Upstream Ag Insights - July 24th 2023

Essential agribusiness news and highlights for industry professionals

July 24, 2023 • Read Time: 21 minutes

Welcome to the 178th Edition of Upstream Ag Insights!

Index for the week:

  1. Farmers Edge Reprioritizes Go-to-Market Strategy and to Slash Staff While Co-Founder Launches Competitive Agronomy Business

  2. Corteva Announces Two New Biological Partnerships

    1. Lavie Bio Announces Licensing Agreement for Bio-Fungicides with Corteva Agriscience

    2. Corteva Agriscience and Bioceres Crop Solutions to Advance Availability of Biologicals in Europe

  3. What Makes Up Agribusiness Innovation Strategies and How Do the likes of Syngenta, Bayer Crop Science, Corteva Agriscience, BASF, FMC Corporation and UPL Compare Across Them?

  4. What CPG Companies Can Learn From Precision Ag Companies

  5. Is Farmer's Business Network Just Like Every Other Ag Retailer? and What Has Been the Biggest Innovation in Ag Retail Over the Last Decade

  6. Electrophysiology: A Yield Game-Changer

  7. Verde’s Products Remove Carbon Dioxide From the Air

  8. Investing in Ag Biologicals: “We are looking for reasons to say no” 

  9. Syngenta Earmarks $166 million to Finance Brazil Farmers via Barter Deals

  10. Tracking Biostimulants: Retailer Survey Data from Stratus Ag Research Highlights and Analysis

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Your Competitors Already Do.

At Upstream, the focus has never been to break news or write about industry hearsay. I have no intention of moving away from that focus either, however, when I receive over a dozen consistent messages from those that are a combination of farm customer, employee, ex-employee or enterprise customer I follow that directional arrow closely and analyze the potential implications on the business and industry based on what I am confident in being real.

Starting in June I received messages that Farmers Edge had pulled out of Australia and Brazil, with screenshots of messages from the company to customers and staff being sent to me via Twitter direct message. I do not think this was surprising. While I feel for the individuals who have had their livelihood impacted, one of the simplest business decisions for incoming CEO Vibhore Arora to make was to cut costs and focus their business geographically, something I talked about last year.

Of note, Australia and Brazil made up about 20% of their employee base and about 20% of their revenue base, according to their company filings:

Our revenue mix by geography for the year ended December 31, 2022 is as follows: 35% Canada, 44% United States, 17% Brazil, 4% other.

If Farmers Edge is ever to reach cash flow positivity, focus is necessary.

I also suspected they would prioritize their core geography: western Canada and the Northern Plains of the USA, and emphasize enterprise software offered to the likes of ag retailers.

This is where the messages I received this week have come in.

Farmers Edge has allegedly begun to shut down its operations hubs and eliminated staff in the Canadian provinces of Alberta and Ontario, along with most of its hubs in the USA. Staff members in the affected regions were given until the end of August to close up offices and tie up loose ends.

As of today, my understanding is that there will be less than a hand full of hubs operating in Saskatchewan, Manitoba and the northern US states to service their direct-to-farm precision service customers.

For those farm customers that worked directly with Farmers Edge and received boots-on-the-ground support that fall out of the geography of the in-person support, they will be transitioned to virtual support, apparently a call center. If farmers are newly into a long-term contract with Farmers Edge, this is likely to be an unfortunate change to their service experience.

Farm customers that purchased services through enterprise retail customers will have support from their retail contacts.

“Virtual” support is notable. The unit economics of in-person, boots-on-the-ground support has been one of the biggest challenges with Farmers Edge business model. It’s also been a differentiator for them— implementing precision agronomy can be a full-time job for even great farmers and comes with a lot of complexity.

Farmers Edge made up one side of the precision ag paradox — employ staff for a high-touch service offering, and you get high costs and lower margins. The alternative side is offer a low-touch service, and you get low grower implementation and high turnover, albeit higher margins on the few you retain.

Given this, one has to assume Farmers Edge knows many of these virtually serviced acres will turnover— but the ones that do remain will have a much higher contribution margin to the business.

This service change illustrates that their direct-to-farmer business will be a small contributor to their future revenue and profits. It then becomes apparent they are focusing in two areas:

  • Enterprise offerings (FarmCommand as ag retail SaaS, crop input marketplace CommoditAg)

  • Carbon business (Soil lab, carbon offsets, insetting efforts)

Note: They do have an insurance business too.

Their enterprise offerings have a fit, albeit they are in a competitive space with the likes of TELUS Agriculture (which renamed their ag retail software, Agrian, to TELUS Agronomy this week) plus in a space I am not bullish on with crop input marketplaces. There is a long tail of farmers that could want access to inexpensive crop inputs such direct shipments of straight urea or generic crop protection products, but I don’t see that taking Farmers Edge to success (they sold just $5.6 million in crop inputs in 2022 and even if they 5x that over the coming 2 years they are selling the equivalent to one good sized ag retail location).

What stands out the most to me with this news though, is the future of their carbon business.

Can Carbon Get Farmers Edge to Profits?

Like precision ag implementation, carbon offset creation is challenging for farmers to do on their own.

At it’s most simple, the Farmers Edge carbon business would rely on three things to create an offset:

  1. Successful implementation of carbon-reducing practices, such as variable rate fertilizer application or lower tillage that are consistent with a qualifying protocol, as two examples.

  2. Effective soil sampling.

  3. Data to verify compliance with the protocol.

With the help and support of boots-on-the-ground agronomists, all three of these points can be accomplished and Farmers Edge has successfully done so according to Amit Pradhan, vice-president of strategy with Farmers Edge in the Manitoba Cooperator:

We have done a good job at serializing these offsets. Where we have not done a good job is selling them

Without the boots-on-the-ground staff, the job of serialization gets more challenging. It’s not impossible, but it likely requires more staff in the carbon business unit and more part-time soil samplers at the very least.

The second half of the comment is interesting, too, because if they can’t sell the off-sets today to make money, farmers will be even less open to working with them on future carbon initiatives.

What is it that could be driving this inability to sell off-sets? I don’t know for sure, but three potential things come to mind (or a combination of them):

  • Higher expectations for prices per offset/view on the future market going higher (eg: not willing to sell below a certain price)

  • No demand for their off-set quality or protocol used.

  • Lowering demand for agriculture carbon off-sets in general.

Two of these can be managed, the last is a fundamental question that remains uncertain for all companies relying on the carbon market.

Will These Changes Make Farmers Edge Successful?

I answer this question, overview Farmers Edge co-founder and previous CEO Wade Barnes new company, and more in the Upstream Ag Professional Subscriber-Only portion of this article.

Ronin Agronomy Inc., a visionary precision agronomy company, is thrilled to announce its official launch in Western Canada. Founded by seasoned industry veterans and led by a renowned business leader, Wade Barnes, Ronin Agronomy brings together more than 20 years of precision agronomy expertise, covering millions of acres across the globe, innovative technologies, and a deep-rooted passion for farming. Western Canada’s agricultural community now has access to a comprehensive suite of precision agronomy services and resources that integrate sustainability, productivity, and profitability, empowering farmers to produce high-yielding, premium-quality, and low-carbon grain. 

2. Corteva Announces Two New Biological Partnerships

Corteva has continued to be one of the most active of the traditional crop protection and seed companies developing commercial relationships on the biological front.

Not only have they acquired companies like Stoller and Symborg, but they have established partnerships, licensing agreements or collaborations with Simbiose, Elemental Enzymes, Gingko Bioworks, Dadelos, M2i, and Marrone Bio over the past 3 years.

Lavie Bio Ltd., a leading ag-biologicals company that develops microbiome-based, computational driven bio-stimulant and bio-pesticide novel products, announced today a licensing agreement with Corteva Inc. a leading ag innovation company. The agreement grants Corteva exclusive rights to further develop and commercialize the lead bio-fungicide product candidates targeting fruit rots and powdery mildew, which were discovered and developed by Lavie Bio. The agreement comes after two years of independent field validation conducted by both companies.

Corteva Agriscience and Bioceres Crop Solutions Corp. announced today that they have entered into an exclusive agreement to advance the availability of biological solutions in Europe.

Under the agreement, Corteva Agriscience and Bioceres Crop Solutions will work jointly to accelerate the regulatory processes required to bring a cutting-edge bioinsecticide developed by Bioceres’ subsidiary Pro Farm, to the European market.

3. What Makes Up Agribusiness Innovation Strategies and How Do the likes of Syngenta, Bayer Crop Science, Corteva Agriscience, BASF, FMC Corporation and UPL Compare Across Them?

There has been an evolution in R&D strategies among the largest crop protection and seed companies.

In the article itself linked above, there aren’t so much “strategies” as there are tactics and technologies of emphasis by the crop protection companies such as focusing on biological development, using gene editing technologies or looking at precision technologies.

The strategies in my mind are the mechanisms and “how” by which they work to bring in innovation, develop innovation or identify innovation.

The primary strategies by these companies include:

  • Open Innovation - Acknowledge that innovation can and will come from outside your organization and then actively seek out and collaborate with governments, accelerators, venture entities (eg: Radicle Growth) and external groups to identify novel technologies and seek to license, co-develop, or learn from them to innovate.

  • Internal R&D - Empowering an internal team and allocating a specific level of expenditure for internal discovery and product development capabilities such as new herbicide molecules, use of CRISPR, computational agronomy and data analysis to drive proprietary capabilities.

  • Corporate Venture Capital - Investing directly into external businesses that have novel technology, cornered resources, the ability to be agile and lack the constraints inherent within a corporate setting. Often CVC’s can get board seats and direct access to unique industry talent.

With that in mind, I decided to go and look at R&D expenditure trends by the big crop protection and seed companies going back five years and created a chart illustrating and comparing how these entities compare by each of the above three segments that is available for Upstream Ag Professional Subscribers.

4. What CPG Companies Can Learn From Precision Ag Companies

Nestlé will help wheat farmers in the US to leverage regen ag practices through a combination of financial support and technical resources and assistance

One thing stood out to me with this news: CPG companies could learn a lot from precision agriculture companies, given the shortcomings of their resources and assistance.

In Upstream Ag Professional, I break down what CPG companies can learn from Precision Ag Companies and what they should consider doing if they want to source regenerative grains successfully.

5. Is Farmer's Business Network Just Like Every Other Ag Retailer? and What Has Been the Biggest Innovation in Ag Retail Over the Last Decade

I answer these questions directly in the Upstream Ag Professional Edition this week, building on the below article:

That need for in-season speed gave Farmers Business Network a good reason to accelerate delivery times on FBN Direct, its direct-to-farm commerce platform selling products like insecticides and seeds to farmers. The company announced last month it has achieved delivery speeds of three days or fewer for most member orders on FBN Direct.

For context, most retails across North America can execute on this in under 3-days, depending on time of day and which company we are talking, this can actually be same day or 2-days max from farmer order to delivery to the farm. Granted, I will give FBN credit, they likely have a lower overhead in accomplishing this without owning numerous certified chemical sheds across their selling geography.

What gave me a chuckle was the “how” they accomplished this 3-day milestone though:

Jack Cox (FBN VP of Fulfillment) told Supply Chain Dive that the company reached that milestone around August of last year, after it debuted its in-house fleet of straight trucks.

Not surprising that adding delivery assets decreased their delivery times!

Bright Yeti was founded in 2017. The company is using plant electrophysiology to stimulate the ions inside a seed before planting, which helps with early-stage vigor and nutrient-use efficiency.

BioLumic and Bright Yeti

This type of technology may sound similar to Biolumic that I highlighted a few weeks ago. The difference is that BioLumic uses light, triggering photomorphogenesis, to influence how seeds and plants grow and develop whereas Bright Yeti uses electrophysiology.

Bright Yeti’s go-to-market runs into some different potential challenges that BioLumic doesn’t though— on-farm operational efficiency:

Verde AgriTech Ltd is pleased to announce the carbon capture properties of its K Forte® and Super Greensand®, as detailed by an independent study conducted at Newcastle University. The carbon dioxide capture is inherent to the Products and is estimated at 120kg per tonne. The CO2 removal does not require any change to the Products’ production and farmland application methods, nor does it change the nutritional benefits to plants.

Related: Ag Biologicals Product Headstarts - Gingko Bioworks

Gingko Bioworks released a “lead candidate strain” list where you can look at more than 75,000 candidate strains across five bacterial genera, with a range of known plant growth-promoting and carbon sequestration-related modes of action, including diverse sugar metabolism and phytohormone biosynthesis.

They included a PDF sharing some more information as well.

Also of interest: Reimagining the Bioreactor - Grow by Gingko

Chinese-owned agrochemicals company Syngenta set aside a record 800 million reais ($166 million) to finance Brazilian farmers in 2023 via a barter scheme, its agriculture value chain director, Eduardo Menegario, said.

Barter generally involves delivery of farmers' future crops in exchange for inputs and is used to lock in input prices.

Syngenta has been working hard to drive their business in developing countries like China with MAP (Modern Agriculture Platform), India and Brazil. They have recently rolled up a group of distributors to increase their market access in Brazil as well, so this new take on the barter system will be interesting to see how it works for them.

10. Tracking Biostimulants: Retailer Survey Data from Stratus Ag Research Highlights and Analysis - Upstream Ag Professional

Non-Ag Article

What is strategic thinking? If we are going to apply the modifier strategic to the activity thinking, what makes it different than just plain business thinking?

1) Seeks to Influence What is not in Your Control

2) Consumes Information Omnivorously

3) Leverages Abductive Reasoning

4) Considers Multiple Variables Simultaneously

Other Ag Articles