Upstream Ag Insights - March 11th 2024

Access a 10% Discount! Essential news and analysis for agribusiness leaders

March 11, 2024 • Read Time: 22 minutes

Welcome to the 206th edition of Upstream Ag Insights, where each week, we dive into the latest events, innovations, and business dynamics throughout the agribusiness landscape.

My name is Shane Thomas.

Whether you're a new subscriber or this newsletter found its way to you through a forward, you're in the right place for frameworks and insightful analysis designed to help you navigate the complex agribusiness landscape, enabling your business and career to thrive.

Index for the week:

  1. The forgotten investment class and the 10% Rule

    1. Access a 10% Discount on Upstream Ag Professional

  2. Bayer 2024 Capital Markets Day and the Toughest Job in Agribusiness

  3. TELUS Formally Announces Proagrica Acquisition: Strategic Acquisition or Act of Desperation?

  4. Generics, Biologicals, and the Volatile Farm Inputs Market with Sam Taylor, Rabobank

  5. 21 Ways To Guarantee Failure in Agribusiness

  6. Climate-Data Startup With All-Star Investors and Roots in Africa Nearly Collapses

  7. Regardless of Age, Selling is About Knowing Your Customer

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There’s zero value in learning signaling.

Learning investments should generate returns in better thinking, mental models, processes, ideas, articulation of ideas, and results. That’s the end goal, anyway.

None of this is for the sake of some certification you can share on LinkedIn because, my brother, no one cares about that.

My friend Janette Barnard has very similar viewpoints to investing in oneself to constantly adapt and improve.

One of the beliefs I have is that every serious agribusiness professional should allocate a set amount of two resources to amplify their career and business: time and money.

I came up with the 10% rule for myself over a decade ago to ensure I had a framework for investing in myself and improving every single week.

The 10% Rule

Learning and continued self improvement is a priority of mine. To keep myself accountable, I developed a simple framework.

I think it is an adaptable framework for any one as well, no matter how busy.

Some take experience as it comes at them, some take opportunities if they are convenient and some show effort for short bursts of time.

None of these are a recipe for prolonged personal or professional growth.

Just like our muscles need to be consistently pushed and worked out to be healthy; our minds need to be consistently stretched to grow.

The framework I use to help accelerate my own learning breaks out like this:

3% of annual income + 7% of my time devoted to learning, networking and getting outside my comfort zone = 10%.

Breakdown

Someone with $75,000/year salary would invest $2,250 in themselves through books, e-mail subscriptions, courses etc. ($75,000 * 3% = $2,250)

168 hours/week x 7% = 12 hours/week.

This equates to 12 hours/week devoted to reading, consuming subscription emails, taking courses etc. that the 3% expenditure bought to ensure a consistent focus on developing.

This framework has ensured consistent investment in myself. And I think it’s applicable to everyone.

Understandably, not everyone can afford that sort of financial investment or time commitment, but I highly encourage you to adapt it to what works for you (Note: It still surprises me that in a knowledge driven industry we don’t have companies that offer a percentage of salary as a spending account for courses, books, newsletters etc, and expect the individual to spend it, just like some companies offer “health spending” account benefits.)

For example, try a 4% rule: 1% of income and 3% of time.

The point is consistency and holding oneself accountable for it weekly or monthly.

With the constant progress in technology, scientific breakthroughs and continuous demands of people, our only real option to thrive as knowledge driven professionals is a commitment to self improvement.

I always have these two quotes in the back of my mind:

We are only limited by what we’re not willing to take the time to learn.

And the other from marketing legend Seth Godin:

In a competition between someone who knows the most and someone who is willing to learn the most, the edge usually goes to the curious and empathic professional, not the one who is simply protecting what’s already known.

In the rapidly evolving world of agriculture, the difference between leading and lagging behind often comes down to one key element: knowledge.

One of the goals of Upstream is to deliver thinking frameworks to improve agribusiness professionals understanding of the industry and ability to make informed strategic decisions to catalyze your career.

Upstream Ag Professional offers not just news, but deep insights and analyses on the latest innovations and business trends that matter.

Investing in your yourself through Upstream Ag Professional is an investment in your professional future. Each issue is a seminar in the forces shaping agriculture today and tomorrow, from technological breakthroughs to market dynamics— it enables you to understand deeply, think critically, and act wisely with the most relevant insights at your fingertips.

Become an Upstream Ag Professional member today – because in agribusiness, being well-informed isn't just an advantage, it's essential.

Become a member before March 17th and receive a 10% discount:

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Last week, Bayer shared its FY 2023 results and had its Capital Markets Day.

The event was highly anticipated as CEO Bill Anderson had stated he would share the go forward plans with Bayer’s three business units:

  • Pharmaceuticals

  • Health Care

  • Crop Science

Anderson and the Bayer executive team shared the news that the business units would be kept as is, stating the following during his prepared remarks:

In short, on the question of structure, our answer is not now. And this shouldn't be misunderstood as never. Of course, we'll keep an open mind. We always do that, but our priority is on tackling our challenges, boosting performance and creating strategic flexibility. We're convinced that this approach is what's best for Bayer.

With that, Bayer highlighted the four pillars for moving the business forward, deemed the “challenges greatly limiting” Bayer’s ability to choose their own destiny, whether that be as a 3-division company or in smaller parts.:

  • building a strong Pharmaceuticals pipeline

  • addressing glyphosate and PCB litigation (along with new strategies to mitigate that include lobbying efforts)

  • reducing debt (cutting dividend)

  • continuing to implement its radical new operating model, Dynamic Shared Ownership (DSO), to improve performance

The “street” didn’t appear to like the news or the guidance delivered on March 5th, with the stock dropping that day and ending down for the week:

Source: Google

The Bayer executive team elaborated on the rationale:

We seriously considered the structure of our company. We did this with the help of numerous external advisers and a set of assessment criteria that included valuation levels, value creation, speed of execution, execution certainty, timing of cash generation and the resulting leverage ratios and the impact on our future optionality.

When it comes to an IPO or a spin, this would require an all-hands-on-deck effort for 18 to 24 months, and cash contributions would be delayed beyond that time frame. In the meantime, the leverage ratios of RemainCo or NewCo could go up significantly, and that could jeopardize our access to reasonable financing.

I incorrectly predicted a Crop Science spinout— whether that meant breaking up the business itself (eg: selling CP separate from seed, or spinning it out together). The trend in all industries, along with in agriculture, is towards a singular focus— focusing and simplifying the business from an internal and external perspective and becoming more attractive to outside investors not wanting the company to “diversify” industries for them.

For now, Bayer has opted to operate in it’s continued pre-existing form.

DSO

It can’t be understated the emphasis on bureaucracy that Bill Anderson sees within the business.

Two weeks ago, I highlighted the Dynamic Shared Ownership model laid out by Bayer in Dynamic Shared Ownership and the Bayer Transition: What is it and Can it Work?

Conceptually, I follow the logic behind DSO. But also see the more pertinent challenges in having a less authoritative, top-down structure along with the pain of transitioning— which means a more significant leadership presence from the top is needed to instil confidence far outside the President’s reach.

In and of itself, this an immense lift for the leaders in each of Bayer’s three business units.

The thing is, DSO isn’t the only change coming to the Bayer Crop Science unit.

To access the full overview of Bayer Crop Science’s initiatives and change that President Rodrigo Santos and the entire Bayer Crop Science Division are navigating and what makes the President of the Crop Science division one of the most challenging roles in agribusiness, become an Upstream Ag Professional member today:

As of March 1, Telus Agriculture & Consumer Goods completed the acquisition of Proagrica. 

The industry had been buzzing of the news since late November 2023. 

The company says this serves three strategic focus areas:  

Bolstering Telus Agronomy: Proagrica's capabilities enhance our existing supply chain order management.

Enhanced data and insights: Enabling organizations to improve their profitability and productivity.

Sustainability: Using the power of technology to minimize inefficiencies, waste and environmental impact.

In November, there was a buzz that TELUS had acquired Proagrica, which I mentioned in the December 3rd 2023 edition of Upstream.

However, the news had not been publicly released until previous CEO of Proagrica, Graeme McCracken, shared a post on Linkedin with the heading: Telus Ag acquires Proagrica - when big is not beautiful. 

Proagrica was previously owned by RELX, a publicly traded entity headquartered in England that is a provider of information-based analytics and decision tools for professional and business customers.

Proagrica is a company that has products for agribusinesses like Farmplan and Sirrus for managing agronomist workflow, leveraging geospatial data, and creating precision recommendations, along with a more recent acquisition in CDMS, a compliance platform that is leveraged heavily within the industry for its label database. Its CDMS asset is one of the most prominent in the ag industry, along with TELUS’ Agrian.

TELUS is a Canadian telecommunications company that embarked on an agricultural and downstream infrastructure software acquisition spree starting in late 2019. They have made close to a dozen acquisitions, including Agrian, Decisive Farming, Muddy Boots, AgIntegrated and TKXS.

TELUS’ stated aim has been to connect the value chain from farm to fork. From their 2020 agriculture launch announcement:

TELUS Agriculture optimizes the food value chain by leveraging data in new ways to increase efficiency, production, and yields, delivering better food outcomes for businesses and the end consumer. Connecting each piece of the agriculture value chain empowers farmers and ranchers, the agri-business industry, and agri-food, consumer goods and retail companies to leverage advanced data systems and artificial intelligence to streamline operations, improve food traceability, and provide consumers with fresher and healthier food.

TELUS has wanted to create an easy button for farmers, agribusinesses, and downstream entities by connecting data, enabling transparency and ultimately, delivering a one stop solution for the entire value chain.

TELUS had a track record of building in the Healthcare industry via its efforts and roll-up that made TELUS Health, which operates as an independent TELUS business unit. While not spun outyet, that could be it’s fate to create shareholder value—something that could have been an approach for the agriculture business.

I think this is an important point, one that was pointed out to me by Graeme McCracken: TELUS’ approach was that of a private equity roll-up— acquiring disparate assets with proven revenue in hopes of integrating and flipping for a profit at a later date. The problem is that if that is the starting point then you are under pressure to find and buy assets focused more on gaining revenue rather than for strategic value.

The common statement heard was, “Well, they did it in Healthcare.”

While there can always be logic behind acquisitions and grand new efforts, the reality is that executing roll-ups is really, really hard. Especially for an organization where that isn’t their core competency (eg: like PE. I talked about this and the reason TELUS is ill-equipped for it in an October 2023 edition) and they are in an adjacent industry (agriculture).

That brings up several signals that things might not be smooth at TELUS, some of which I highlighted early in 2023.

Signals of Struggle

To access the full insights and analysis surrounding the signals of struggle at TELUS Agriculture, what strategic initiatives they could take, why they might have acquired Progrica and what it means for their future, become an Upstream Ag Professional member today:

If you are interested in the world of crop inputs, this podcast is worth the listen— they dive into topics that are prominent within Upstream, such as biologicals, competitive dynamics between equipment and crop input companies along with h

The entirety is worth listening too, but two areas stood out to me:

  1. Biologicals

  2. Crop Input Companies Competing with Equipment Companies

Regarding biologicals, there was a great job by Sam highlighting some key aspects driving interest in biologicals. He highlights the need for new resistance management tools and regulatory driving a lot of the interest in biocontrol. I think this is accurate. And he does highlight the reality that bioherbicides are something like 2% of the biocontrol market, which is a small subsegment of the overall pest control market. There are a number of reasons for this, including the cost to produce products currently that are high efficacy.

The often not mentioned aspect for other biological growth— specifically for biofertilizer and biostimulants is a growth opportunity— by selling products that are used for abiotic stress management or delivering nutrients to the crop, those traditional chemical and seed companies can tap into a different budget of the farmer and overall value pool, such as the nitrogen budget or phosphorous budget for example. Bioherbicides, even if their COGS are palatable and performance is high, would often cannabalize the existing market for the input manufacturers, delivering minuscule upside.

  1. One of my favorite topics is the competitive dynamics between crop input companies and equipment companies.

The frequent view is that companies like John Deere will eat into the volume of crop input manufacturers. While this is true, it is also an oversimplification.

There are aspects, such as Jevon’s Paradox, and as I talked about in John Deere to Crop Input Companies: “Your Margin is My Opportunity” the commoditization of active ingredient IP, trait IP and customer relationships all come into play influencing the implications of See and Spray— not just with herbicides, but with fungicides and insecticides too.

John Deere (and other manufacturers of this technology) cannot stop at herbicides with See and Spray— they must go beyond to other crop protection products and fertilizers.Deere is at risk of the value of See and Spray eroding (from a decreased install perspective and short-changing the potential value capture for them down the line on other crop protection applications like fungicides) as crop protection companies shift to prioritize pre-plant herbicide messaging and development focus for example.

In fact— Deere publicly stated in the Q&A of their Leaps Unlocked event in 2022 that fungicide was where they are headed next! And, they have initiated partnerships and investments with Syngenta and InnerPlant respectively to enable, illustrating they are going there.

Become an Upstream Ag Professional member today to get full access into what the competitive dyanmics between crop input companies and equipment companies could look like and how co-innovation and adoption chain risk play into the realities of collaboration and competition in the future:

As usual, my friend Dan Schultz has put together an article filled with unique insights. If you haven’t subscribed, check out his newsletter.

This week he shared some thoughts about what you shouldn’t do as an agriculture leader or entrepreneur:

Learn nothing vicariously, especially nothing from other industries.

I believe that agriculture is a unique industry, but I also see an enormous amount of bad behavior, willful ignorance, and learned helplessness perpetuated by people who constantly trot out the line “ag is different” or “that won’t work here” without providing true first-principles thinking on the subject.

Confuse how much you raised with winning.

I see this one play out a lot in the agtech space, especially now that capital is somewhat harder to come by. But raising money isn’t winning; it’s failure deferred.

Focus on winning lots of industry awards.

Most of the “accelerators” and industry awards are a waste of time and money. If you need someone to tell you you’re doing the right thing, you’re probably not.

While lists like these can go on forever with caveats, I would add three more:

  1. Forget about unit economics — It doesn’t matter how much customers like your product if it costs more to make than you can generate for it.

  2. Over index on short-term or long-term time horizons — I like to emphasize long time horizons, but I am often reminded of the need for short-term wins. Focusing too much on one or the other leads to inferior outcomes.

  3. Ignore the rest of the ecosystem in which you operate— Lacking an understanding of how your product influences various other companies throughout the value chain, along with incentive structures for or against your product at each point, will help you navigate partnerships and resources.

While not a company I know a lot about or cover, given some of their geographies of focus, the news is notable for individuals in the agtech world.

While it seems there was a lot of challenges, fundamentally it sounded like they struggled with not only finding customers, but scaling the platform beyond singular customer— essentially turning them into low-cost consultancy company.

I agree with much of this article.

Knowing the customer is important, no matter their age—the only thing that changes with the seller's age is the medium in which you use to communicate and/or gather information about them.

In all settings, including farming, people often don’t know what they want or aren’t even certain of what they need. That’s why understanding your customer better than competitors is a competitive advantage.

I often think of this quote from Steve Jobs:

Some people say, "Give the customers what they want." But that's not my approach. Our job is to figure out what they're going to want before they do. I think Henry Ford once said, "If I'd asked customers what they wanted, they would have told me, 'A faster horse!'" People don't know what they want until you show it to them. That's why I never rely on market research. Our task is to read things that are not yet on the page.

This isn’t even specific to brand-new agtech companies building novel products. It is true in ag retail and general agriculture sales as well.

Understanding your customer deeply is key for any business endeavour. This is especially true in a relationship driven business like agriculture. Successful agribusiness professionals understand not only what their farm customers want, but what they need. Knowing what your customer needs is paramount to establishing a stronger relationship, differentiating versus competitors and increasing your sales and margins.

In our case as agribusiness professionals, we can break it out into a farm operations implicit and explicit needs.

Explicit needs are important to understand for professionals, but where the real opportunity is is uncovering the implicit needs.

For an overview of Implicit vs. Explicit Needs and how theyh play into being an effective agribusiness marketer, sales person, product manager or entrepreneur, become an Upstream Ag Professional member today:

Non Ag Article

Over the years, The Economist has gained a reputation as a “contrarian indicator”.

What does that actually mean? Well, the weekly publication — which was founded in 1843 — is read by basically every manager, executive and decision-maker in the business and political worlds.

By the time an idea is mainstream and important enough to make the cover of The Economist, all of the upside from an investing standpoint has probably been squeezed out (this is related to the stock-picking aphorism that states “buy the rumor, but sell the news”).

Other Ag Articles