Upstream Ag Insights - June 17th 2024

Essential news and analysis for agribusiness leaders.

June 17, 2024 • Read Time: 20 minutes

Welcome to the forefront of agricultural innovation with the 220th edition of Upstream Ag Insights, where over 16,600 agribusiness leaders start their week discovering the latest industry news and learning about groundbreaking innovations and business strategies shaping the future of agriculture.

With curation and analysis from Shane Thomas, each edition delivers unparalleled insights and expert analysis meticulously crafted for the practical professional, empowering you to be among the best informed in the industry and make superior tactical and strategic decisions.

Whether you're a new subscriber or this email was forwarded to you, Upstream’s field-tested frameworks and in-depth examinations equip you with the knowledge and foresight to seize opportunities and catalyze growth in your business and career.

Index:

  1. 5 Key Takeaways for Agribusiness Professionals from Stratus Ag Research Report: Boosting Ag Retailer Success Through Manufacturer Support

  2. Nutrien 2024 Investor Day Highlights and Analysis

  3. Who’s Buying up Dying AgTech Companies? How Ego’s and Incentives Play-in

  4. Ag Drones Feed America Webinar: Why Banning Chinese Ag Drones Hurts US Farmers and Rural Communities

  5. Nutrien Ag Solutions Sees Transformation Afoot For Ag Retail

  6. Top Advice For Getting Started In Ag Retail

  7. FMC Corporation Board of Directors appoints Pierre Brondeau chairman and chief executive officer: Does the move make sense?

  8. Key Success Factors in Biorationales

  9. Farm Startups Bent on Shaking Up Cargill, ADM Are Stumbling

  10. From bytes to bushels: How gen AI can shape the future of agriculture

  11. Sentera to Launch Precision Weed Management Service: Is it a See and Spray Killer? Follow up.

  12. Useful and Overlooked Skills

  13. Other Interesting Ag Articles (8 total this week)

This Week’s Edition of Upstream Ag Insights is brought to you in partnership with The Combine and the AgTech Connect Conference

Experience the Pinnacle of AgTech Innovation and Collaboration!

The Combine is excited to present the third annual AgTech Connect Conference, a premier event set in the agricultural hub of Lincoln, Nebraska. This is where the brightest minds in agribusiness come together to explore the future of agriculture and technology.

What to Expect:

  • Expert-Led Discussions: Dive into the latest AgTech trends with industry leaders like Matt Foley from FMC Ventures, Ben Williamson from Invest Nebraska, and Micheal Jung from Grit Road Partners.

  • Innovative Startup Demonstrations: Witness groundbreaking advancements from ALA Engineering and Barn Owl Precision Agriculture that are reshaping the industry.

  • AG Producer Panel: Gain insights from frontline experts and producers who are steering the future of agriculture.

  • Keynote Speakers: Be inspired by Mark Theurkauf and Alex Russomagno of AGCO Ventures as they share their vision and strategies for the future of AgTech.

  • Networking Opportunities: Wrap up the day with our Happy Hour & Networking event – an opportunity to connect with fellow professionals and form valuable partnerships.

Why Attend?

"The AgTech Connect Conference is not just another event. It's a crucial platform for those invested in the sustainability and innovation of agriculture. Here, ideas flourish, collaborations form, and the future of AgTech takes shape," says Josh DeMers, Program Manager at The Combine.

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Two weeks ago I emphasized the importance of the retailer when discussing consolidation implications in the world of crop inputs:

It’s often said that the retail will go extinct, however, the retailer is the one with the farmer relationship which is a core component of staying power. The “last mile” is often the most difficult (financing, delivery, market nuance etc).

“Influence erosion” of the ag retailer is happening and challenging retail margins however, the grip that local retail agronomists and sales representatives have on farmer decisions remains strong.

Stratus Ag Research recently released a report titled Boosting Ag Retailer Success Through Manufacturer Support and there were five takeaways for me.

Summary of Key Takeaways

  • Key Takeaway #1: Design marketing campaign to drive the farmer to ask retailer about the product.

  • Key Takeaway #2: Print and direct media is continuing to be more effective than digital.

    • Ancillary takeaway: Opportunity to identify better digital channels for advertising.

  • Key Takeaways #3: Incentivize the retailer and give them effective collateral for engaging in a value-added discussion with farmers (eg: trial data, interactive tools etc)

  • Key Takeaway #4: Align sales representative resources to maximize revenue (marketing budget, grower reps and retail reps, account teams etc.)

  • Key Takeaway #5: If you are an agtech provider, go-to-market approach and focused efforts matter.

In this Upstream Ag Professional article we break down exclusive data and images from Stratus Ag Research and go into detail of the key takeaways, laying out practical applications for agribusiness professionals in ag retail, crop protection manufacturing, biostimulant companies and agtech start-ups. Commentary includes what new digital channels for marketing might be, how to think through resource allocation, company resource alignment and what agtech start-ups can learn from the work.

Some Takeaways

  • Nutrien has increased the percentage of potash tonnes manufactured by them and then sold through their retail network by 15% over the last 5 years. Since 2018, this has meant and increase of 400,000 tonnes going through their ag retail facilities which has led to $40 million in benefit through netback efficiencies and production utilization gains.

  • Currently, 40% of gross margins from proprietary products come from crop nutrients which includes biostimulants, starters and foliar micros for example and they want this to grow.

  • Nutrien has invested $500 million over last 5 years in their proprietary crop nutrients efforts through a combination of actions like manufacturing expansion, acquisitions and R&D.

This week Nutrien had their 2024 Investor Day.

In this exclusive Upstream Ag Professional article, I highlight notable comments and images from their executive presentations, and go into detail breaking down Nutrien’s new initiatives, including global distribution of their proprietary product line and the considerations they for that endeavor, along with the value of vertical integration in their business.

Index for the breakdown:

  1. Nutrien Overview

  2. Updates Strategy Efforts

  3. Vertical Integrations Benefits to the Business

  4. Potash and Phosphate Highlights

  5. Retail Highlights

  6. New Proprietary Product Effort: Will it work?

3. Who’s Buying Out Dying AgTech Companies? - Upstream Ag Professional

Last month ago I read this post on X:

I have the same question for agriculture.

Whether you think VC is the right model for agriculture or not, the reality today is that there are scorns of agtech companies that are stranded assets with little upside.

  • Some of these are bad businesses.

  • Some are too basic to ever be a stand alone, profitable business.

  • Some have the potential to be a good business, with devout but not a VC scale return business.

In conversations with venture capitalists, it’s apparent there is pain being felt throughout the industry—starting with the VCs themselves to raise and close their own funds leading to them backing out of deals or reprioritizing capital, but then also trickling down to the start-ups themselves, with endless bridge rounds keeping companies on life support, instead of the funding being the catalyst for growth that it should be. I have heard suggestions from VCs of anywhere from 50%-75% of ag companies that took venture funding could be looking at risk of implosion in the coming 24 months.

For the full Upstream Ag Professional article on the logic of why a buyout fund makes sense, and what psychological hinderances there are to this being accomplished in agriculture successfully including among founders and venture capitalists.

Guardian Ag, a US-based drone manufacturer, has previously raised concerns about US dependency on Chinese-made drones, such as those from DJI and XAG.

The primary risk highlighted has been the potential for these drones to be reprogrammed via over-the-air software updates to act against American interests, effectively turning them into the "ultimate Trojan horses." This scenario underscores the broader issue of security vulnerabilities associated with utilizing technology from potentially adversarial sources in sensitive sectors like agriculture.

In 2023, there was 3.7 million acres sprayed by drone. Most of these via Chinese manufactured drones, such as the largest global drone manufacturer, DJI. In 2022, DJI stated that more than 200,000 drones by them were active globally.

According to the above webinar, on average it is 2.5x more expensive to purchase non-Chinese made drones.

There is currently a bill in the US House, Countering the CCP Drones Act, that would require the Federal Communications Commission (FCC) to add DJI to its “covered list.” That would mean the FCC could no longer approve new equipment from DJI, and current assets in the US could be grounded. The bill would include software for the hardware assets as well. The bill is specific to DJI, but could also lead to all Chinese drone manufacturers.

The groups on the webinar are working to educate around why they think this bill is a net-negative for US agriculture, including Drone Nerds, Rantizo, Bestway Ag and others, are concerned that if the bill passes it will decimate the US drone industry.

The webinar goes through points such as Chinese manufactured drones being the best price and the best performance, specifically as it pertains to pesticide applications, the shortage of US based manufacturing and capabilities, and the farmers and business owners reliant on these Chinese-made assets currently.

The companies on the webinar dive into work that they say illustrates there is no risk of data going back to China, there is no security risk, has been no data breaches recorded and that there are efforts in place that keep that security breach from happening.

When Clayton thinks about the future, he says one of the biggest challenges forthcoming is having the professional talent required to help move the industry forward. He says the professionals in this industry will uphold a trifecta of characteristics: be tech savvy, passionate about the role, and keep the farmer’s best interest first.

The above article is an interview with Nutrien Ag Solutions, SVP of Retail Operations Rob Clayton, specifically around the need for talent within retail organizations.

He goes on to say:

I hear from the young professionals, the new generation that say they want to work for an organization that makes a difference.

I agree with everything he states in the article.

However, from a Nutrien perspective, this interview is a missed opportunity.

For the full breakdown on where Nutrien has opportunity to emphasize to the market and one of the mental models I use for thinking through the quality of an ag retailer.

Another article from The Scoop this week focused on advice from their top 40 under 40 2023 group.

Bushel co-founder and CEO Jake Joraanstad shared a good suggestion:

One mentality is that your opportunity to move up in your career will be after someone retires. If you’re in that position, don’t let that be an okay answer,” he says. “Figure out how to step in and suggest to your team that you can do more. Don’t be scared to raise your hand and count yourself in.

It reminds me of a quote from Wal-Mart CEO Doug McMillon on one of his suggestions for getting promoted (emphasis mine):

Look around at things that just aren’t getting done…..Maybe there’s a project you could tackle. Maybe there’s an issue that always gets back-burnered for other priorities. Challenge yourself to take on those difficult assignments. They’re learning opportunities, and you have a chance to change something for the better.

It’s key to show your manager how equipped you are to do not only your job, but a bigger one….You become a low-risk promotion…Your manager can imagine you in the next job because you’ve already shown you can do it.

The mental model of positioning oneself as a “low-risk promotion” is a powerful one for those that aspire for career progression.

Another suggestion from Cory Broad in the article that resonated:

Success depends more on how much you’re willing to learn than what your background is in.

Related: 22 Mental Hacks for Agribusiness Leaders - Upstream Ag Professional

Brondeau was chairman and CEO of FMC from 2010 until his retirement in June 2020, and has continued to serve as chairman of the board during the last four years.  He presided over a period of significant growth at FMC, transforming the company into an agricultural sciences leader. During Brondeau’s prior tenure as CEO, FMC embarked on significant M&A transactions, increased R&D investments and expanded into new geographies, delivering total shareholder return of more than 325 percent from 2010 to 2020.

CEO Mark Douglas is stepping down after 4 years at the helm of FMC and 14 years with the organization.

During his tenure as CEO, the stock declined by ~50%.

The stock has been the target of Short Seller Blue Orca (covered in the September 10th 2023 Edition of Upstream) which has, among other things, called into question the integrity of management, such as on commentary about legal battles regarding their diamide patents in countries like India.

For the full breakdown, including the short interest against FMC’s stock and whether the new CEO Pierre Brondeau makes sense for the business, become an Upstream Ag Professional member:

8. Key Success Factors in Biorationales - Agribusiness Global

This is a good summation of the needs of successful bio-based organizations:

  1. Manufacturing capability and capacity. The successful supplier must have not only the capability to produce product but also the capacity to ramp up production as a product succeeds in the marketplace.

  2. Formulation technology. Getting the product to market and to the field to be applied accurately and in a timely manner while retaining viability and efficacy is often as important as the MOA of the product itself.

  3. Understanding the mode of action and biological efficacy. Targeting the MOA to the most effective pests and crops is frequently at least half the battle of bringing a biorational to market.

  4. Market access. Many suppliers falter here thinking their products will sell themselves to farmers based on efficacy alone. Without deep market access – key partners, for instance, particularly in the distribution channel – biorationals products sometimes struggle to succeed.

  5. Dedicated marketing. This goes hand in hand with the factor above: there must be investment in marketing beyond claims that the product just works.

  6. Dedicated technical salesforce. This also is often overlooked by many suppliers: the need for a professional salesforce that also understands the technology behind biorationals and how and why they work in the field.

The devil is always in the details of these, too.

For the Upstream Ag Professional expansion of specific details, including on points #3, #4 and #5, become an Upstream Ag Professional member:

For those following the agtech world over the last 5-7 years, nothing in this article will be new.

The quick and dirty is that numerous organizations, like Indigo Ag and FBN were going to disrupt the industry, raised billions and now expectations have came back to reality.

It’s interesting to understand and consider what challenged these organizations in order to learn from the challenges to gain a better insight into what the agtech start-up of the future might look at doing to have a better chance of success.

Many in the industry will say they acknowledged the challenges with disruption from the beginning and called it, specifically where there was little acknowledgement shown by these start-up organizations for the infrastructure that physical goods like grain and crop inputs demand, along with the reliance farmers have on localized support.

I started down the route of breaking down the challenges of three of the companies mentioned in the article: Farmers Business Network, Indigo Ag and Farmers Edge.

All three of these companies have readjusted and refocused their efforts and messaging in the market place.

I think McKinsey did a great job highlighting some of the opportunities for generativeAI in ag across the value chain.

The potential for genAI in ag (and beyond) is significant.

I also think there is ample need for consideration around where genAI gets built, and who is best positioned to execute in the realm of software and agribusinesses.

Competitive advantage through genAI in agriculture will not be who has the best model or the best singular feature.

Become an Upstream Ag Professional member to see the framework for thinking through genAI strategy for agribusinesses and what Apple teaches us about workflow for agriculture.

Last week I highlighted a new service from Sentera, including some of the pro’s and cons of it and real-time see and spray systems.

I missed a couple key considerations. Become an Upstream Ag Professional member to see the full article surrounding precision spraying, how Sentera’s service stacks up and discover useful frameworks for analyzing the validity of precision ag solutions.

Related: Selling Farmers on a See & Spray Subscription - Precision Farm Dealer

Non Ag Article

A great list of under appreciated skills.

Other Interesting Ag Articles

Beware of the platform! - Software is Feeding the World