Upstream Ag Insights - October 14th 2024

Essential news and analysis for agribusiness leaders.

October 14, 2024 • Read Time: 20 minutes

Welcome to the forefront of agricultural innovation and strategy with the 236th edition of Upstream Ag Insights, where over 18,300 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 foresight to seize opportunities and catalyze growth in your business and career.

Index:

  1. The Rise of Biologicals and Specialty Fertilizer: A Report on Agribusiness Strategy, Progress and Initiatives

  2. Solinftec Seeking to Raise R$300 Million for 17% Equity

  3. Sentera Aerial Weed Scout Update

  4. Unlocking Demand for Regenerative

  5. Rethinking the Financing of Agtech Innovation: Is Venture Capital the Best Path Forward?

  6. Bridging the Gap: How Bio-Enabled Combination Solutions are Leading to the Future of Bio-Control

  7. The Context Network's 2024 Biotech Traits Commercialized (BTC) Study Highlights and Analysis

  8. Steve Jobs and Jeff Bezos Enter a Room

  9. Other Interesting Ag Articles (7 this week)

Happy Thanksgiving to all Canadian readers!

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This week I went through the largest fertilizer and crop protection companies annual reports, quarterly earnings calls analyst materials and historical announcements to aggregate key insights about each entities biological and specialty product strategy and business, including partnerships, investments, acquisitions, current revenues and targets and what they might do next.

Become an Upstream Ag Professional member and get exclusive access to all of the insights, plus more than 25 images created for the report, or strategically clipped from disparate company presentations:

Discover why this latest report has generated more positive feedback than anything I've ever written in the first 48 hours. The report is essential reading for those serious about staying ahead in the ag industry:

Index

  1. Agribusiness Comparison Snapshots

  2. Largest Bio-based and Specialty Acquisitions to Date

  3. Four Key Market Drivers

  4. Company Overviews

    1. Yara

    2. Mosaic

    3. Nutrien

    4. ICL

    5. Corteva

    6. BASF

    7. Bayer

    8. Syngenta

    9. FMC

    10. UPL

According to The AgriBiz article, Yvy Capital is in talks to invest R$300 million (Brazilian Real, converts to ~$54 million USD) in Solinftec. The article states that the investment has not been executed, but that it would value the company at ~$270 million USD pre-money.

According to Crunchbase, Solinftec has raised almost $147 million (USD) to date.

The investment angle is notable, but what stood out to me more was the revenue growth and sales of the Solix, their autonomous machine targeted at “living in the field.”

Last year, the startup grew almost 40%, delivering net revenue of approximately R$260 million. EBITDA, which was negative until 2022, reached R$86 million, with a margin of 33%.

Solinftec has a strong foothold in crops like sugar cane in Brazil, where significant portions of their revenue come from by being the essential operating system for a significant portion of the large operators in the region.

The bigger vision of Solinftec is to scale their autonomous Solix platform

Solix

The Solix is a solar-powered autonomous platform that is not only equipped with cameras to acquire data about the field but also equipped with the capability to spray— specifically weeds that it identifies within the crop and is equipped with the capabilities to lure, detect and eradicate insects autonomously using a specific light frequency. In the future, there are other potential use cases, from soil testing, to rock picking.

The Solix platform is a four-wheeled, solar panel equipped, fully autonomous system weighing in at a mere 1200 lbs, coming with sixteen RGB cameras for both navigation and data acquisition about the crop and RTK for sub-inch route accuracy.

The unit travels at around 1 mph, constantly. This means the machine can cover just under 100 acres per day, but that’s why they have a vision of it “living in the field.” Going at this speed and executing the data acquisition capabilities uses only about 1% of the energy the solar panel captures daily. Data is stored on the machine and processed on the edge before being sent to the cloud.

The system is powered by Solinftec’s ALICE software that drives information acquisition and analysis. ALICE could be considered the platform's lynchpin, as that runs the Solix unit and acts as the point of interaction for farmers, agronomists, and any party interacting with the unit via their phone or computer.

To get more on the Solix business, forecasted revenue and unit sales for 2024, go-to-market strategy, what the system could mean for ag retails and farmers and why it’s worth paying attention to, become an Upstream Ag Professional member:

Plus get access to a deep-dive on Solinftec including images, videos and expansion of the Solinftec business: Solinftec and the Solix Autonomous Platform: Reimagining Farming from First Principles - Upstream Ag Professional

Note: I do not typically cover Brazilian agriculture, however the innovation coming out of Brazil and its importance to global ag and food is undeniable. The above article was found via The AgriBiz, a Brazilian focused ag publication that reminds me of a Bloomberg-style of reporting with an agriculture focus. I recently subscribed to their English newsletter and wanted to highlight it in case you are interested in staying up on the business side of Brazilian agriculture. You can subscribe to it here: The AgriBiz Newsletter Sign-up.

Addressing Ag’s Top Three Technology Challenge: Farmers Edge Managed Services

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3. Sentera Aerial Weed Scout Update

Earlier this year Sentera shared their new product offering, Aerial Weed Scout, a selective herbicide application service that targets a lower use of herbicide for farmers who do not have actual optical spot spray technology equipped machinery.

I wrote the below highlighting some of the gaps it could fill, along with its shortcomings:

Last week, Sentera CEO Brian Wenngatz shared some of their results from the season on Linkedin:

Data captured at an average 90 acres/hour (13,300 acres / 5 states)…

With precise geo-located data - 94% detection of ¼”+ weeds...

At an average 10-hr turn-time with 90% of weed status insights & precision spray Rx files delivered by 6AM the next day..

Driving an average of 66% projected herbicide savings.

Good performance, overall.

One thing not shared is effectiveness of the application on weeds, or what percent of weeds were left in the field? — it is one thing to detect 1/4” weeds with a drone, it is another thing to hit them with an adequate spray dose, when spraying with a traditional sprayer. This challenge is not specific to Sentera’s solution, but Sentera has a unique challenge as it pertains to accuracy given they are attempting to precision apply in a traditional sprayer without reinforced booms.

For the full overview of the realities surrounding spray booms, what Sentera is experiencing and what surprises me about the results, become an Upstream Ag Professional member:

4. Unlocking Demand for Regenerative - Prairie Routes Research

Crop insurance is an example of maximally-invasive government programming in agriculture. Incentivizing the status quo through historic calculations of risk premiums, the influence of government crop insurance seeps into every decision including in discussions with farm lenders.

One of the under appreciated aspects of integrating new practices, like no-till or cover crops, on farm is uncertainty and its tie to insurance:

Practice change can reduce profitability in the year of implementation, it can also increase risk in subsequent years, whether in having to manage the change further (eg: inability to plant through higher amounts of plant residue), and through dragging down a farmers APH (average production history) leading to reduced insurance coverage in instances of a catastrophic event, such as flooding, or ability to access capital at palatable rates.

Notably, average production history is not indicative of profitability, which drives interesting incentives— as we see with nitrogen application, crop rotation etc. Farmers aren’t the bad actors that some claim, they are just responsive to incentives in a notoriously tight margin business.

One of the points of emphasis I constantly hear is regenerative practices will lead to premiums (eg: more $/bushel). I think premiums will be fleeting, yet even if a farmer is able to access premiums, they still need to successfully implement new practices and produce the crop successfully. But that change brings on risk.

Farmers focus on managing risk. If their insurance coverage can be compromised, it decreases the likelihood of change. Again, responsive to incentives, particularly incentives surrounding farm-preservation.

I do not have the answer for what needs to happen to insurance programs in North America. I do not think insurance programs are inherently bad, but they are based on a food security mindset above anything else— which was in the best interest of farmers and society when it was implemented. Many today argue that mindset brings on negative second order implications, such as over application of fertilizer, poor crop rotation, increased use of crop protection products etc.

We have begun to see an evolution on the financial side of things, with a company like Fractal Ag offering farmers discounts on annual financing for implementation of specific regenerative practices (on a practice by practice basis, which is the right way to think about “regenerative” in my opinion), which is one positive evolution on the financing side of things.

This article is available for all Upstream Ag Insights subscribers at the link.

The question about whether venture capital is the right funding model for agriculture is an interesting one.

To many individuals that have a similar background to me (working directly in the industry), you might say, “why does it matter?”

The reality is that attracting capital and driving innovation in agriculture is crucial to moving the industry forward— whether your point of emphasis is increasing production, decarbonizing production, improving the quality of crops or some combination of all of this and more.

That means the important becomes:

How do you fund new innovation? What is the right way to fund innovation where new tools come to market and investors get a viable return that will continue to attract capital?

To many that answer is VC, to some others it is not. I am ill-equipped to deliver a right answer on this topic, but I do find some of the base level rationale I hear or read to be inadequate to suggest it is the right, or wrong, method for funding innovation in ag so I went asking some colleagues their view.

Time Horizons

Consider the often cited time horizon issue that comes up in the this AgFunder News article The venture capital model is still suitable for agtech. Sort of:

‘The question is whether VCs have a long enough horizon for agtech’

This might be the case, but recent data from CB Insights illustrates that even other venture funded segments have a relatively long time horizon with median years to exit being 13 years.

It suggests to me there is more at play than just misaligned time horizons in agriculture.

For the full article highlighting some thoughts from colleagues about what financing innovation in agriculture could look like, check out the full article above.

There's an exciting wave of innovation in agriculture as bio-controls emerge as the next-generation mode of action, offering precise performance and an improved sustainability profile with minimal non-target impact. Vive Crop Protection is at the forefront of this movement. We are bridging the gap between synthetic solutions and the bio-revolution with combination products designed to harness the unique benefits of each active ingredient, ensuring reliable performance and fostering trust in the market.

In 2014 my manager asked me about future trends in crop inputs to be raising at a leadership meeting. One of my views was that we would see an increase in co-packaging, co-formulation and full-field system approaches with biostimulants, biopesticides and traditional synthetic chemistry.

I thought the evolution would occur more quickly (which I was wrong on), but my view is that that directional arrow remains.

In this AgFunder article, Enko Chem CEO Jacqueline Heard shares great commentary (emphasis mine) surrounding this:

There’s this false dichotomy between these different crop protection modalities, where one is good and one is bad. I think a lot of capital went into biologics thinking that it was going to be so much easier to get [products] through regulatory. It’s the wrong rationale, because no matter what, things have to be safer, and biologicals have more variables.

It’s been a couple of decades [of development in biologicals] and they’re proving to be very challenging. I think there’s a place for biologicals in food, but efficacy really has to trump because you need to have things that work for growers.

So why can’t you have both? Why can’t you have modalities that really work, like small molecules, but then really develop them with the eye that you need to have a different safety guard around things from the get go and use a systems approach to design things that are safer and more sustainable anyway.

It’s not a black and white, there’s a continuum. 

I specifically like her comment on a continuum, which brings up the following question:

Where does synthetic end and “natural” or bio-based begin?

The technical answer is when a molecule is derived from chemical synthesis in laboratories, consists of artificially created compounds or has a naturally occurring molecule that has been altered.

The question I have is, does it matter?

For more on the logic behind rethinking “good” vs. “bad” in the world of crop protection, including the logic and comparison behind spinosyns, pyrethrins and a company synthetically producing a molecularly identical natural substance for biofungicide purposes and why we should think critically about this, become an Upstream Ag Professional member:

Recently, The Context Network shared their 2024 Biotech Traits Commercialized (BTC) Multi-client Study that explores the landscape of biotech traits, highlighting the current state, company development trends, and extrapolating future initiatives that will drive the commercial success of agribusinesses globally in the world of seed.

Check out the link for the full breakdown, available to all Upstream Ag Insights subscribers.

  1. Introduction

  2. Growth Drivers of BioTech Traits

  3. Insights by Company

    1. BASF

    2. Bayer

    3. Corteva

    4. Syngenta

  4. Insights by Crop

    1. Canola

    2. Corn

    3. Potato

    4. Soybean

    5. Wheat

  5. Final Thoughts

I see a lot of nutritional trait opportunities that previously were not available because of the cost and time of the journey from a transgenic standpoint. It’s the same thing with disease; we’ve known disease genes that we could over express transgenically, but the value of the product didn’t warrant the cost of the journey so we sort of opted not to do that. But now that door is open with genome editing.

However, when it comes to insects where we are leveraging our traditional Bt traits from microbes [in transgenic crops], it may be a little bit harder [to achieve similar results with gene editing]. We may get there in time, but I think in the immediate future, you’re probably still going to need traditional biotechnology.

Non Ag Article

In 2000, legendary investor John Doerr brought Jeff Bezos and Steve Jobs to a pitch meeting to critique the Segway.

The article shares some really good insights into Jeff Bezos and Steve Jobs thinking.

Other Interesting Ag Articles

  1. 21 Laws of Life and Agronomy - Dan Aberhart Linkedin

"At the end of the day, the farmer has to come out ahead. If the advice we give doesn’t help the farmer win, then what’s the point? You can’t lose sight of that—everything else is just noise if the farmer isn’t seeing the benefit. That’s the only way the system works."

Farm automation faces a trust and manufacturing barrier that investment money alone cannot overcome.

Would I, as a farmer, trust a piece of equipment from a company called “Agtonomy?” I wouldn’t. Like most farmers, I don’t buy equipment from unknown brands.