Upstream Ag Insights - November 20th 2023

Essential news and analysis for agribusiness leaders

November 20, 2023 • Read Time: 17 minutes

Welcome to the 193rd Edition of Upstream Ag Insights!

Happy Thanksgiving to all of those who celebrate in the United States, and I hope everyone else has a wonderful week as well!

Next week’s edition will include

Index for the week:

  1. Q3 2023 Agribusiness Results Highlights and Analysis

  2. FMC 2023 Investor Day Highlights and Analysis

  3. AgTech Write-Downs and Privatizations

    1. Valmont Writes Down Prospera by almost 50%

    2. Fairfax Offers to Take Agritech Firm Farmers Edge Private at 99% Below IPO Price

  4. BASF introduces xarvio SeedSelect as part of xarvio FIELD MANAGER

  5. Bayer demonstrates digital technologies as a critical enabler for regenerative agriculture

  6. The Shortcomings of Poor Questions in Surveys: The 2023 CropLife 100 Preview

  7. AGCO Continues Technology Transformation to Become an Industry Leader in Smart Farming Solutions

  8. Syngenta Hits 230 Million Acres on Digital Platform

  9. Autonomous Ag at a Tipping Point

  10. The Direction Of The Moat

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1. Q3 2023 Results Highlights and Analysis - Upstream Ag Professional

For highlights from the following companies Q3 results, check out the link above:

  1. BASF

  2. Bayer Crop Science

  3. Corteva

  4. FMC

  5. Nufarm

  6. Syngenta

  7. Nutrien

  8. Lavoro

  9. Yara

  10. Mosaic

  11. ICL

  12. American Vanguard

  13. AGCO

  14. CNH Industrial

  15. Lindsay Irrigation

  16. Valmont Industries

  17. Farmers Edge

Key Themes and Breakdown Topics from Q3 2023 Agribusiness Results

  1. Continued Destocking in Crop Protection

  2. Corporate Dynamics

    1. Syngenta IPO on Hold

    2. Bayer Corporate Restructure

    3. FMC Battling Short Seller

  3. Fertilizer Earnings Tighten from 2022 Highs, Expected Growth in 2024

Become an Upstream Ag Professional member and get exclusive access to highlights, analysis, and themes from the agribusiness Q3 2023 earnings season:

2. FMC 2023 Investor Day Highlights and Analysis - Upstream Ag Professional

On Thursday, November 16th, FMC had an Investor Day— their first one since 2018, where they went through the future outlook for their business.

The timing wasn’t optimal—not only are they coming off of their second straight ~30% YoY decline, but they are also fending off a short seller in Blue Orca Capital that questioned the resiliency of their diamide business.

It allowed them to address these challenges, which also means they were playing defense for a significant portion of their event instead of emphatically focusing solely on the exciting parts of their business.

In the write-up, I highlight several essential components of the event they held in Philadelphia.

Overviews Include:

  • Defense of the Diamide Business

  • Strategic Diversification and Product Innovation

  • Expanding the Biologicals and Plant Health Business

  • Enhanced Technical Support for Growers and Adaptive Market Strategy

Become an Upstream Ag Professional member and get exclusive access to highlights and analysis from the FMC Investor Day:

3. AgTech Write-Downs and Privatizations

During the third quarter of 2023, Valmont completed its annual impairment testing of goodwill and certain intangible assets. As a result of the impairment analysis, it was concluded that the carrying value of the Agriculture Technology reporting unit exceeded its market value. As such, the Company recorded an impairment loss on goodwill and certain intangible assets of $137.3 million. Significantly slower growth of Prospera’s agronomy technology solutions compared to the original financial projections was the primary driver of the impairment. The recent decline in the North American agriculture market was also a contributing factor.

Canadian financial group Fairfax Financial Holdings Ltd. offered to buy out minority shareholders of agriculture technology firm Farmers Edge Inc. at a price that would crystallize near-total losses for any longer-term holders of the stock. Fairfax’s takeover bid of 25 Canadian cents a share is almost 99% below the C$17 a share at which Farmers Edge offered stock in a March 2021 initial public offering.

For more on the FairFax offer to privatize Farmers Edge and how the Prospera acquisition stacks up to the largest agtech exits along with future implications for the agtech industry, become an Upstream Ag Professional member:

BASF is introducing xarvio® SeedSelect, a novel seed variety placement technology based on an algorithm derived from plot trial field research, local topographic and soil attributes, and variety-specific yield building characteristics. Using advanced data and analysis methods, xarvio SeedSelect evaluates soybean varieties based on how they build yield, which provides a foundational understanding of what field characteristics will best support growth and matches them to growers' fields based on those characteristics.

The capability that xarvio is launching here isn’t unique— Bayer, Syngenta, and others have previously launched this capability.

What stands out to me about it, though, is the positioning:

xarvio SeedSelect is available as part of xarvio FIELD MANAGER, an advanced crop optimization platform that helps agricultural retailers deliver unrivaled service and value to customers, through timely, field-specific agronomic recommendations. xarvio FIELD MANAGER supports retailers and growers throughout the entire season, from planning to harvest.

I do not think I have ever read a release from BASF that emphasizes the retailer with their xarvio functionality. The focus was always on the farmer.

xarvio has pivoted away from focusing its efforts on the farmer to focus on retailer tools. We have witnessed this with many organizations over the past 24 months.

For more on how the xarvio initiative compares other company’s like FMC and what it means for the future of xarvio’s strategy, become an Upstream Ag Professional member today:

At Agritechnica, Bayer announced an array of “Magic” technological services specific to Europe:

  • MagicScout Air: This drone-based solution allows farmers to scout their fields from the air efficiently. It aids in analyzing crop emergence and weed presence more quickly than traditional ground-based methods. The technology integrates high-resolution drone mapping with AI to identify plant types, mainly weeds, and generate precise geospatial data for creating crop protection prescription maps. These maps can be used for accurate spot spraying with conventional sprayers.

  • MagicTrap: MagicTrap uses advanced imaging to identify pests in the field. Future developments are expected to provide recommendations for pest control. This technology aims to facilitate the monitoring and management of pests, much like TrapView or RapidAim.

  • MagicSprayer: This spot sprayer is designed for ultra-high precision application and can target individual plants. It can automatically execute a spraying program only in necessary areas, reducing crop protection risks and volumes. MagicSprayer is part of Bayer’s initiative to reduce the environmental impact of crop protection products, aligning with the goals of the EU Green Deal.

I can’t see this initiative coming to North America, but it will be interesting to watch how it plays out in Europe.

Bayer also announced an LLM initiative through Microsoft Azure:

Bayer is presenting new large language model (LLM) capabilities with a prototype for an agriculture copilot. Built on Azure Data Manager for Agriculture, the prototype aims to help end users receive actionable insights from their farm data, simply by asking questions. For example, farmers or agronomists could type into a chat interface, “Which of my fields had an in-season crop protection application in 2023,” or “Which of my fields had recent harvest activity?” Internal teams at Bayer are testing multiple scenarios where LLM capabilities could add value through the ability to interact with farm data in a natural way.

The initial tooling itself won’t raise significant excitement but shows directionally that Bayer is thinking strategically about how to leverage new technology to make information acquisition and task execution much simpler for farmers and agribusiness professionals within digital platforms.

That leads to the next topic along the same lines:

6. The Shortcomings of Poor Questions in Surveys: The 2023 CropLife 100 Preview - Crop Life

Technology adoption has been all the rage this past year as drones and semi-autonomous vehicles have dominated much of the ag news. But when it comes to artificial intelligence (AI), ag retailers are a bit more cautious.

When asked what role AI might play in the upcoming growing season, half of the respondents said it was still too early to tell. Another 35% thought AI’s place in the industry would be “small” in 2024. Only 15% foresee such systems playing a “big role” in the nation’s crop fields.

I find it frustrating when surveys frame something, particularly artificial intelligence, as a monolith. If you ask the wrong questions, you get low-value responses.

Asking someone whether artificial intelligence will impact them is so broad, and most people don’t have the depth of understanding surrounding it that it becomes a useless question.

For example, the question fails to acknowledge that artificial intelligence is enabling all precision spraying technology (eg, See and Spray technology) or that artificial intelligence is influencing the one app retailers likely use the most— the weather app or that autonomy is predicated on artificial intelligence (which the author states as being all the rage). These are just a few examples.

The survey is proper— it will play a small role in most of retail’s 2024 season. But which retailers will be paying attention to it? The best ones.

The best retailers aren’t using artificial intelligence in 2024 because it will have an outsized impact on their business in 2024 but because the edges are where opportunities are. Those who are leveraging artificial intelligence tools today are the ones likely to deploy them more effectively in the future— whether by using them agronomically, from an administrative perspective, within new services, or otherwise.

What is more interesting is targeting those edges with the survey questions— asking which companies are leveraging artificial intelligence in 2024 and then following up with how they are doing so. There’s a lot more to learn from that.

Mediocrity thrives when it’s positioned as the default.

Regarding some of the AI that I suspect the survey is genuinely getting at (LLM chat-based interfaces like ChatGPT), I know there is only so much being done for 2024. Still, I have had conversations with multiple retailers, input manufacturers (see Bayer above), and agtech startups that are currently building tools that will be used in 2024, including those aligned with the topics I have written about over the past couple of months in Artificial Intelligence and the Supply Chain in a World of Converging Agribusiness Software— touching on how to think about LLMs in vertical software scenarios, or on how LLM Agents within agribusiness software can improve agribusiness professional efficiency and The Shortcomings and Opportunities of Large Language Models in Agronomy.

Become an Upstream Ag Professional member today for exclusive insights into how LLMs will impact farmers and agribusiness professionals:

AGCO signed an agreement to acquire digital assets from FarmFacts GmbH, a leader in Farm Management Information Software (FMIS) located in Pfarrkirchen, Germany and a subsidiary of BayWa AG group. FarmFacts specializes in software for farmers and service providers to generate field action plans from prescription maps to guidance line creation. FarmFacts’ products include the NEXT Farming AG Office application and the NEXT Farming Live data platform and offer customized solutions that include documentation, fertilizer requirements for site-specific management and connections to all the major farm equipment terminals. The acquisition increases AGCO’s FMIS offering and software development capabilities to serve farmers’ data management needs.

The EU market is more fragmented in digital agriculture. This acquisition from AGCO seems more about rounding out some capabilities in Germany and other European countries rather than displacing or enhancing anything within the larger AGCO family, which now includes Trimble Ag Software as part of the joint venture/acquisition with Trimble.

AGCO also announced AGCO Ventures:

Building on AGCO’s legacy of equity investments in early-stage technologies, the company is launching “AGCO Ventures.” This initiative formalizes AGCO’s approach to sourcing and funding new and early-stage technologies to deliver on the company’s strategic priorities and to drive innovation by investing in start-up companies, venture funds, incubators, accelerators, higher education and research institutions.

Corporate venture capital (CVC) is an initiative we see throughout all industries. Many organizations in agriculture have their own CVC arm, including Bayer, Syngenta, FMC, and BASF.

Ultimately, it allows incumbents to stay abreast of what is going on in the startup world and get first-hand experience looking at or investing in technologies, getting a seat at the table with some of the brightest entrepreneurs in the industry.

This announcement isn’t particularly exciting, though it is fundamentally good that more integrations are occurring.

I highlight it, though, because of what Syngenta shared at the end of the article:

The Cropwise platform and its solutions are present in more than 25 countries and has over 40 000 users around the globe. Close to 230 million acres are digitally monitored by Syngenta Group’s digital solutions.

I will be the first to acknowledge the shortcomings of associating digital platform success with acre numbers— In 2020 and 2021, I shared aggregations of digitized acres by company, and that has been the most divisive thing I have ever published within Upstream because of the shortcomings of that measurement, the variables needed to acknowledge and so on.

However, it is worth highlighting when companies have that high of acre count— for clarity, we don’t know how Syngenta defines an acre (I reached out but hadn’t received a response before publishing), but 230 million acres indicate they are on more acres than Climate FieldView. In the above press release, Bayer stated they have “>220 million acres subscribed.” For context, John Deere, in their 2022 annual report, said that they have 330 million “engaged” acres.

Syngenta has been the least vocal about its digital initiatives compared to BASF, Corteva, and Bayer, yet it seems to have been quietly growing the reach of its offerings.

9. Autonomous Ag at a Tipping Point - Tenacious Ventures

This is an excellent article from my friend Sarah Nolet at Tenacious Ventures.

One quote that stood out to me was the following:

Beyond simply automating the tasks that farmers do today, we also see tons of opportunities to develop innovative business models that capture more value. As autonomous technology proliferates in every ag sector, from sprayers to tractors to harvesters and scouts, new companies and farm production practices will arise to take full advantage of the new circumstances.

I think this is accurate. It also gets to the heart of the opportunity to view various technologies as a system, integrating them to create something new.

I have talked about this in the context of pheromones, drones, and remote-sensing technology. It can also be viewed through the lens of last week's InnerPlant, John Deere, and Syngenta announcement or how Solinftec is reimagining crop production with a unique view on leveraging autonomous systems.

Non-Ag Article

The Direction Of The Moat - Eagle Point Capital

Everyone talks about “moats” but almost no one talks about how moats change. Moats get a little bit wider or narrower every day. A widening moat is even more valuable than a wide moat. A moat’s direction is more important than its width.

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