Upstream Ag Insights - November 18th 2024

Essential news and analysis for agribusiness leaders.

November 18, 2024 • Read Time: 26 minutes

Welcome to the forefront of agricultural strategy and innovation with the 241st edition of Upstream Ag Insights, where over 18,800 agribusiness leaders start their week discovering crucial industry news and learning about the latest innovations and business strategies shaping the future of agriculture.

With curation and analysis from Shane Thomas, each edition delivers insights and analysis crafted for the practical agriculture 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 systems to seize opportunities and grow in your business and career.

Index:

  1. Guest Article: Agricultural Transitions for a Net Zero Economy, special feature - irrigation

  2. Thoughts from Biostimulant World Congress

  3. Q3 2024 Agribusiness Results Week of November 11th to 15th

  4. New Approaches to Herbicide and Bioherbicide Discovery Highlights and Analysis

  5. Innovation Theatre with Shane Thomas of Upstream Ag

  6. It’s a Legacy Agriculture Company (Bayer Crop Science)—And Your Newest AI Vendor

  7. The Sacred Cow-Volume Discount or Volume Bonus?

  8. Why Do So Many Agtech Companies Struggle with International Scaling?

  9. Bushel expands access to its payment network for farmers and agribusinesses

  10. GROWMARK, Indigo Ag Form a Biologicals and Sustainability-Based Strategic Partnership 

  11. Elicit Plant Raises $48M in Series B Funding

  12. Aggressive growth continues at FBN, evolving to meet members’ needs

  13. Non-Ag Article from Morgan Housel

  14. Other Ag Articles (5 this week)

This week’s edition of Upstream Ag Insights is brought to you in partnership with Headstorm

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1. Agricultural Transitions for a Net Zero Economy, special feature - irrigation - Upstream Ag Insights Guest Post by Dan Northrup of Galvanize Climate Solutions

This article is a guest post by Dan Northrup of Galvanize Climate Solutions, LLC and is available for all Upstream Ag Insights subscribers.

Getting to net zero requires changes in agriculture.  Like transportation where emissions result from multiple transportation modes – shipping, aviation, light duty, trucking, etc. - agriculture is comprised of many different production systems.  In transportation, different technical developments are needed for each category.   Similarly, it is important to consider the geographic regions, production systems, and end markets for agricultural decarbonization solutions.

In this article, I highlight the potential for irrigation management in regions of the Ogallala aquifer to extend economic productivity and achieve net zero goals.  I believe that a combination of an incentive system and education can promote the adoption of technology and minimize the economic effects of water use reductions. 

Check out the link for the full article from Dan Northrup.

Related: Agriculture – On the cusp of a rapid evolution - Upstream Ag Insights Guest Post by Dan Northrup of Galvanize Climate Solutions

2. Thoughts from Biostimulants World Congress

This week I attended Biostimulants World Congress in Miami.

It was great connecting with many of you and diving deeper into the world of biostimulants for the week.

I wanted to share a few thoughts from the week.

a. Soil Health is Not a Problem. At Least Not a Specific One.

I attended one panel that had individuals from distribution and ag retail talking about biostimulants and understanding farmer needs and requirements.

Nutrien Ag Solutions Senior Vice President of Retail, Rob Clayton, was a panelist and he started one of his comments out talking about the following:

“Biologicals have to be a solution for a problem.”

No argument here. It’s fundamental to the The Funnel of Specificity— understand the specific abiotic stress (aka problem) your biostimulant solves and ruthlessly lean into positioning your product for solving that stress:

For a more in depth walk through and case study, you can purchase The Biostimulant Playbook, here.

What was notable to me was his comment later on:

“We are treating biologicals too much like crop protection products, there needs to be an emphasis on soil health.”

His first statement on solving a problem, which I agree with, is at odds with the latter statement.

Crop protection products are the epitome of products solving a problem, exactly what biostimulants should do:

A farmer has palmer amaranthe in their corn field? That’s a problem. The right herbicide solves it.

That same corn field has armyworm chewing the leaves? Insecticides solve that problem.

That same field has soil borne fusarium in it? Seed treatment can mitigate it.

Specific solutions for acute problems.

The conundrum?

It’s rare to hear a farmer talk about “soil health” as a problem.

That’s because soil health is not a problem.

At least not one that drives urgency in spending $8+/ac on a biostimulant by farmers. It’s too broad and too vague.

But, I have heard farmers talk about soil compaction as a problem.

I have heard them ask about ways to improve phosphorous availability and was asked questions on increasing soil organic matter. 

I had questions about minimizing erosion.

Erosion is a problem. Compaction is a problem. Phosphorous deficiency and therefore availability is a problem.

Biostimulants can, and should, be apart of a program that minimizes or alleviates these problems.

Instead of Integrated Pest Management (IPM), that traditional crop protection products solve for, biostimulants can be part of an Integrated Stress Management (ISM) strategy.

Soil “health” is an aggregate concept that assesses all of the above, and more. But it’s looking at the components specifically, to connect how biostimulant usage will influence the specific soil health measurement (eg: soil porosity, organic matter etc) and then linking those impacts to specific outcomes that will drive biostimulant usage, and soil health.

Just like “crop resilience” and “plant health” are unlikely to drive action, I do not think “soil health” will either. There is a need for more specificity.

That belief reinforces that companies need to look at biostimulant positioning and messaging exactly like crop protection products in order for the segment to thrive commercially.

What biostimulant companies and retail advisors need to do is understand, inform on and evangelize specific abiotic stresses and soil health problems and components to farmers.

That means using the funnel of specificity, which nails down the specific problem that biostimulants can alleviate— which is exactly what crop protection companies do to position and drive urgency and usage of their products.

I think this view is more of a subtle framing difference from what Rob Clayton was talking about, but I think it’s a framing variance that is useful to consider when talking about biostimulants.

b. ROI Emphasis

I continue to hear ROI emphasized. ROI is a very important consideration in any input decision. But, what is not talked about as much is taking that a step further:

How do I increase the believability of my ROI? And how do I get distributors, advisors and farmers to conviction in product use more consistently?

In venture capital, investment teams will talk about getting to conviction on an investment. If decision making individuals at a VC firm can’t get to conviction, they wont invest in a company.

Getting to conviction is about the return they can achieve, which has to do with things like total addressable market and their ability to capture a portion of it, but it’s also on assessing the coachability of the team, it’s about their assessment of the team to attract talent, about a vision of market trends and much more— this all contributes to a belief that there will be an outsizes upside (ROI) for the VC team.

This same dynamic is at play with biostimulants and farmer/advisor decision making.

Showing farmers 12% yield increase data all day is table stakes. Getting farmers to conviction requires more effort, including using these five approaches.

For a breakdown of five ways to improve the believability of your results and move farmers and advisors to conviction, you can purchase The Biostimulant Playbook here, or become an Upstream Ag Professional member.

3. “Biostimulants as a Symphony”

I was fortunate to connect with Layne Harris, founder of Foresight Agronomics and really enjoyed a metaphor she shared with me surrounding biostimulants:

“Just because something is complex, doesn’t mean it can’t be clear or effective.

If we think about a symphony by Beethoven, there are many complexities that might seem overwhelming at first if you look at it on paper. There are many different instruments playing in the orchestra, many talents and skills required to expertly play those instruments, many of the instruments are playing different notes, and if you look at each part in isolation, you might think it would sound like chaos. But when you hear the symphony all together, it is not chaos. Its stunningly beautiful. You can easily identify the melody, and the emotion being conveyed through and all the parts working together is clear. If you simplified it too much, it would lose its magic.

I think biologicals work a lot like this.

There is complexity to how they work and how we can use them. But their complexity doesn’t have to mean chaos. If we can look at them in the context of biological systems, the melody begins to become clear. Then we can figure out how to use them most effectively and with precision. Oversimplifying them too much could be doing them a disservice.”

She shares some more insights on this concept on a podcast that I think brings a very precise logic to thinking through biostimulants: Gene Expression Analysis — Better from the Groundup

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Index

  • UPL

  • Bayer Crop Science

  • American Vanguard

  • Nufarm

  • Mosaic

  • ICL Group

Note: Once all companies have reported their earnings there will be an aggregated report completed by agribusiness segment exclusively for Upstream Ag Professional members:

  1. Crop Protection and Seed Companies

  2. Fertilizer Manufacturers

  3. Equipment Manufacturers

Each report will include macro trends and themes, along with useful comparison charts and images.

A couple highlights:

Bayer Crop Science

Overall, the results weren’t positive for Bayer— the stock dropped to 20 year lows.

  • Crop Science sales fell by 3.6% on a currency and portfolio-adjusted basis, to €3.99 billion. Growth in fungicides and insecticides was countered by declines in glyphosate-based herbicides and corn seed sales. Glyphosate was down 19%. A big driver of the decrease was due to LatAm.

Mosaic

  • Revenue declined 21% YoY to $2.8 billion, primarily due to lower selling prices, while net income was $122 million, improving from a net loss of $4 million in Q3 2023.

For the full deep dive into each business, check out the link above and become an Upstream Ag Professional member.

The herbicide industry faces rising costs and extended timelines for bringing new products to market, with the expense of launching a new active ingredient now exceeding $300 million and development taking over 12 years.

This increase is driven by complex regulatory demands and a reliance on older herbicide molecules, which has led to significant weed resistance and an urgent need for new modes of action (MOAs).

To address these challenges, companies are adopting innovative approaches in herbicide discovery.

Last week I read New Approaches to Herbicide and Bioherbicide and highlighted some of the techniques and companies, along with breaking down useful insights from AgbioInvestor to lay out the importance of these new approaches, technologies and companies.

For the full article, including images, synthesis across industry reports and insights into the implications of concepts like Eroom’s Law, become an Upstream Ag Professional member:

The Pacesetter Pods is one of my favorite podcasts in the industry— Joe Mosher brings a deep industry understanding, insatiable curiosity and fantastic business acumen which make every episode an opportunity to learn something new.

Joe was kind enough to invite me to join him and talk about Innovation Theatre— a concept I have talked about several times in Upstream.

In it we discuss:

  • Innovation and The Red Queen Effect

  • Explore the tension between innovation and certainty

  • What is innovation culture vs. innovation theatre?

  • Tell-tale signs of novelty infatuation in a business.

  • Why the revolutionary Michelin PAX tire failed.

  • Analyze John Deere’s innovation strategy with See & Spray.

  • How to ensure genuine problem-solving innovation.plus more.

Check out the podcast with me, or one of the great podcasts from the Pacesetter archive.

You can also check out the article I wrote on Innovation Theatre:

Microsoft today announced it is working with the German pharmaceutical-and-agricultural group and other companies on specialized AI models fine-tuned on industry-specific data. The companies can now list and monetize those models on Microsoft’s online model catalog. 

This new domain-specific GenAI model from Bayer is being called E.L.Y. (Expert Learning for You). E.L.Y. has already been used by over 1,500 frontline Bayer employees in the United States.

Three years ago this month, Bayer and Microsoft announced their original partnership to:

build a new cloud-based set of digital tools and data science solutions for use in agriculture and adjacent industries, bringing new infrastructure and foundational capabilities to accelerate innovation, boost efficiency and support sustainability across value chains.

They have since made additional announcements, but shared very little in terms of traction.

Bayer has talked about its digital value creation approach being anchored to three pillars:

  1. Franchise Value — eg: improved decision making or selling as a system (Preceon Smart Corn).

  2. Downstream Value — eg: via ForGround

  3. Platform Value — eg: revenue from digital infrastructure, such as that built in collaboration with Microsoft.

In 2023, I asked a question about the revenue potential of platform value to Bayer leadership and Head of Climate and Digital Farming Jeremy Williams answered it honestly: they didn’t have a number yet, but think it can be lucrative.

It remains unclear if they have a specific number for the platform segment, but what is clear is this model is likely to fall into it.

In March Bayer announced an LLM pilot (note: the announcement with Microsoft is surrounding an SLM, small language model). Bayer seems to be ready to take things commercial.

I reached out to Sachi Desai, apart of the E.L.Y team at Bayer to ask about the business model and he stated they are still working on it, but suggested it is “likely to include a combination of model setup fee, yearly license, and consumption.”

It’ll be interesting to hear the pricing in the future— it seems unlikely that this generates enough revenue to move the needle for Bayer, but they have to start somewhere with their platform initiatives.

The announcement though is first and foremost scratching their own itch. Sachi Desai from the WSJ article:

“A lot of folks have the same pain points that we have….There’s a lot of ways to not only amortize our own cost by allowing others to collaborate off the same platforms or build on it, but also to up level the outcomes for our customers.”

This is very Amazon-esque approach— solve your own problems and then make the functionality available at scale and turn it into a revenue stream, like Amazon Web Services.

The problems for Bayer are ensuring there is a model that they can be confident to bring to their internal teams, and have it understand agricultural jargon and nuance. That entails enhancing the Phi family of small language models with the following:

  1. Retrieval-Augmented Generation (RAG) — a specific technique of combining a language model with an external knowledge base., allowing it to retrieve relevant documents or data during inference to provide more accurate, and context-specific responses, reducing hallucinations and improving reliability. This might be specific crop protection label information, for example.

  2. Other Guardrails — Limiting scope or ensuring output validation, such as ensuring there is no specific recommendation made, or always having a list of options.

  3. Data —Bayer has a host of data on products, labels etc which can augment the model, along with 3rd party, publicly available agriculture data.

The idea is that these steps make it the best option for agricultural based entities to pull from the Microsoft shop and integrate into their own softwares and systems, and pay for not having to go through the hassle of doing it themselves, along with access to Bayer know-how.

The thing that I continue to wonder— what will the perception be from companies that it is Bayer, a seller of inputs? Or view on agronomic robustness? Agronomy goes far beyond seed and crop protection to fertilizer and irrigation for example, and can you get enough data ands know-how from Bayer to adequately make this model high utility beyond traditional seed and crop protection?

A small single-store dealer can’t come close to the Lieb deal. My opinion is that the Volume Bonus/Discounts are not good for the industry. How about another example on a $400,000 tractor sale. The small single store dealer has a $24,000 higher cost because he doesn’t qualify for a Volume Bonus/Discount like the mega dealer would. Ironically, if you carry this further, the small dealer is helping fund the manufacturer to pay the Volume Bonus/Discount to the big dealer because the small dealer is paying a higher cost. Does that seem right?

These conversations are always interesting.

Size matters. Scale wins. Capitalism trends this way.

For Deere, transaction costs are real. Smaller dealer accounts need to be managed. And Deere needs to incentivize dealers to grow because that’s the expectation their investors have of them and because their competitors are always nipping at their heals. It’s an economic reality.

The writer states the following about his dislike of volume bonuses:

Nothing has really changed from 30 years ago when I brought this issue up at the Hesston meeting. With the big dealers it touches the same nerve. It is kind of like a secret they like to keep that way? They have been nursing on this Sacred Cow a long time. The Big Boys now think it is their “right.” Mr. Johnson wants to make sure I call it a “Bonus,” yet his defense is like they have earned it. What has the small single store dealer earned who is in the trenches everyday?

My concern with this view is that it neglects the fact that every large dealer started out as a smaller dealer and expanded either through strategic greenfield initiatives or acquisition.

A twenty location dealer didn’t emerge from nothing. It emerged from being aggressive, taking on risk and executing— all of which should be rewarded, because they did earn it. It’s in John Deere’s best interest and farmers best interest (on average and there are limits to this of course) to rewards companies that can execute well.

The companies operating more efficiently, and/or effectively, will have higher sales, and/or higher margins, which leads to more capital to grow and differentiate. This, generally, will come back to the farmer in better service and/or price.

If we look at this through a consumer lens— apparently, Costco and Wal-Mart shouldn’t receive volume discounts from their suppliers, which means they might not exist, which hinders consumers ability to find low cost goods or groceries. Does anyone say Wal-Mart and Costco shouldn’t access volume discounts?

My friend Patrick Honcoop wrote a great layout of the challenges to expanding internationally.

One thing I would add to his list of reasons agtech companies struggle with international expansion is distraction.

Being focused on one geography, and then needing to focus on another means the new reason does not get the businesses undivided attention.

I had a discussion about geographic expansion with a couple agtech founders recently surrounding their desire not to expand internationally, yet.

For the full breakdown of how distraction takes away from agtech start-ups, and insights from AgVend CEO Alexander Reichert on how he thinks about expansion, become an Upstream Ag Professional member:

Bushel, an independently-owned software technology company for the agricultural supply chain, announced a new feature in Bushel WalletTM that allows verified farmers and agribusinesses to invite their trusted partners into Bushel’s digital payment network for fast and secure payments. By bringing businesses such as agronomists, truckers, and custom harvesters—into Bushel’s payment network, farmers and agribusinesses can now avoid the hassle of traditional checks and ACH delays, achieving near real-time payments tailored specifically for agriculture.

This is a smart initiative from Bushel to attempt to generate a network effect and increase usage of their Wallet offering.

Last week in Is a Super App Possible in North American Agriculture? I went deeper on the topic, and it’s challenges.

Indigo Ag and GROWMARK have announced a major multi-year strategic partnership to bring new innovative powder-based biological products and sustainability programming to GROWMARK’s member companies and farmers. Now, farmers will be able to conveniently access and benefit from Indigo’s market-leading suite of biological and sustainability solutions through their local FS cooperatives.

This announcement is effectively a distribution deal for Indigo’s CLIPS device — a flowable powder seed coating application system. I dove into the device in the September 15th Edition of Upstream.

John Giebel, Head of Global Product Management and Licensing at Indigo, stated this on his Linkedin post:

With this agreement the demand for this innovative biological delivery system has surpassed our ability to manufacture the product for our first commercial launch year.

It’s not clear how many acres that works out too. Indigo stated they do not share that publicly.

The biologicals seem to be aimed at a foundational aspect for the two entities working together more on the sustainability front, too.

Elicit Plant, a pioneering agri-biotech company specializing in biosolutions for broadacre crops, has raised €45 million to accelerate its global expansion as farmers face mounting climate challenges. This investment round was led by Carbyne with participation from existing investors Sofinnova Partners, ECBF, and BPI. Primary net proceeds to the company will enhance commercialization of existing products and support further development of new solutions, aimed at providing farmers worldwide with effective products to combat the climate uncertainties affecting their yields and ability to feed populations.

Elicit Plant produces bio-solutions based on patented technology that utilizes phytosterols. Phytosterols are plant-derived sterols with a chemical structure similar to animal cholesterol. Phytosterols are a versatile biostimulant option. They currently have agreements in France with Bayer and BASF for distributing their biostimulant products.

Future Farming shared an update on “growth,” including 2024 membership numbers coming in at 87,000 on over 137 million acres in the US and Canada and stating they have provided over $2 billion USD (loans for land and equipment, operating lines of credit, etc.). They shared a high level update on Gradable, stating that in 2024, so far over 20,000 farms have engaged in the platform through partners like ADM and Poet Ethanol.

There was no mention of their crop protection business outside their chemical pricing transparency offering.

Non Ag Article

A Few Short Stories - Morgan Housel

It’s easy to underestimate how social norms stall change, even when the change is an obvious improvement. One of the strongest forces in the world is the urge to keep doing things as you’ve always done them, because people don’t like to be told they’ve been doing things wrong. Change eventually comes, but agonizingly slower than you might assume.

Incentives drive everything, and most of us underestimate what we’d be willing to do if the incentives were right.

Other Interesting Ag Articles

Germany-based startup Klim raised $22 million. Its platform helps ~3,500 farmers across 700,000 hectares plan, finance, and track soil health while earning from "carbon farming."

This is a thoughtfully written post on a complex subject.

Total investment increased more than 10% for two consecutive quarters following a dry spell for the category, according to Pitchbook, though fewer deals are happening