Upstream Ag Insights - May 13th 2024

Essential news and analysis for agribusiness leaders.

May 13, 2024 • Read Time: 17 minutes

Welcome to the forefront of agricultural innovation with the 215th edition of Upstream Ag Insights, where over 16,000 forward-thinking professionals 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.

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. Jevons Paradox, Complement Disruption and Precision Applications in Agriculture: Implications for Crop Protection Manufacturers

  2. Seeing Into the Future of Farm Autonomy

  3. Precision Ag and Patents: ‘Farmers increasingly interested in more precise planting’

  4. FMC Corporation announces multi-year collaboration with AgroSpheres

  5. AgZen’s Vishnu Jayaprakash on spraying, praying, and sticky droplets

  6. GenerativeAI and Agriculture

    1. Generating (Somewhat) New Biology with AI

    2. AlphaFold 3 predicts the structure and interactions of molecules

    3. Phi-3: Redefining What’s Possible with SLMs

  7. Venture Capital’s Space for Sheep

  8. Other Interesting Ag Articles

This week’s Edition of Upstream Ag Insights is brought to you in partnership by Biome Makers

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Jevons Paradox is named after the English economist William Stanley Jevons. It’s a counterintuitive economic theory that suggests improvements in efficiency for using a resource can lead to an overall increase in the consumption of that resource, rather than a decrease. This paradox has primarily been applied to sustainability efforts, specifically in the context of energy consumption and environmental conservation.

The implications reach beyond energy consumption, though.

More specifically, the concept and its second order implications can be directly applied to crop input usage and precision agriculture with direct impacts on company margins, business models and strategy.

Index:

  1. Understanding Jevons Paradox

  2. Real World Examples

    1. Energy and Iron

    2. Transportation

  3. Extrapolating to Farming

    1. Yield and Quality as a Primary Revenue Method

    2. Early Examples and Practice Evolution

    3. Herbicide Resistance

    4. Not an Isolated Technology

  4. Second Order Implications

    1. Commoditization of Crop Protection Products

    2. The Jobs-to-be-Done Lens Behind Crop Input Decision Making

    3. Disruption Through Complements

    4. Access to Information

  5. Final Thoughts

    1. Implications for Input Manufacturers

For the full breakdown and analysis illustrating what Jevons Paradox means for crop input volumes in the future and how complement disruption could impact crop protection manufacturers such as negatively influencing margins, programs and revenue models, become an Upstream Ag Professional member today:

SwarmFarm is an integrated autonomy company with a compelling vision for how autonomy will transform agriculture.

I always enjoy learning more about SwarmFarm’s vision. In this interview with Tenacious Ventures they share some notable stats and viewpoints, including:

With over 4m acres already autonomously managed by their robots

An impressive number.

They also indirectly illustrate the importance of identifying the most valuable use case and focusing diligently on it to build out a market. In the instance of SwarmFarm, precision weed control:

Some people will say, ‘oh, you guys are just a spray company’. And, well, we’re not, so it’s an excellent conversation to have.

What we’ve built alongside our robots is an app ecosystem, SwarmConnect. It's kind of like the Apple App Store, in that we allow independent developers to release their technology on our robots with hardware and software integrations. We create a path for other independent technology developers to get their products to market faster, and deliver more value to growers by being on a robot.

But we had to start somewhere that delivers a strong ROI for farmers or they wouldn’t adopt it.

Weed management is a crucial agronomic consideration for farmers, each year, multiple times per year. This is another example focus being crucial.

The following is sentiment that I am seeing more frequently surrounding biologicals and precision application:

Right now, if you have a biological product with only 60% efficacy, farmers won't use it. But if it works 60% of the time or targets 60% of the pests it’s supposed to treat, when you start adding that to autonomy and you do it, maybe, on a weekly, three day, or even a four-hour cycle, suddenly that product that was initially disregarded, finds a market and becomes a useful tool for farmers.

I have a different perspective surrounding the biologicals and precision applications, though.

Farmers won’t use a product that is 60% efficacy (or anything lower than that market standard), when the market standard is say 85% or 95%. No matter if the farmer has autonomous and precision assets or not.

Applying inferior products more often still has an immediate monetary cost (more application of an inferior products = $$) and an uncertainty cost (does this lower control lead to other implications and will I have to manage more later?) versus using the best product available.

If a product isn’t able to stand on its own without precision application, then it should’t be commercialized. If a farmer can use a market leading input product within the autonomous system, that is still going to be the desire. I talked about this a few weeks ago in Biologicals are ‘economically unfeasible’ According to Report: The Shortcomings and Opportunities.

SwarmFarm goes onto the state the following:

It’s the same situation for timing of application- some of these products work best at night when there is less UV light around, humidity is higher, and temperatures are cooler- that’s the perfect use case for robotic application.

This is spot on. Optimizing outcomes is the opportunity with autonomy and precision applications. Best in class inputs with autonomy and precision application can deliver previously unattainable results, that should be the emphasis.

3. Precision Ag and Patents: ‘Farmers increasingly interested in more precise planting’ - Future Farming

What precision ag is or isn’t often gets muddied in conversations due to conflating precision ag with a singular technology — farm management software or a soil sensor technology for example.

Precision agriculture is a farm management approach based on observing, measuring and responding to temporal and spatial variability across the farm to improve production output and farm economics.

At its most basic, precision agriculture is agronomy applied at a higher resolution.

In farming, we have increasingly seen a shrinking unit of focus:

Farm → Crop → Field → Zone → Plant

We have experienced precision improvements also from managing by parameter of any given input.

For the full article on the next layer of precision parameters, what technology enables precision agriculture, a precision ag patent overview three patents from equipment manufacturers and what that means for the future of precision ag, become an Upstream Ag Professional member:

FMC Corporation, today announced a research agreement with AgroSpheres, a biotechnology company pioneering breakthroughs in sustainable crop protection and crop health. The agreement will accelerate the discovery and development of novel bioinsecticides, which is a key part of FMC's long-range strategic plan.

AgroSpheres is widely known for having encapsulation technology that can effectively support the usage of small, bio-based molecules like peptides, and nucleic acids (RNA) along with volatile compounds such as pheromones in agriculture. AgroSpheres’ patented AgriCell technology allows for improved stability, performance and targeted uptake of actives in pests.

In a world where bio-based crop input products are forecasted to grow at a double-digit CAGR, and one of the biggest challenges is delivering them effectively to the mode of action in the target plant or organism that means significant potential for AgroSpheres. Peptides and RNA, for example, have several major challenges: high cost of goods, challenges with bioavailability, and instability in the formulation and in the field due to things like UV light breaking it down. AgroSpheres technology can help to overcome these challenges. For example, its AgriCell product can withstand a pH range of 4 to 11 and temperatures of 0–54°C, with a shelf life of 24–30 months.

What is lesser known is that they also boast their own internal pipeline of proprietary active ingredients— during a call last year with CEO Payam Pourtaheri, he mentioned they have their own proprietary molecules in the fungicide and insecticide segments, the first product of which is expected to receive EPA approval this year and commercialized in 2025.

The strategy to develop their own active ingredients started over three years ago and has resulted in Agrospheres building their own library of novel biomolecules, such as RNAs and peptides, along with building their own manufacturing capabilities.

That makes AgroSpheres a vertically integrated active ingredient & technology development company in the space of biological inputs.

For the full overview of what this capability means in conjunction with FMC along with how it could further benefit the FMC business and lifecycle management of the largest portion of FMCs business, become an Upstream Ag Professional member today:

This is an interesting company highlighted by Jennifer Marston of AgFunder News.

AgZens first product is a system stacked with cameras that are bolted onto a sprayer and linked to a tablet in the cab to show the operator what is happening to the droplets in real time:

Based on that data and the conditions at the time, the AI-powered RealCoverage system can tell operators how to optimize everything on the sprayer, from pressure, boom height and droplet size, to how fast to drive and how many gallons of spray per acre (GPA) is best for a particular chemical mix on a particular crop in a specific location. This can enable 30-50% reductions in chemical inputs, claims Jayaprakash.

The EPA estimates up to 70 million pounds of pesticides are lost to drift each year— or close to 10% of total applications in the United States.

AgZen says they have already signed leases for over 60,000 acres across the US, already generating revenue, and they are launching a second product:

Its second commercial product is a nozzle that cloaks droplets with adjuvants (rather than simply mixing them in), dramatically increasing the likelihood they will stick to plants, enabling farmers and growers to make further reductions in chemical use.

The second product is nozzle and direct injection based, which is compelling, but will depend on cost to make sense for farmer investment and hassle (filling separate system).

While AgZen products are different in technical specs, the product benefits are similar to MagrowTec. Magrowtec uses Magnetic-assist, a magnetic technology that became a product which has a retro-fit capability on spray machinery to ensure spray droplets hit, stick and move into the target plant.

What stands out to me about AgZen is the challenge with market access and distribution through traditional means:

You can buy them upfront or we can do lease-to-own contracts [whereby the equipment is leased with the option to buy at the end of the lease term].

The challenges with distribution for AgZen become three-fold.

For the entire overview of AgZen distribution challenges and opportunities, the application of adoption chain risk and how it can be used to think through distribution strategy and who could be a good fit for the company to partner with, become an Upstream Ag Professional member today:

6. GenerativeAI and Agriculture

GenerativeAI has many potential implications for agriculture. Many of these are further out, but worth paying attention to in the interim:

So, when people say “generative AI for biology,” they are talking about the development of deep learning models capable of generating new types of biological outputs—like new DNA sequences or proteins.

This could have a positive benefit on the design bio-based molecules, related to the aforementioned AgroSpheres news:

In a paper published in Nature, we introduce AlphaFold 3, a revolutionary model that can predict the structure and interactions of all life’s molecules with unprecedented accuracy. For the interactions of proteins with other molecule types we see at least a 50% improvement compared with existing prediction methods, and for some important categories of interaction we have doubled prediction accuracy.

When it comes to plant breeding and trait development, or microbial pesticide development, AlphaFold could help through informing the understanding of protein structures by enabling scientists to gain insights into protein function without relying solely on lab experiments. AlphaFold could help increase the speed and minimize the downstream impacts (eg: yield drag) associated with development.

We are excited to introduce Phi-3, a family of open AI models developed by Microsoft. Phi-3 models are the most capable and cost-effective small language models (SLMs) available, outperforming models of the same size and next size up across a variety of language, reasoning, coding, and math benchmarks.

Specific to agriculture, this probably has more applicability to small holder farming, but could be beneficial in low connectivity areas. Small language models can make generativeAI more affordable and efficient for agriculture. The size of Phi-3 enables it to run on a phone, even without internet connectivity. Microsoft illustrated that agriculture-specific copilots, customized using features of Phi-3, could achieve GPT 3.5 equivalency on Microsoft’s agriculture benchmarks.

Non Ag Article

The average investor does not spend all day simply searching for the best new company; they spend all day searching for the best new company in a socially approved technology “space.”  Twenty years ago, that space was e-commerce, the “dot.com”-ing of brick-and-mortar stores. Fifteen years ago, “social-mobile-local.” Ten years ago, the “sharing economy.” Three years ago, gaming and crypto. Now, it’s artificial intelligence.

Other Interesting Ag Articles