Upstream Ag Insights - January 22 2024

Essential news and analysis for agribusiness leaders

January 22, 2024 • Read Time: 23 minutes

Welcome to the 200th Edition of Upstream Ag Insights!

Thank you for your support of Upstream Ag Insights over 200 editions and more than four years of writing! I will strive to improve the experience, the insights, the tools and the coverage of the world of agribusiness in 2024 and beyond.

Index for the week:

  1. Distributed Soil Testing: Radicle Agronomics and the Future of Soil Testing

  2. John Deere, Meet Elon Musk: SpaceX Satellites to Link Farm Giant’s Equipment

  3. Q&A with Carlo Lambro, Brand President of New Holland + The Insight is the Edge Follow-up

  4. Ever.Ag Announces Acquisition of AgencyRoot + Control Points and Agribusiness Software: Implications for the Industry

  5. World Agri-Tech Innovation Summit 2024

  6. Syngenta & Corteva vs. FTC Update + The Implications

  7. Syngenta and Enko Accelerate the Discovery of Innovative Crop Protection Solutions

  8. Cibus Announces Major Breakthrough in Wheat Regeneration from Single Cells

  9. 100 Million Farmers: Breakthrough Models for Financing a Sustainability Transition: Insights Surrounding Indigo and Growers Edge Traction

This week’s edition of Upstream Ag Professional is brought to you by AGI (Ag Growth International)

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Soil testing is the foundation of positive agronomic, environmental, and economic outcomes.

Successful Farming found in a farmer survey that about 33% believed in testing soil annually, while almost 60% found it important to test only once every few years. In my eyes, this is lower than it should be.

There are challenges in ensuring soil testing informs decisions, but not testing regularly is a major hurdle to overcome.

Three major reasons for not testing are:

  • cost

  • hassle and inefficiency to soil sample (need for labor and equipment)

  • slow timeline that results are returned on (72+ hours out to weeks)

Radicle Agronomics aims to overcome each of these obstacles, so they have been of interest to me since being announced in 2022.

Radicle Agronomics by Precision Planting is a soil testing solution that combines planning, sampling, analysis, and the entire logistics of soil sampling into a system. It's the first automated and distributed soil laboratory.

I reached out to Mike Easter, Commercial head of Radicle Agronomics, to learn more about the system and dig into its potential, shortcomings, and where they are headed in the future.

Index:

  1. Components of the Radicle Agronomics System

  2. What does it test?

  3. Cost and Business Model

  4. Who is it for?

  5. The Future

  6. Final Thoughts

Become an Upstream Ag Professional member today to access the full deep dive on the company disrupting the soil testing landscape:

The world’s largest farm machinery manufacturer signed a deal with SpaceX’s Starlink business to connect tractors, seed planters, crop sprayers and other equipment in areas that lack adequate internet service, allowing them to use Deere’s digital products.

This week, news broke that John Deere has struck a deal with Starlink.

This is not a surprise. For almost two years, Deere has talked about this publicly. I covered it when executives brought it up at the John Deere Leaps Unlocked event in 2022:

Deere stated that “connectivity is as important as sunlight” to farming. While there is some hyperbole there, the fact that Deere is talking about this with such emphasis illustrates its importance— stating they are looking at putting satellite reception capabilities onto their tractors (e.g., to access satellite internet connectivity such as Starlink).

Deere & Company announced it has issued a satellite communications focused request for proposals to secure a cutting-edge solution that will further connect its fleet of intelligent machines.

Deere emphasized that they wanted to move quickly and hoped to have a solution by mid-2024 and wanted to have 1.5 million connected tractors by 2026.

There is frequent talk about enabling infrastructure for agtech products, such as software and API’s—it cannot be understated that ubiquitous internet connectivity on every piece of equipment and farm is the biggest enabler of them all.

Connectivity is one of the biggest hurdles to successful agtech utilization, and it is unrealistic that traditional internet or 5G providers would connect all rural parts of Brazil, the United States or elsewhere.

According to the WSJ article, “about 30% of the acres farmed in the U.S. lack sufficient Wi-Fi service, according to Deere. Elsewhere in the world, the wireless deficit is even bigger. In Brazil, one of the world’s largest producers of soybeans, sugar cane, fruit and other farm commodities, more than 70% of the acres farmed lack adequate connectivity.”

Companies have been very good at making things work “at the edge,” however, connectivity to fast internet has a host of benefits, and some other second-order implications, with a few aspects being:

  • getting (more) data to the cloud for reporting

  • enabling real-time models

  • better-enabling autonomy

  • allowing real-time support and monitoring

  • over-the-air software updates and novel services

These are just a few examples of the value this Starlink partnership unlocks within the Deere ecosystem, being a key component of the John Deere tech stack.

This enabling infrastructure is also key to John Deere’s forecasts and commitments to shareholders: 10% of revenue from annual recurring sources by 2030.

Connected machines enable farmers to take full advantage of new capabilities Deere is launching: See and Spray, autonomy, and ExactShot, as a few examples.

Deere did not specify pricing, but I suspect they will take what’s known as a “razor and blades” business model approach.

For an overview of what the business model could entail, the speed of the connectivity, what it could mean for future services and how Elon Musk will further influence the ag equipmernt space, become an Upstream Ag Professional member today:

I do not want to pile on CNH Industrial— last week, I shared The Insight is the Edge: Why CNH Industrial Struggles to Keep Up and received an immense amount of feedback in numerous directions. I greatly respect the organization and what they do to progress the industry forward. But I would be remiss if I didn’t highlight an interview with New Holland President Carlo Lambro. In it, Margy Eckelkamp asks 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.

For the full break-down, including access to the full Insight is the Edge article, become an Upstream Ag Professional member today:

Ever.Ag, a leader in agribusiness solutions, is excited to announce the acquisition of AgencyRoot, a software platform built for the agri-food sector, designed for crop insurance agents. This acquisition signifies Ever.Ag's commitment to enhancing its presence in the crop insurance sector by providing agents with innovative and user-friendly technology.

The acquisition augments Ever.Ag's presence in the crop insurance sector, complementing its existing agribusiness software solutions across Dairy, Livestock and Crop.

AgencyRoot is focused on providing crop insurance professionals with software that simplifies their workflow and increases efficiency— specifically specializing in document management across various segments of the insurance process, from field agents to owners and management to processors.

This move signifies Ever.Ag's continued desire to invest in technologies that impact various portions of the agribusiness value chain.

This acquisition aligns with Ever.Ag's broader focus to find software systems of records across various agricultural segments and acquire, depending their reach across the agribusiness value chain.

The fit is notable in terms of extending the capacity of what AgencyRoot does, too—today, AgencyRoot digitizes crop insurance provider workflow and can progress towards leveraging artificial intelligence to streamline the workflow. For example, can they leverage another company’s APIs to identify planting dates using satellite imagery or alert to where hail damage has recently occurred. This is a natural extension of AgencyRoot’s offering.

It also illustrates something that EverAg has done well: acquired companies that act as the control point within their industry vertical.

In Catalytic Themes to Watch in AgTech and Agribusiness for 2024 I highlighted my interest in watching agribusiness software dynamics in 2024, along with highlighting where some challenges for agronomic/farm management software have been and what that will drive in 2024 and beyond.

Control Points and Agribusiness Software

Businesses want a single point of action across their company. They don’t want ten different softwares; they want one.

The way to become the “one” is to own a control point. If a company doesn’t own the control point, they will struggle with adoption, stickiness and value creation over time making them more prone to being displaced.

A Control Point is the most important application in a software customer’s feature suite. It is the last software users turn off at the end of the day or the first one they look at in the morning. Some might refer to this as a core operating system.

There are typically only one or two control points in any segment: one in the front office that touches the customer and drives sales, and one in the back office for operations and management.

In the world of large-scale row crop farming in North America, the most influential groups tend to be the retail input providers and the grain originators— these are also the points where transactions occur either to purchase inputs or services or for a farmer to be paid for their grain.  

From the early 2010’s until roughly 2020, many in the industry thought the control point was agronomic software (I am guilty here)– but it’s not.

For the article overviewing what companies will find challenges, what types of companies are positioned well and what that means for acquisitions and private equity strategies, become an Upstream Ag Professional member today:

The World Agri-Tech Innovation Summit is happening in San Francisco on March 19th and 20th, 2024.

The Summit unites more than 2500 global leaders and innovative businesses focused on advancing and investing in technologies to build a more resilient agriculture value chain.

It is the one agriculture event I look forward to each year because the networking is second to none, and the subject matter is dialed* into the most important areas of agtech.

Since 2021, I have shared my views on the sessions I am most looking forward to.

While many stand out, here are three that I am excited about and why:

  1. Agtech: What Went Wrong, What’s Going Right, and Why Should We Still be Excited for the Future?

    1. The speakers for this session are filled with incredible experience. Vinod Khosla, founder of Khosla Ventures and early investor in The Climate Corporation and David Friedberg, founder of The Climate Corporation, CEO of TPB and Ohalo are sure to deliver deep insight into the world of agriculture along with how it pertains to macro levels investing. Given David Friedbergs newest undertaking as CEO of Ohalo (a company incubated by TPB) and the relative shortage of information about exactly what Ohalo is doing, I am hopeful that this session will also be one where we can hear more about his views on gene editing and share more on how Ohalo enables that future.

  2. Investor Panel: Laying A New Foundation for the Economic Framework for AgTech

    1. There is constant scrutiny surrounding venture investment in agriculture— does it work for farmers and agribusinesses, is there economic upside for VC’s, is it the right structure, is permanent capital a better approach and so many more questions come up. I shared my views in Catalytic Themes to Watch in AgTech and Agribusiness for 2024, but I am eager to hear how those directly involved in agtech investment view on things like opportunities to adjust investment approaches in agtech rather than applying standard the standard Silicon Valley playbook.

  3. Biologicals in Action: Getting Traction on Today’s Farms

    1. Last week I emphasized my curiosity surrounding what biological companies are doing to gain traction at the farm in The Hierarchy of Agronomic Needs. Listening to organizations leading in this space, including retailers like Lavoro and bio companies like NewLeaf Symbiotics will surely deliver some unique views on how to grow the adoption of biologicals.

Join me and thousands of others at World AgriTech 2024 in San Francisco and save $700 off your Summit pass with the discount code UPSTREAM10 before January 25:

*Disclosure: I am on the World Agritech advisory team.

6. Syngenta & Corteva vs. FTC Update - Reuters Court Document

In 2022, the FTC brought anti-trust allegations against Corteva and Syngenta surrounding exclusion payments to distributors, keeping crop protection pricing to farmers artificially high.

Syngenta and Corteva deny these allegations.

Corteva and Syngenta have attempted to get the suit dismissed, however, as of January 12th 2024, these motions have been dismissed.

This means the complaint is ongoing and unlikely to be dropped in the short term.

The Judge, Thomas Schroeder, said in his decision said Syngenta and Corteva “have not demonstrated that the widespread failure of generics to enter the market is due to competition on the merits rather than plausibly anticompetitive conduct by defendants.”

Syngenta and Corteva will have another chance to get the lawsuit dismissed as it is now entering the “evidence-gathering stage.”

There are several allegations within the case, but the big one is “exclusion payments,” which are where Syngenta or Corteva pays distributors to limit their business with generic pesticide manufacturers.

For example, Syngenta allegedly does this through its “Key AI” program. For each active ingredient in the program, Syngenta sets a “loyalty” threshold. The thresholds vary by ingredient and by year, and have usually been between 85% and 99%. In the 2014/15 market year, Syngenta set a 99% threshold for mesotrione. For a distributor to qualify for the mesotrione payment, 99% of its mesotrione sales had to be Syngenta products; no more than 1% could be generic. If a distributor met the threshold, then Syngenta would reward it with an exclusion payment. Syngenta also runs a loyalty program for retailers.

The exact size of the exclusion payment is apparently “subject to complex calculations,” the payments “generally amount to a high single-digit or greater percentage of the distributor’s purchases or sales of eligible Syngenta-branded products during the market year.”

The loyalty programs are designed to be binary. If a distributor buys $1 too much of a generic ingredient (and thus fails to meet a loyalty threshold), then it risks losing the entire payment linked to that ingredient. According to the document, Syngenta also coerces distributors into staying loyal by punishing those who do not comply. For example, when one large distributor opted out of the Key AI program, Syngenta stopped selling pesticides to it altogether.

The suit focuses on several active ingredients, including:

  • azoxystrobin (Syngenta fungicide)

  • mesotrione (Syngenta herbicide)

  • metolachlor (Syngenta herbicide)

  • rimsulfuron (Corteva herbicide)

  • acetochlor (Corteva herbicide)

  • oxamyl (Corteva insecticide and nematicide)

In 2022, I wrote the following talking about the implications if the FTC wins along with background on the lawsuit, specifically the emphasis on “exclusion payments:”

In 2022, I ignorantly brushed off the allegations of Syngenta and Corteva in my initial reading. I am not a lawyer, but in reading all of the public court documents, along with talking to individuals within the industry in the United States, it seems like the FTC is putting together a compelling case against Syngenta and Corteva, which could have significant implications for the entire input value chain.

Syngenta Crop Protection, a global leader in agricultural innovation, and crop health company Enko announced today the discovery of novel chemistry to control fungal disease in crops, using a platform that reduces the time required for R&D discovery.

Enko has raised $135 million in venture funding and has partnerships with leading agribusinesses such as Nufarm and Bayer Crop Science in addition to Syngenta.

In an interview with Agribusiness Global, CEO Jacqueline Heard stated that Enko can bring a single molecule to development in ~75% less time compared to traditional methods, reducing the cost to bring products to the market. Ultimately, Enko is targeting a 9-year development cycle versus the current cycles that are upwards of 15 years now for agribusinesses.

In that same interview, Heard stated that their leading chemistries are herbicides. Interestingly, this new chemistry is a fungicide:

The new chemistry features a new mode of action designed to target diseases that can devastate cereal crops. This breakthrough was achieved by screening billions of chemical molecules within Enko’s DNA-encoded libraries, and then using artificial intelligence and machine learning models to identify potent, selective molecules. This significantly shortens the time required for the discovery process, while ensuring molecules meet specified safety criteria.

In 2021, I highlighted the challenges currently facing crop protection discovery through the lens of Eroom’s Law, the inverse of Moore’s Law applied to pharmaceutical discovery stating the following about Enko:

The Enko capability is exactly what the leading crop protection companies are needing.

Eroom’s Law in Crop Protection - Upstream Ag Professional

In the aforementioned Agribusiness Global interview, Heard made a notable statement (emphasis mine):

We believe that having partners that have the global footprint and distribution channel are really important for at least in the near term, getting our products to farmers. And in time we hope that we can continue to bring chemistry further and further downstream…. eventually becoming a player that can bring their own products to the market through a variety of different channels.

Enko today focuses primarily at the discovery portion of the crop protection value chain:

However, as we can see in the quote, there are aspirations to move downstream over time, which presents unique opportunities for distributors or retailers in the future, as a couple examples.

Another notable quote from the interview was the progress beyond pesticides:

We’re moving forward to try to find chemistry that are more like the biostimulants, something that targets a biology in the host or the biology of soil.

Illustrating that we can expect more from Enko beyond traditional pesticides and partnerships in the coming years.

Cibus, Inc. a leading agricultural technology company that develops and licenses plant traits to seed companies, today announced that the Company has successfully regenerated plants from single cells in a wheat cultivar.

This is compelling news— enhancements in breeding capabilities through single-cell regeneration for wheat enable the ability to precisely and quickly introduce novel traits. The Cibus method allows for more targeted gene editing, enabling breeders to modify specific crop characteristics. This process can significantly accelerate the development of improved wheat varieties compared to traditional breeding methods.

According to Cibus Investor Materials, the process length for conventional trait development is 12 to 15 Years, and the Cibus capability shrinks that time down to ~5 years through its Trait Machine breeding process.

Examples of potential traits could include disease resistance (eg: fusarium graminearum) or enhanced nitrogen use efficiency.

Not only is wheat an important crop, but it is incredibly complex. The wheat genome is one of the largest of all crops, with more than 16 billion base pairs. Corn has about two billion, and the human genome has about three billion.

Typical wheat breeding methods involve crossbreeding different plants over multiple generations to develop desired traits. The process can be time-consuming and unpredictable, as it relies on the natural reproduction process. In contrast, single-cell gene editing allows for precise and direct modifications at the genetic level of a single cell, leading to faster development of wheat varieties with specific, desirable characteristics. This method provides a more controlled, efficient approach to creating improved wheat varieties.

Source: Cibus Investor Materials

Cibus has multiple traits currently available for canola and rice, such as herbicide tolerance and pod shatter reduction.

They have other late-stage development traits, such as sclerotinia tolerance for soybean and canola, forecast to be fully developed in 2024. The new capability in wheat delivers an ancillary crop and segment to develop traits for licensing, the core revenue driver of Cibus’ business.

The report itself is high level. The reason I am sharing is because of the insight regarding two companies’ traction reported within— Growers Edge and Indigo:

Indigo offers several programmes for farmers adopting regenerative practices. Some 2,000 farmers have enrolled 6 million acres in its industryleading carbon monetization programme since it began in 2019.

Growers Edge offers sustainable warranty-backed crop plans to drive the adoption of cover crops and nutrient management. These crop plans will be available in more than 20 states for 2024, the third year of the offering, and are forecast to impact over 350,000 acres.

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Today, management is a skill that only a select few know because it is expensive to train managers: You need to give them a team of humans to practice on. But AI is cheap enough that tomorrow, everyone will have the chance to be a manager—and that will significantly increase the creative potential of every human being.

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