Upstream Ag Insights - February 5th 2024

Essential news and analysis for agribusiness leaders

February 05, 2024 • Read Time: 21 minutes

Welcome to the 202nd Edition of Upstream Ag Insights!

Index for the week:

  1. FBN’s Refined Focus: One-On-One With Its Interim CEO 

  2. BioConsortia Extends Nitrogen-fixing Microbial Products Beyond Cereals to Vegetables and Other Markets: 2-Year Viability and Integration into Fertilizer Granules

  3. Inari Raises Equity at $1.65 Billion Value

  4. John Deere, Corteva Partner to Deliver Customized Agronomic Solutions to Farmers

  5. The Shortcomings and Opportunities of Large Language Models in Agronomy

  6. Farmwave Collaborates with Dell Technologies to Decrease Harvest Loss for Farmers

  7. Phospholutions and Growers Edge Partner

  8. Pitchbook Reports A Drop In VC Deals In AgTech During Q4

  9. Corteva Reports Fourth Quarter and Full-Year 2023 Results, Provides 2024 Guidance

  10. The Last Interface

if you are interested in discounted team access, reach out to [email protected]

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

Headstorm is a high-powered technology consultancy dedicated to crafting cutting-edge digital solutions for our clients. Our expertise spans the full technology lifecycle across Strategy, Product, Engineering, Data, and AI. We have deep expertise in AgTech, solving a wide range of complex, mission-critical business challenges.

Elevate your position in AgTech with Headstorm as your trusted partner.

By leveraging our profound industry expertise, we develop technology strategies and digital use cases that decisively move the needle in agriculture.

This week Margy Eckelkamp interviewed interim CEO Devin Lammers, who has been at the helm since November replacing John Vaske, who was in the role for 8 months after replacing Amol Deshpande, where Lammers talked about their renewed focus and some financial updates.

Some of the highlights include:

  • “Overall, we are narrowing toward overall profitability, but we’re striking a balance between growth and being profitable”….“There are two pillars to our platform: access to information and access to commerce. A platform built with transparency in the marketplace is the DNA of FBN”

  • In 2023, FBN completed 33,000 deliveries of farm inputs, provided $1 billion in financing, and paid $22 million in premiums from Gradable.FBN boasts 80,000 members today, up from the 75,000 they stated in Q3 2023. About 16,000 of those members transacted with them in 2023.

Last week I speculated that FBN would focus their business on inputs, sustainability software efforts and suggested they could stay in finance, too (finance as a focus should have been more obvious #3 to me instead of a side note, considering their inputs business).

Basing off the of the quote from Lammers, those pillars seem to be the general focus:

“Much of the market has viewed us as an inputs provider, but FBN Financial and Gradable are 40% of our business as a contribution. We are just as much a financial services provider and sustainability platform/grain technology provider”

That makes the FBN focus: inputs, sustainability software and FBN Financial.

The interview emphasized partnerships and collaboration and in talking to colleagues from around the industry, it sounds like FBN has been attempting a more cordial approach with other industry players over the last year or so (coinciding with Amol Deshpande leaving the organization).

What I wonder is this: Are there enough organizations open to partnering with FBN?

For more on what the FBN relationship with ADM could mean, context on what 33,000 deliveries could be in revenue and gross margin, an overview of the new FBN initiative in bringing overseas active ingredient manufacturers to North America and more, become an Upstream Ag Professional member today:

BioConsortia, Inc., a leading agricultural technology company that designs and licenses advanced microbial products to reduce the ecological impacts of agriculture while ensuring crop productivity, today announced that the Company has developed nitrogen-fixing products to expand the addressable market to new crop opportunities.

N-fixation is complex, yet as many recognize, presents one of the most significant opportunities within the industry.

In The Challenges of Nitrogen Fixing Microbes and What it Means for R&D and Commercial Efforts in the Industry I broke down many of the challenges in commercializing crop agnostic nitrogen fixing microbes, including:

  • microbes are produced cost effectively

  • microbes remain viable on-seed or in jugs, throughout the supply chain

  • microbes can effectively fix N and establish a symbiotic relationship with crops to transfer that Nitrogen to the plant

  • high application rate needed

In having a conversation with leadership from BioConsortia, they are confident they have successfully overcome these issues.

BioConsortia has a unique approach to identifying and selecting microbes.

They call it directed selection.

They start with soil from around the world and then grow specific crops in that soil while removing specific plant needs, such as nitrogen or other nutrients for example, and then grow that crop in the soil continuously until they have a microbiome they are confident deliver a specific outcome. At that point they begin to identify the specific organism that is responsible for delivering that specific outcome and isolate it. The organisms they are focused on are all gram positive, or spore producing microbes.

From there they use some of their proprietary technology, including RhizoViz to understand the organisms ability to colonize the specific crop and then use their GenePro gene editing capability along with novel production methods to deliver a supply chain stable and optimized product, being viable in the supply chain for up to 2 years.

Today, BioConsortia has organisms that include biostimulants, biocontrol, and N fixing microbes. I will focus on the N fixing.

For more on who BioConsortia, an overview of the microbe, its capabilities along with who BioConsortia is partnered with and why it’s important, become an Upstream Ag Professional member today.

Massachusetts agtech startup Inari Agriculture Inc. said it raised $103 million of new equity at a $1.65 billion valuation.

Existing investors including Hanwha Impact, Canadian pension giant CPP Investments, Rivas Capital, NGS Super, State of Michigan Retirement System and Flagship Pioneering participated in the round, as did new investors such as the RCM Private Markets fund, an affiliate of Rokos Capital Management.

According to Crunchbase, this brings Inari’s total funding to $609 million, which comes about 15 months after their $124 million raise. This means we can extrapolate their burn rate to north of $8 million per month. Notably, the investors are not agriculture specific, outside Flagship Pioneering, which is best known for their capital deployments within Indigo and Cibus, along with Inari.

Inari is what they call a pure play SEEDesign company, combining AI-powered predictive design and a cutting-edge multiplex gene editing toolbox to deliver step-change seed products. Part of this tool box includes CRISPR. Their goals include increasing soy, corn and wheat yields by 10%-20% along with decreasing corn’s need for water and nitrogen by 40%.

I reached out to Inari with some questions including whether they have any partnerships that have delivered a commercial product today, whether they are generating revenue today, along with what their business model(s) is. They declined to comment on those questions. They operate in an incredibly difficult and complex space (gene editing) where new products do not happen quickly.

It’s curious though that an 8 years old company (founded in 2016), has raised over half a billion dollars and has partnership announcements with companies like Mertec (Stine Seed subsidiary), Eden Enterprises, and Beck’s is not comfortable stating whether they generate revenue or not and how they will generate revenue. Given they are a trait based company, which would likely operate with a licensing model, it illustrates they likely do not have anything commercialized, and may still be a bit away from it. They could also operate as R&D-as-a-service, or something similar to Cibus, though, again it’s unclear.

One other aspect to consider with Inari is the pending lawsuit they are in with Corteva from Q4 2023. From The Wall Street Journal:

Corteva filed a lawsuit in federal court accusing the seed-gene-editing company Inari Agriculture of illicitly obtaining Corteva seeds from a U.S. depository and illegally shipping them to Europe. Corteva alleges that the startup made small changes to the plants’ genetics and now is seeking to patent the seeds in the U.S.

Corteva claims Inari began taking its technology in 2020 through a nonprofit depository of seeds called the American Type Culture Collection that makes them available for research. The suit alleges that Inari used a separate seed-distributor company to purchase hundreds of Corteva’s proprietary seeds from the ATCC and then had them shipped to Inari, which moved them out of the U.S. to Belgium.

Lawsuits are a part of business and to be clear, Inari has NOT been found guilty at this point, but if the below is true, it’s a very strange maneuver by Inari and likely signals challenges not just with Corteva moving forward, but other large entities within the industry, many of whom would be their customer:

The company alleges that Inari tried to pressure Corteva into a “quid pro quo” agreement: Inari offered not to sell certain corn seeds containing Corteva’s technology, but only if Corteva agreed to pay Inari to use the startup’s soybean products, according to the lawsuit.

According to a message I did receive from Inari, they have filed a motion to dismiss the case and believe Corteva views them as competitive threat.

For years, farmers have had to navigate a complex landscape of digital tools to harness the power of their on-farm data. Corteva Agriscience and John Deere have announced a partnership to make it easier for farmers to access Corteva’s industry-leading agronomic recommendations through the John Deere Operations Center.

This is a seemingly smart move for both entities.

John Deere is not traditionally strong in agronomics. Therefore, they can benefit having access to models from strong agronomic companies that know seeds, crop protection and how those decisions get informed.

It is often stated that Corteva has gotten out of digital agriculture. And while they have got out of it in the sense of competing with the likes of Bayer and FieldView for subscriptions, they still have Granular functionality to empower their staff, such as Pioneer reps. Having data from John Deere Operations Centre integrate with their software and models will help them deliver better recommendations, or share relevant prescriptions to farmers.

Deere has done similar with other crop input organizations as well, such as xarvio/BASF in Europe.

Last year I highlighted many of the challenges with LLMs in the above article.

This week another study surrounding LLMs in agriculture was released:

It comes not long after I talked with Bailey Stockdale in early January, who has been looking at comparing various models and open-sourcing the questions and the models for others to work on as well:

Correctly answering CCA questions is a good start for these models, but as I have pointed out, there is still a long way to go to deliver relevant. The rate at which LLMs have improved in the general gives me optimism that progress will be made in agriculture too. But they hit on something that is important in the new paper:

Agriculture as an industry has not seen much penetration of AI, and we study a potentially disruptive application - what if we could provide location-specific insights to a farmer?

There is a need for not only the contextual information to inform the decisions— weather, soil info, crop stage etc, but also the calibration of that information and the ability to connect all of that effectively. There is a ton of data in agriculture, often not calibrated or verified, which makes location specific insights difficult today. Figuring this out, along with the baseline interoperability is important, but then the important question surrounding the deployment of these models becomes:

Where does value accrue? 

What entity will derive the upside, incentivizing them to invest more in the effective deployment of these models. I speculate it won’t be the groups building the models, but the ones enabling the distribution of it. It’s an area I intend to explore more in the coming months.

Increasing yield is one of North American agriculture's most significant points of emphasis. We want an extra 2, 12, or 20 bushels per acre through some new practice or product. However, one culprit that can challenge yield increase is ineffectively capturing those yield gains at harvest.

In wheat, harvest losses can be as high as 10% and are often still 3-4%. On a 50-bushel crop, that’s still around 2 bushels/ac. The delta between a poor loss (8%) and a good loss number (2%) is about 3 bushels per acre.

Corn losses can be in a similar range. Losing 4% on a 180bu/ac crop vs. 2% is 3.6bu/ac lost.

It is unlikely to reach zero losses per acre; however, improving upon losses is a significant opportunity to directly benefit farmer bottom lines.

Farmwave has created an excellent harvest loss management tool that can help identify losses and adjust combine settings accordingly and be added onto combines in a retrofit manner. Notably, Farmwave CEO Craig Gannsle emphasizes themselves as an AI company.

Typically, companies with a core competency in software or AI, don’t also have a core competency in hardware— think Google. The inverse is also true, such as Apple being predominantly known for their hardware capabilities.

We can extrapolate that to agriculture too. If Farmwave is an AI company, they can benefit from a hardware partnership with a company strong in producing hardware. Specifically as the amount of computing power needed grows and the complexity of an agriculture setting is higher than typical consumer areas.

We knew the hardware would need enough horsepower to run our AI at the edge because there's limited connectivity on farms. It would also need to be portable enough to take it to connectivity so data can upload as well as be rugged enough to withstand the farm environment. We found all of this in the Dell Latitude 7230 Rugged Extreme Tablet, and Dell Technologies was able to build it to our specs for our edge-AI

Farmwave continues to be an interesting company in my eyes, not only because of notable initiatives like this— but specifically if we run their technology and the value they bring to farmers through The Innovation Adoption Evaluation:

Farmwave’s product actually scores very high on almost every aspect. Over time, assuming they can prove benefits over and above traditional combine lost monitors, they become a likely target for equipment companies.

For full access to the Upstream Ag Professional The Innovation Adoption framework, become a member today:

To give farmers confidence in adopting the newest, top performing products, Growers Edge and Phospholutions have launched a new Warranty-Backed Crop Plan. This unique offering provides peace of mind and eliminates some of the risks of trying new products, thus helping farmers adopt new sustainable practices that can improve yields.

Getting farmers to try new products can be challenging, specifically when there is an increase in their cost, or there is a request to do something different than their norm, such as reduce fertilizer rates.

Phospholutions falls into these categories, making them a notable fit for a warranty backed program to decrease farmer apprehension.

For farmer to qualify for the program, they must:

  • Enroll by March 31, 2024, and apply RhizoSorb 8-39-0 to a minimum of 200 acres of corn

  • Provide as-applied maps by June 30th, 2024

  • Provide harvest yield maps and receive $1,000 for providing data, win or loss.

  • Maintain an active multi-peril crop insurance policy.

When I wrote about Phospholutions $10.15M Raise, they told me their product premium is about 35% on a pound for pound basis. Phospholutions says a farmer can reduce their fertilizer rate by up to 50% without seeing a yield reduction.

If yields do not meet 100% of the farmers 10-year actual production history (APH), farmer receive:

  • $40/acre when 80-89% APH is achieved

  • $20/acre when 90-99% APH is achieved

These programs are never easy to execute on, however, I think it’s a smart move by Phospholutions to go this route. Efforts similar to this have been done by companies such as Sound Agriculture as well.

Key Takeaways:

Agricultural technology funding significantly slowed in the fourth quarter as companies weathered operational and market challenges, Pitchbook reported Monday, ending the year on a “sour note.”

Venture capital activity totaled $1.4 billion for agtech firms, down 35% from the third quarter, according to the Morningstar capital market subsidiary. Deal counts reached 181, down 17% from the same period.

I won’t dive deep into the results this week, leaving that for when the annual report is released. I will share some highlights from the analyst call and earnings report though:

  • Corteva stock surged almost 20% after beating Q4 adjusted earnings expectations and saying they expect strong demand from farmers will drive profits higher over the next two years.

  • Full-year 2023 sales declined 1% and organic sales decreased 3% versus prior year with gains in North America and EMEA offset by declines in Latin America and Asia Pacific.

  • The Company provided full-year 2024 guidance and expects net sales to be in the range of $17.4 billion to $17.7 billion and Operating EBITDA to be in the range of $3.5 billion to $3.7 billion.

  • “At our core, we are a technology company and last year, we had more than 400 new product launches. In Seed alone, we introduced 300 new hybrids or varieties, 2 new product concepts and 41 new trait or stack registration approvals. In Crop Protection, our team delivered and launched about 140 new products in 2 new actives, Adavelt and Reklemel, the latter being the first of its kind selective nematicide that also has beneficial soil characteristics”

  • “The expectation is for continued strong EBITDA growth off the 2023 base, an EBITDA margin rate of 21% to 23% in 2025.”

  • When asked about acre shifts from corn to soybean: “I don't think it's any secret that corn is always more profitable for us than soy in North America… And so we've been planning for this and it's baked into our numbers right now. And I think the other important part is it's still – there still is a difference, but the difference isn't quite as great as it had been. And the reason is today because we're not dependent on somebody else's technology on soybeans. So soy, relative to where we would have been three, four or five years ago, is much more profitable. So there is still a difference there. We factored it in. But it's not quite the difference we would have had prior to the significant shift to Enlist E3 within our business”.

As annual reports are released I will begin going deeper into the results and key takeaways from the influential publicly trades agribusinesses.

Non-Ag Article

Related to my commentary on LLMs in agriculture from above:

At that point, the question is whether the value will be captured at the API layer or the distribution layer. And that probably comes down to funding: a few quarters ago, LLM wrappers were easily fundable. Now, of course, they're not. But as AI gets deployed more, there is room for defensible moats in this area, for the same reason that "Web and app frontend for a SQL database" describes a few dozen $10bn+ companies. The details still matter, as does enterprise distribution, and there are some categories that are big enough to support a unique product but small enough that Microsoft won't just add them to the Office suite and OpenAI or Google Cloud won't turn them into a trivial API call.

Other Ag Articles