What functionality? How will it be monetized? What actions are being taken to progress the effort forward?

If we go back to The Future of Ag podcast mentioned in The Insight if the Edge with Kermisch, there was waffling regarding “when” and “how” autonomy will be monetized.

One can have a different view from John Deere’s vision of a fully autonomous corn cropping system with recurring revenue monetization surrounding automated precision offerings by 2030 being too early or not the right business model, but there is conviction and a north star continually communicated to the entire John Deere stakeholder base.

A business does better with a destination, just like a car or plane. Without knowing where you’re going, it’s easy to get lost.

Disney CEO Bob Iger has stated the following:

“A company’s culture is shaped by a lot of things, but this is one of the most important — you have to convey your priorities clearly and repeatedly…In my experience, it’s what separates great managers from the rest.

This kind of messaging is fairly simple: This is where we want to be. This is how we’re going to get there. Once those things are laid out simply, so many decisions become easier to make, and the overall anxiety of an entire organization is lowered.”

It remains unclear what unique vision CNH has, how it shapes its vision and worldview, and what specifically they are doing to drive towards that vision.

Maybe it is semantics, or maybe it is that CNH Industrial places a lesser emphasis on external or shareholder communications, but ultimately, it is challenging to see where CNH Industrial is headed relative to key competitors, and if it seems that way to me, I would bet there are many more who see the same.

Non-Ag Article

Getting Lucky - Howard Marks

Howard Marks is a famous investor and a clear thinker.

His memos have a cult-like following in and out of the investing world.

This week, I was re-reading some of his memos, including “Getting Lucky,” from 2014, and his perspective remains timeless.

Other Ag Articles