Upstream Ag Insights - January 8th 2024

Essential news and analysis for agribusiness leaders

January 08, 2024 • Read Time: 20 minutes

Welcome to the 198th Edition of Upstream Ag Insights!

Happy New Year! I hope everyone had a wonderful holiday season.

Index for the week:

  1. Catalytic Themes to Watch in AgTech and Agribusiness for 2024

  2. NewLeaf Symbiotics Closes $45M Series D Round, Continues Growth Trajectory

  3. CropLife 100: A Bump in Seed Sales in 2023 Bodes Well for the Future

  4. GreenLight Biosciences Secures EPA Registration for New Bioinsecticide, Calantha

  5. Koppert to Introduce Digital Assistant in 2024

  6. OneOne Biosciences Partners with Ginkgo Bioworks

  7. The Dark Side of Sales

Search Accessibility for Upstream Ag Professional Members

This week was the launch of Upstream Ag Professional Search and Summarization.

Every edition of Upstream has been loaded into a trained model to create a searchable database to ease navigation of previous editions.

The search is equipped with LLM summarization, along with links to the specific editions with the topics you are looking for. I have used it myself for the last two months.

Access is available for all Upstream Ag Professional members.

Whether you want to find information about a previous agtech announcement, do a competitive analysis in a segment of the industry, or understand what is happening with a specific company in the agriculture space, the new search functionality will support those endeavors.

Below is an example:

Audio Summary for Professional Members

Upstream Ag Professional members will now receive audio summaries of each edition to make the consumption of Upstream Ag Professional more flexible for busy agribusiness professionals or for those who prefer to stay informed via audio.

Below is an example for this week’s edition:

Don’t miss out on access to tools that can make you a more efficient and effective agribusiness professional. Become an Upstream Ag Professional Member today:

2024 marks the start of the fifth year for Upstream— while agtech venture funding has slowed within the industry over that time frame, the implications of technology, complex interactions between companies, and macro trends continue to drive compelling new themes to pay attention for agribusiness professionals.

Instead of making predictions (though there are some), I want to highlight the themes surrounding agtech and agribusiness that I am most interested in over the coming year.

They are in no particular order.

Below is the executive summary of each. In the above link, there is a deep dive, including images and expanded viewpoints for each area.

  1. Vertical Ag Software Battles Intensify: The competitive landscape in vertical agriculture software is becoming more intense. Companies like Bushel, AgVend, Smartwyre, and Ever.Ag are making significant strides in market penetration. The focus on reducing friction for agribusiness professionals and customers, enhancing user experiences, and expanding platform value chains is driving further competitive dynamics.

  2. Evolving Crop Input Trends: There is a significant shift towards sustainable molecules in crop protection, biology and formulation technology, moving away from reliance solely on proprietary synthetic active ingredients. Companies are differentiating through novel formulation technologies that can enhance product performance, extend intellectual property, and reduce environmental impacts.

  3. Precision in All Aspects of Agriculture: The trend towards precision in agriculture is expanding beyond traditional areas like fertilizer application. It now encompasses various activities including product marketing, gene editing, grain marketing, crop protection product formulation, and staff training. This shift towards more granular and precise approaches in various facets of agriculture aims to improve efficiency and outcomes and will eliminate generalities and focus on the average.

  4. Soil and the Convergence of Crop Protection and Fertilizer Industries: There is a growing overlap between the realms of crop protection and fertilizer manufacturers. Companies traditionally focused on crop protection are now entering the soil health and nutrient efficiency space. This convergence is leading to new competitive dynamics in the industry, with companies like Corteva and Syngenta expanding into nutrient and nutrient-use efficiency products.

  5. Advancements in Agribusiness Software and AI: The integration of AI and large language models (LLMs) in agribusiness software will impact agriculture in 2024, but not in the way that is most talked about with agronomic decisions; the primary method will be through administrative and workflow optimization for agribusiness professionals. This includes applications like crop protection programming, product sales materials, and automated workflow processes. The integration of AI is seen as a key enabler for improving the efficiency and decision-making capabilities of agribusiness professionals.

  6. Rocky Raising Environment and Venture Capital Shifts in Agtech: The agtech sector is facing a challenging capital-raising environment, prompting a trend towards self-funding and more sustainable unit economics. Venture capitalists are responding by looking at new methods of funding too, such as venture studio models. This also leads to potential consolidation, particularly in the agribusiness software and biologicals sectors.

  7. Digital Infrastructure and Cloud Wars in Agriculture: The competition in cloud computing is intensifying in agriculture, with major providers like Amazon, Microsoft, and Google forming partnerships with ag-specific companies. These collaborations aim to deliver the digital infrastructure to transform agricultural data into actionable insights, indicating a shift towards ecosystem clouds. This trend reflects a move toward integrated cloud services and applications that are specifically tailored to the unique needs of the agricultural sector.

  8. Challenges in Climate Smart Agriculture, Traceability, and MRV: Progress in sustainability, traceability, and MRV in agriculture will move at a snails pace in 2024. A lack of unified direction and inconsistent approaches hinder them. The effectiveness of large-scale projects is questionable, suggesting that starting with smaller, more manageable initiatives could lead to more significant, scalable successes in climate-smart agriculture and related areas moving forward.

Become an Upstream Ag Professional member to get full access to insights, images and research regarding the above:

NewLeaf Symbiotics, global leader and pioneer of pink-pigmented facultative methylotrophs (PPFMs), announces the fully funded close of its series D financing round, totaling $45 million. This round was led by new investor Gullspång Re:food and followed by Otter Capital Partners LP, S2G Ventures, Leaps by Bayer and others.

NewLeaf focuses entirely on a group of bacteria known as pink-pigmented facultative methylotrophs (PPFMs). PPFMs can be found on plant leaves and in the rhizosphere, and they have been found in more than 100 species of plants to date.

PPFMs are compelling as a crop input for multiple reasons, including their biostimulatory attributes such as ability to impact phosphorous solubilization, nitrogen fixation, plus induce physiological changes in plants, making the plants better equipped to manage abiotic stress. In addition, many of them possess biocontrol activity.

Today, NewLeaf has biostimulant products for use in the corn market through companies like Meristem Crop Performance and AMVAC. This includes BioWake and Revline Hopper Throttle.

They also have a new insecticidal-type product for corn rootworm— the verbiage used on their webpage is interesting to note: they say that it “mitigates” feeding. Typically, we use crop protection products for insects that kill the insect. In my conversation with NewLeaf they used the word “repel,” and when reading some of the literature on PPFMs, that implication comes from what is known as a biofilm. This unique type of protection is useful to optimize yield and minimize things like Bt resistance.

It also creates the opportunity for NewLeaf to “stack” plant health promoting PPMF’s along with crop protection PPMFs, establishing an even more robust product.

This stack could grow in the future too. NewLeaf states they have organisms in their library that include biofertilizer and methane-reducing capabilities on top of protection and biostimulants.

In the release, their acre growth stood out to me:

The market saw NewLeaf’s product-applied footprint increase from approximately 800,000 acres in crop year 2022 to 3.5 million acres in crop year 2023, with a projected nearly 11 million acres in crop year 2024.

Impressive growth and forecast for 2024. The numbers themselves got me wondering: what has driven their growth?

NewLeaf was founded in 1999 and has raised more than $134 million and has just begun to see growth in the last few years.

As with many aspects of the biological realm, a big part of it came down to the production cost.

CEO Brent Smith told me their production cost has come down 100-fold since 2018! They accomplished this by working on an improved fermentation and spray-drying process, enabling a better priced product in the market.

The most compelling part is that lowering the cost of goods (COGS) to what I suspect is the equivalent of cents per acre increases not only the prospects of profitable unit economics on a traditional product acre but also the optionality for the company.

With lower COGS, they increasingly open optionality. For example:

  • Stacked Products - Touched on above, it opens up the possibility to profitably formulate multiple types of products together, like a biostimulant plus crop protection.

  • More Crop Types - Instead of only having opportunities in high-value crops, they can be relevant in all row crops. This could expand to various geographies as well.

  • Application Type - PPMFs have an effect foliarly, or in the soil, which means they can be formulated as a liquid, plus they can be used in a planter box type product (eg: Revline Hopper Throttle by Meristem), potentially granulated for in-soil application as well.

  • Go-to-Market Flexibility - Being able to formulate their own products and go to market through the traditional channel is always an option, but with lower COGS they can also license their technology to other companies or go directly to a retailer and offer them a novel product that enables higher margin potential.

The COGS decrease has unlocked growth opportunities for NewLeaf, coupled with the new funding, they are seemingly in a strong position to grow in the coming years.

According to many market watchers, seed is the “most personal” decision grower-customers make each growing season “because all of the other crop input/service decisions are made afterward.”

The above quote tends to be true. But I think the “how” behind selling seed has evolved.

Take the question asked by CropLife:

The question is poor and the answer options are poorer, which makes it difficult to glean any real insight. However, it seems to illustrate that the emphasis surrounding seed focuses first on variety.

This is wrong. And I think the best seed sellers operate accordingly.

There is a need to understand the farmer's context, their challenges, and their soil. Everything cascades from there, including variety decisions.

For more on what will drive the future of seed selling, become an Upstream Ag Professional member today:

GreenLight Biosciences has been granted registration by the U.S. Environmental Protection Agency (EPA) and several states for its groundbreaking Calantha™ product, designed to target and control the highly destructive Colorado potato beetle. An industry first, the registration of Calantha, an innovative bioinsecticide based on RNA, represents an historic stride forward in diversifying options for farmers and reducing reliance on conventional chemical pesticides. Following the federal and state approvals, the company has now successfully sold and shipped its first order.

I have highlighted Calantha before, it has now been granted EPA registration and is the first dsRNA based product to recieve EPA registration.

The release doesn’t state what the price per acre will be or who the product will be distributed through, and Greenlight wouldn't share those details.

One of the notable challenges for companies with RNA products is to get the cost of production down.

In cross-referencing a generic number from their old public documents that state they can synthesize dsRNA for less than $1/g with their release statement that effective control of the Colorado Potato Beetle needs just 4 g/acre, that puts the cost of the product to manufacture around $4/ac before any other formulation, packaging, distribution, marketing, etc. which could bring the cost to the farmer up closer to $20/ac, depending on Greenlight margin expectations.

Another challenge is that farmers are used to spraying one insecticide and killing multiple or all insects.

RNA is highly targeted and only kills the specific insect it is formulated for. This isn’t bad, but it brings up adoption and educational challenges around the product, specifically if the product is expensive and if there are other insects in the field close to the economic threshold. There is rarely only one pest in the field at any given time.

What is positive in reading the EPA report, it can be tank mixed with other insecticides and fungicides without impacting degradation:

Results from the assays showed that, in the presence of SGF, Ledprona was digested within 10 minutes irrespective of whether it was alone or combined with any one of the four tank mix partners individually.

The digital assistant uses a natural language processing model to interpret the question and a generative AI model to deliver the answer in a ChatGPT-like fashion.

Koppert is a global organization that specializes in sustainable solutions for crop protection. Recently, they announced a chat interface AI assistant, which I think has significant shortcomings today (though I am a fan of Koppert trying new things like this).

In October, I wrote about LLMs in The Shortcomings and Opportunities of Large Language Models in Agronomy, and the Koppert example from the release illustrates one of the shortcomings:

The more specific your prompt, the more relevant the response. For example, weather conditions can matter when using our products.

The answer any farmer or agronomist receives from an LLM will be a product of the quality of the prompt. The reality is that many prompts will not be specific enough to deliver a valuable answer because there are too many “unknown unknowns.” The “right” product depends on a host of considerations that are difficult to input into a text prompt but are inherently understood to ask or consider by an experienced agronomist.

For more on what is necessary to drive success with LLMs in agriculture, who is working in this area, and who is best positioned, become an Upstream Ag Professional member today:

OneOne Biosciences, a French startup building a comprehensive suite of agricultural microbial solutions for farmers, and Ginkgo Bioworks, which is building the leading platform for cell programming and biosecurity, today announced a new partnership. This collaboration will leverage Ginkgo's robust ag biologicals infrastructure, biotechnological expertise, and Strain Optimization Services.

OneOne is developing the OneOne Multiplier, a device that would be positioned at a large farm or retail and proliferates specifically formulated microbes for application on crops.

The Multiplier would have OneOne Livepods with specific microbes, and allow for a tailored approach to crop needs, areas such as including nitrogen fixation, phosphate solubilization, and crop protection.

OneOne is still a couple of years away from an initial commercial launch, according to CEO Julien Sylvestre, but their approach is interesting for two reasons:

  1. What they can do to streamline supply chain efficiency and costs.

  2. How they are sourcing their microbes.

Number two is where Ginkgo Bioworks comes in.

Ginkgo Bioworks has a platform to enable its customers to program cells like we program computers. Their cell programming platform, or “foundry” enables the growth of biotechnology across various markets, including agriculture.

Ginkgo has positioned itself as The Amazon Web Services of Biology. Just like AWS enables software-driven start-ups the ability to be up and running quickly without the need for investment in servers or computing infrastructure, Ginkgo enables biological-based start-ups (or incumbents) the ability to access biologicals, or ramp up R&D capabilities, without the need for capital investment in their own infrastructure:

Become an Upstream Ag Professional member to view:

Discovery has many components, specifically when talking about bio-based molecules, and Ginkgo supports the majority of that, including in silico screening to in vitro assays/characterization and in planta efficacy assays, all the way to fermentation process development and strain optimization— this also goes beyond living organisms and gets into areas like peptides and proteins.

Ginkgo has relationships with agribusiness like Bayer Crop Science, Syngenta and Corteva and they also have partnerships with smaller entities beyond OneOne, such as Exacta, which uses Ginkgo’s fermentation and formulation optimization services to reduce their COGS.

Ginkgo charges its customers for using its foundry and/or takes royalties on its customers’ revenues.

The potential for a company like Ginkgo is immense. However, there remains questions about their viability from short sellers and their ability to grow revenue in their cell engineering unit (related to the foundry), which will need to grow in the future, and is why we see a more significant push agriculture: Ginkgo’s total revenue was $478 million in 2022, driven mainly by its Biosecurity business unit, which provides COVID-19 testing and genomic surveillance services— they expect these to decrease moving forward (due to decreasing COVID needs) meaning their other revenue, cell engineering, needs growth.

To date, there haven’t been many public commercial successes from Ginkgo within agriculture. For example, it’s unclear how Ginkgo/Joyn Bio (Bayer JV) has contributed to Bayer’s biological business. They had an announcement with AgBiome to optimize AgBiome’s COGS, something AgBiome drastically needed, but it’s not clear that anything positive has came from that, seemingly needing immediate payoff.

I believe because of all of the above— mainly the potential of Ginkgo in agriculture and the pressure to derive cell engineering unit revenue; we will hear a lot more from Ginkgo in 2024 within agriculture.

Non-Ag Article

7. The Dark Side of Sales - David Sacks from Bottoms Up

Problems often occur when founders are too trusting of the alignment created by a sales incentive plan. Many founders believe that once the incentive is set up, the Sales team will largely take care of itself without much need for supervision. This “set it and forget it” mentality can lead to a rude awakening when perverse incentives arise and produce unexpected results. As a well-known sales adage warns, “you get what you inspect, not what you expect.”

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