Upstream Ag Insights - May 6th 2024

Essential news and analysis for agribusiness leaders

May 06, 2024 • Read Time: 20 minutes

Welcome to the forefront of agricultural innovation with the 214th 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 agribusiness landscape.

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. Yara 2023 Annual Report Highlights and Analysis

  2. Marketplaces in Agriculture

    1. Landus to Transform Farm Cooperative with Launch of Farmer-Owned Technology Platform

    2. GROWERS Gives Ag Retailers and Manufacturers a New Way to Maintain and Grow Customer Loyalty with Flexible Rewards System

  3. Is John Deere Losing Ground in Drones or Is The Market Just Not Ready?

  4. CNH Expands Network Connectivity with Intelsat Collaboration

  5. Solinftec Autonomous Filling Video + Solinftec and the Solix Autonomous Platform: Reimagining Farming from First Principles

  6. BHP’s High-Stakes Tilt for AngloAmerican: The Agriculture Considerations

  7. Indigo Ag Sets Out Plan for Renewal in Accelerated Drive to Profitability and Growth: Focused Efforts

  8. What Does The Future of Ag Retail Look Like?

  9. Highlights from Pitchbook’s Q1 2024 AgTech Report

  10. The Economics of Generative AI

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

Biome Makers has worked with industry leaders like Syngenta, Bayer, UPL, and Disagro to redefine soil health analysis. Their BeCrop® Technology combines DNA sequencing and AI machine learning to create functional, qualitative and quantitative data for each biological metric, specific to the crop type planted.For Ag Retailers:Empower your decisions with their soil biology insights. BeCrop® equips ag retailers with the intelligence to predict disease risks, identify biological bottlenecks, and provide tailored recommendations for effective farm management. Their portal tools and reports support the creation of custom fertility plans, positioning your top products to maximize ROI and meet grower needs.For Input Manufacturers:Drive product development and performance with validated data. BeCrop® offers a robust platform for testing and refining ag inputs, giving manufacturers the power to develop and commercialize leading products. You can utilize their extensive trials and analytics to ensure your products stand out in a crowded market.Ready to see the difference BeCrop® can make?

Highlights:

  • Revenue was down below 2021 levels at $15.5 Billion, with operating income and operating margins the lowest since 2009 and EBITDA the lowest since 2017

  • Yara had the lowest return on invested capital of any major fertilizer company in 2023.

  • Yara has a digital hectare target of 150 million globally. As of end of 2023, they reported 23 million.

  • Research and Development (R&D) expenditure amounted to $113 million in 2023, compared to $95 million in 2022.

  1. Overview and Financial Metrics

  2. Strategy Highlights

  3. KPI Distortion, Digital Farming Solutions, Yara FX Insight

  4. Regenerative Ag and Agoro Carbon Alliance Approach and Revenue

  5. Premium Generated (through Premium Products)

  6. Yara Amplix (Biostimulants) and The Sauce Paradox

  7. Research and Development and Corporate VC

For the full breakdown, including a look at what carbon revenue might be, how Yara is tracking on their ambitious 2025 targets, a look at their digital strategy, how their financials compare to other fertilizer competitors, opportunity for their premium products and more, become an Upstream Ag Professional member today:

Today, leading agriculture solutions company Landus announces Conduit, a first of its kind company that combines the best elements of a farmer-owned cooperative and a technology company. The Conduit platform will change the way farmers do business by initially offering low cost and user-friendly online financing, ultimately offering tools that support all aspects of agricultural commerce, insurance, and sustainability.

As part of the launch and as an ongoing initiative, Conduit will offer 0% financing to qualified borrowers on all input purchases in season, addressing one of the biggest challenges for farmers today as they battle the rising cost of operating capital. Additionally, Conduit will be making financing opportunities available in certain states for land, input, and equipment loans.

This is an interesting announcement.

It’s the starting point to what is an attempt at Landus building a spin-out online marketplace that they are calling Conduit.

For the full overview, including where the challenges and opportunities are in building a marketplace, what their future expansion might look like, who is involved, what the potential for success is with the new initiative and which companies are better positioned, become an Upstream Ag Professional member today:

GROWERS, a leading provider of agricultural technology to farmers, retailers, and manufacturers, is excited to announce a significant enhancement to its platform: an innovative rewards and loyalty program. This program is designed to streamline and improve the agricultural input supply chain. Now fully integrated into the GROWERS platform, this brand-agnostic, technology-enabled rewards and incentive program, aligns the interests of farmers, retailers, and manufacturers.

This program allows retailers to utilize incentives from aligned manufacturing partners, tailoring these rewards to meet the precise needs of their farmers. Each qualifying purchase a farmer makes earns points that accumulate in dedicated retailer reward wallets, converting directly into dollars usable in future transactions. This ensures that rewards remain within the original purchasing organization, fostering true loyalty and repeat business.

I think this is a really compelling offering from GROWERS. Delivering the ability to design and manage programs is a really useful offering.

Input manufacturers will often allocate funds to retailers to incentivize specific product purchases, or to help support a focus point of a retailer. Tracking and managing those programs has always been a challenge. This new functionality solves a problem and is unique in the market.

The hurdle for GROWERS though is the number of different parties they are having to attract and engage— they are simultaneously attempting to be sales management software for retailers, a marketplace for retailers and farmers, an advertising business attracting input manufacturers and a loyalty program working to support all three entities (and likely distributors, too). This can turn-off certain target audiences (eg: selling the sales software to a retailer that dislikes their marketplace initiatives), deplete resources and confuse messaging in the market.

Ben Thorpe of Ag Equipment Intelligence recently wrote What Happened to John Deere’s Ag Spray Drone?

It’s a thoughtful question that’s worth exploring.

In 2019, John Deere had a significant presence of drones at their Agritechnica display.

Since then there has been little communication from John Deere surrounding a drone offering— meanwhile, they have announced numerous new products and partnerships, including See and Spray, ExactShot, a partnership with SpaceX and a host of other initiatives and technologies, including those discussed at their 2022 Leaps Unlocked Event.

Drones have not been a part of their talking points, even with all of the improvement over the last 5 years.

It begs the question: Is Deere missing out? Are they behind? Or does something else position them well for when and if drone demand grows?

Become an Upstream Ag Professional member for the full overview of what has changed across the drone landscape over the last five years, why that’s important, where some of the challenges are and how Deere may or may not be positioned for drones in the coming decade if or when they choose to pursue that avenue:

CNH and Intelsat, operator of one of the world’s largest integrated satellite and terrestrial communication networks, today announced a collaboration that will be the first to provide farmers ubiquitous access to the internet via a ruggedized satellite communications (SATCOM) service. Based on a new memorandum of understanding, Intelsat will provide multi-orbit internet access to connect CNH equipment working in remote locations and easy-to-use satellite terminals ready to handle the challenging environment on a farm.

CNH Industrial is partnering with SatCom provider, Intelsat, to equip their tractors with internet connectivity, starting in Brail in the second half of 2024.

This announcement follows news from January of 2024 where John Deere announced a partnership with SpaceX’s Starlink for connecting machines in Brazil later this year.

The news is unlikely to come as a surprise to anyone. In January when covering the John Deere/SpaceX announcement I stated the following:

Other equipment players likely aren’t far behind John Deere on the connectivity front— CNH Industrial and AGCO might not use Starlink, but within the next few years, all major OEMs will begin to offer machine connectivity. There are Starlink competitors out there, such as Intelsat, which can deliver similar services.

Because of how important connectivity is and will be for farmers moving forward, it’s not surprising that CNH Industrial has followed John Deere’s lead in enabling ubiquitous farm connectivity.

There is frequent talk about enabling infrastructure for agtech products— it cannot be understated that ubiquitous internet connectivity on every piece of equipment and farm is the biggest enabler of them all.

The CNH service will be offered through an aftermarket kit that farmers can use to upgrade their existing tractors, combines and sprayers.

CNH did not specify an internet speed guarantee or expectation, but Intelsat’s website states that they supports peak download speeds of 100 Mbps and peak upload speeds of 20 Mbps and a latency of less than 600 msec round trip transmission time. More than adequate for any precision agriculture need, today.

For the full overview, including comparison of Deere’s business model potential, what connectivity sets CNH Industrial up for with product offerings and new features, what consumer companies CNH can learn from and more, become an Upstream Ag Professional member today:

Late last year I wrote about Solinftec’s Solix platform and their concept of living in the field.

One of the most common questions that was sent was “What about refilling?”

Solinftec CEO Britaldo Hernandez shared a video of the Solix platform autonomously refilling this week on Linkedin for those interested in seeing it in action:

Solix Autonomous Filling - Britaldo Hernandez Solinftec CEO Linkedin

Recently, mining company BHP made an unsolicited conditional offer to acquire Anglo American (AA). Anglo initially turned down the offer, but BHP is expected to come back with another.

BHP’s proposal was to partially break up and then acquire Anglo and has been noteworthy for the mining industry, as other miners (eg: Glencore, Rio Tinto) assess whether they should make a rival bid, or sit on sidelines and snatch up sell-offs after the acquisition. All the big miners at the moment are keen to expand in copper — a primary driver for BHP’s Anglo bid.

BHP, however, does have a Potash business.

AA is one of the largest mining companies in the world, including having majority ownership in diamond giant DeBeers. They also have an agriculture business— in January 2020, AA purchased Sirius Minerals, an entity establishing a mine in North Eastern England.

The mine, named The Woodsmith Mine, has 50+ years of multi-million tonnes of production of polyhalite, a mineral that contains potassium, sulfur, calcium, and magnesium. Notably, it is low in chloride and can be positioned as an organic-approved fertilizer.

The acquisition and spend on the business has drawn the eyre of investors, and would be an interesting potential spin-out to another agricultural fertilizer producer if AA is acquired by BHP (or BHP make a deeper run in fertilizer).

Polyhalite isn’t entirely new— ICL markets polyhalite-based products as Polysulphate.

According to ICLs annual report, they produced just under 950,000 tonnes in 2022— up from just over 700,000 in 2020. The market is reportedly 3 million tonnes in total today.

For a deep dive on the AngloAmerican Poly4 business, including product overview, target tonnage, comparison to Mosaic specialty volumes, product positioning, and more, become an Upstream Ag Professional member today:

Indigo Ag today announced the establishment of two new business units focused on Sustainability Solutions and Biological Products as part of a renewal and reorganization of the company following the appointment of Dean Banks as the new Chief Executive Officer.

The establishment of the new business units will streamline the company, providing clear decision-making, improved alignment on commercial goals and accountability for results, and will enable the company to better serve and deliver for its partners and customers across agriculture.

In 2020, then CEO of Indigo David Perry (in)famously stated that Indigo was “five start-ups in one” because they had so many different pillars within their business. Being that this was across crop inputs, grain, carbon, transportation and more, the total addressable market that Indigo could sell to investors was massive.

But, this broad based approach was a red flag for myself and many others. Focus wins. And even after focusing their efforts on three business units— it was still too many.

New CEO Dean Banks has acknowledged this:

A renewed innovation orientation, embedded throughout the company, will drive global expansion and new solutions and products. In addition, the company will continue to exit non-strategic and non-core businesses so that it can focus resources on the biggest opportunities for its partners and customers.

Business strategy and tactics stem from the concept of strategy in war.

A basic understanding of battlefield strategy is that you cannot attack an enemy from every direction. It scatters resources and people, leaving you in a weak or vulnerable position. The aim is to focus resources, play to your strengths, and get small wins, then move from there.

Indigo was doing the equivalent of aimlessly letting soldiers run rampant on the battlefield— this wreaks havoc on a battlefield, just like in a market, wasting resources, not gaining any ground and making it a challenge for the army or business to gain momentum and wins that it needs.

In Zero to One by Peter Thiel, he emphasizes that it is easier for start-ups to overcome competition by dominating a small market rather than a large one.

Any big market is a bad choice, and a big market already served by competing companies is even worse…In practice, a large market will either lack a good starting point or it will be open to competition. And even if you do succeed in gaining a small foothold, you’ll have to be satisfied with keeping the lights on: cut-throat competition means your profits will be zero.

In other words, dominate a niche.

In order to succeed in a competitive environment, an entity needs to do something that others cannot. A business needs to be 10x better or solve a unique problem which means starting in a very small market.

Once an organization can dominate a niche, it can expand into new markets. This is the fundamental Amazon strategy (start with books), which is a good comparison for Indigo— Amazon didn’t start as “the everything store,” they became the everything store over time after exploiting very niches in a very targeted way.

Indigo was trying to be everything to everyone before being a single thing to anyone.

If we think about Indigo, they took on an incredible amount of capital that had them going in many different directions— not only in terms of types of markets, from grain marketplaces, to transportation, to microbes, to carbon, but they were trying to do this across multiple geographies. Indigo never owned a specific position in the market.

It is challenging to find an example of a company that has been successful at starting in multiple different directions and attempting to “boil the ocean.” My view of their investor and executive team logic was that in order to overcome the oligopolistic dynamics within the value chain, they need to be able to do everything so that they were not hindered at any given point, however, that presented new challenges.

Indigo is now focusing more, though they still have some challenges to overcome in winning in the highly competitive bio space and growing revenue in the challenging carbon space.

For a deeper dive on the Indigo business, become an Upstream Ag Professional member:

Ag retail is a passion of mine. I love learning what retails are doing, talking to individuals about it, or reading peoples perspectives on the incredibly complex space and how it will evolve.

This article highlights ideas and thoughts, many of which I share.

I have written about ag retail ad nauseum, but the potential also keeps evolving.

I am currently working on a layout on redefining “winning” in ag retail with my friend Dan Schultz of Ag Done Different, with themes that include:

  • Vertical

  • Digital

  • Novel

  • Targeted

Stay tuned for that in the coming weeks.

9. Highlights from Pitchbook’s Q1 2024 AgTech Report - Pitchbook

  • Total Deals: 161

  • Total VC Raised: $1.2 billion

  • Quarter Over Quarter Growth for deals was - 20.3% and - 25% for dollars.

  • Investment levels are now at 2017 levels.

  • AgTech now makes up less than 1.7% of the total venture capital investment, well under the >2% historical norm.

  • Agtech only experienced 6 exits in the quarter, a low for the space. These were primarily downstream, with only one (Agency Root to EverAg) being what I would consider upstream agtech.

  • Agribusiness marketplaces saw an increase in investment.

Non Ag Article

This is an excellent article highlighting where value has historically accrued in technology evolutions like Cloud and Mobile, and now generative AI, sharing compelling data and visuals to reinforce the points.

The summary comes out to the following:

We are in Inning #1 (Semis) and I expect we’ll get to Inning 3 (Applications) by the end of the decade. As a corollary, given we are stating a low base, I see the biggest open opportunity to be in the application stack! 

I have discussed similar in seeing the opportunity in agriculture being in the software (application) layer in GenerativeAI Strategy in Agriculture: What Can We Learn from Farm Management Software?

Other Interesting Ag Articles