Upstream Ag Insights - October 2nd 2023

Essential news and analysis for agribusiness leaders

October 02, 2023 • Read Time: 25 minutes

Welcome to the 186th Edition of Upstream Ag Insights!

This week is a special edition of Upstream Ag Insights— Insights subscribers get the same access as Upstream Ag Professional members!

This includes:

  • Ability to read the three Upstream Ag Professional evergreen articles from the week, which include:

    • Exclusive deep dive on ag technology company Rantizo.

    • Highlights and Analysis of the AGCO and Trimble news.

    • A detailed breakdown of the influence of human psychology on agtech adoption and how we are always Predictably Irrational. 

  • Access to the key takeaway summaries of all nine ag stories for the week.

  • Access to all research, insights, and analysis for each story.

  • Viewing of all exclusive images and charts for the week.

This week is an example of what Upstream Ag Professional members get every Sunday.

If you want to become a member, for the next 7 days, I am offering a 15% discount for Upstream Ag Insights subscribers to upgrade to a Professional membership:

Index for the week:

  1. Exclusive: Rantizo Raises More than $6 Million to Scale Automation Orchestration

  2. Highlights and Analysis of AGCO's Acquisition of Trimble Ag Assets and Joint Venture

  3. Predictable Irrationality and the Dilemma of AgTech Adoption

  4. Corteva News

    1. Top Agriculture Company Corteva Accuses Startup Inari of Stealing Seeds

    2. Harpe Bioherbicide Solutions, Inc. Signs License Agreement for CRISPR-Cas9 Genome-Editing Technology with the Broad Institute and Corteva Agriscience

    3. Tropic Announces Collaboration with Corteva Agriscience Utilizing Tropic’s Groundbreaking GEiGS® Technology to Develop Robust Disease Resistance Traits in Corn and Soybean

    4. Morgan Stanley Investor Event: Corteva

  5. John Deere and Yara Partner to Increase Fertilization Efficiency

  6.  The agritech party is over, and Syngenta’s CVC arm is surveying the damage

  7. Biotalys CEO Patrice Sellès Discusses the Future of Biological Controls

  8. Nestlé, Danone, and other major food companies commit to a framework for regenerative agriculture

  9. A new perspective when examining maize fertilizer nitrogen use efficiency, incrementally

  10. Charlie Munger: The Psychology of Human Misjudgement

Key Takeaways 

  • Rantizo raised more than $6 million to scale their leading operator network for spray drone services. 

  • Rantizo connects demand and supply for agricultural spray drone services by selling drones, support, software, and training to ag retailers and spray drone operators, and by flying contracted acres for spraying services. Rantizo provides a service platform that can deliver new revenue for ag retailers and seeks to automate spray service delivery. 

  • The future of Rantizo is unlikely to stop at a focus on drones— the future could be the enablement of novel services and business models along with being an orchestrator for the entirety of services and autonomy in agriculture. 

Upstream Ag Insights Exclusive on More than $6 Million Funding Raise 

Rantizo, the leading operator network for spray drone services, announced today an expansion of its oversubscribed funding round. Led by LEAPS by Bayer, with Fulcrum Global Capital and Innova Memphis, this round will allow the new executive team to lean into a new growth strategy for Rantizo 

A company raising capital at any time is noteworthy. Given the macroeconomic environment and the investors, it is especially notable. 

LEAPS, being the corporate venture capital arm of Bayer, furthering their investment, and Fulcrum Global Capital, an innovative investment group that has a notable portfolio of drone spraying company Precision.ai and automation company Sabanto.  

When I had a conversation with Rantizo about the raise and their new focus in the market, I was enthralled by the evolution of the business: 

“Our vision is to build a service network that puts autonomy to work in ag, starting with spray drone services. We are excited to expand our nationwide operator network, deploy our work management and as-applied map software, and continue our exponential growth in acres treated,” said CEO Mariah Scott.  

Given this new vision, I wanted to dive deeper into what Rantizo is working toward, how they might spend their recent capital raise, and look at their business.

Check out the link above for a deep dive into the Rantizo business.

Key Takeaways:

  • The purchase price for the Trimble Ag business comes in at an implied enterprise value of approximately $2.35 billion and a transaction multiple of approximately 13.8x based on 2023E EBITDA of roughly $170 million.

  • The transaction brings some natural immediate benefits to AGCO’s business, including integration of Trimble products in all AGCO equipment, channel expansion, talent integration, margin expansion, and amplifying AGCO’s retrofit strategy.

  • The acquisition/JV has interesting potential implications for the precision spraying market, including the Bosch/xarvio ONE Smart Spray initiative.

AGCO Corporation, a worldwide manufacturer and distributor of agricultural machinery and Precision Ag technology, announced it has entered into a Joint Venture (JV) with Trimble, where AGCO will acquire an 85% interest in Trimble’s portfolio of Ag assets and technologies for cash consideration of $2.0 billion and the contribution of JCA Technologies.

This week, AGCO announced one of the largest precision ag deals ever with the acquisition of Trimble Ag Assets.

In Highlights and Analysis of AGCO Acquisition of Trimble Ag Assets and Joint Venture, I break down the following aspects of the deal:

  1. Structure overview

  2. Trimble products as the primary choice in all AGCO equipment.

  3. Channels to market dynamics.

  4. Margin expansion for AGCO.

  5. Talent acquisition for AGCO.

  6. Precision spray implications.

  7. Whether the deal makes sense for AGCO or not.

To read the full highlights and analysis, check out the link above.

Key Takeaways:

  • Humans are not economically rational— things outside traditional ROI constantly influence us, and are often making decisions based on cognitive biases that are less tangible to navigate. This includes farmers and B2B professionals.

  • Human psychology needs to be considered to maximize agtech adoption. Hurdles to overcome include loss aversion, status quo biases, and the need to consider how social perception influences decision-making priorities.

  • Understanding the actual pain point is crucial to positioning the product and understanding the true ROI of an agtech product, especially when progressing beyond the early adopter segment of farmers and agribusiness professionals.

This week, I read a LinkedIn post by Ken Zuckerberg, Lead Economist at CoBank, where he shared Five Things to Overcome to Accelerate AgTech Adoption:

  1. Prove the technology generates a positive return on investment.

  2. Resolve data integrity and cyber-security issues.

  3. Increase performance despite imperfect rural infrastructure.

  4. Determine which technologies are compatible with each other.

  5. Encourage farmers to prioritize what tools can provide a 30%-40% increase in productivity (and ignore everything else).

I have an immense respect for Ken, and while there is merit to much of what Ken highlights, the framework is incomplete— for farmers and agribusiness professionals.

There is a need to do much of what Ken suggests:

Proving a return on investment is crucial.

Illustrating data integrity and being transparent helps alleviate farmer concerns about what will happen with their data (though I am not certain cyber-security is a primary concern of most farmers, even though it is essential, more so for the agribusiness professional camp).

Reliable performance, regardless of connectivity, goes a long way with digital technologies.

A coherent understanding of which products are interoperable also goes a long way and needs to be constantly improved.

Encouraging farmers to prioritize the tools that provide the best return is also astute (though I do not know any technologies out there today that give a 30%-40% increase in “productivity”…10% would be excellent).

The above is generally well-accepted among many agribusiness professionals but still falls short.

There is more that hinders adoption that is often overlooked— the specific pain point is not addressed effectively, there isn’t confidence in the education and support infrastructure, and most importantly, but least talked about, farmers and people are predictably irrational, and psychological factors need to be addressed.

These all need to be considered, specifically regarding the group Ken states he is talking about in the post— those beyond the early adopters (early adopters tend to be motivated more by what Ken lays out (ROI, for example).

In the full article, I discuss farmer and human psychology, addressing pain points and the need for solid support infrastructure to create a practical framework for maximizing agtech adoption.

In this report, Ken Zuckerberg provides views surrounding future service expansion for retailers.

I think there is a lot of nuance to what he suggests. For a practical example of a company offering unique tools to ag retailers, Solinftec is useful to look at. This group is driving forward in the autonomy space with a unique world-view and offering to ag retailers (Note: The first story on Rantizo provides another good example):

4. Corteva News

This week, Corteva made waves with multiple announcements surrounding lawsuits, partnerships, and industry events.

Key Takeaways:

  • Inari is a gene editing company that has raised over $500 million.

  • The lawsuit filed by Corteva alleges that Inari deliberately used a third-party agent to obtain protected Corteva seeds, illegally exported the seeds out of the United States, made slight genetic modifications of the biotech traits, and is pursuing U.S. patents for those modified traits.

Inari is a startup that has raised over $500 million, according to Crunchbase, for its capabilities in gene editing. They apparently can simultaneously turn genes on and off, dial up or down a gene's expression to increase or reduce its effects, and - through their patented PRIDE™ technology, they can make exact gene replacements.

Gene editing is an area of agriculture that can deliver tremendous outcomes moving forward because of the precision ability to tweak plant genes that has never been possible before. Inari has an all-star cast of advisors, including Jennifer Doudna, the American scientist known for her pioneering work in CRISPR gene editing. She also has a book about her journey by the renowned writer Walter Isaacson.

Corteva is alleging the following of Inari:

Corteva filed a lawsuit in federal court accusing the seed-gene-editing company Inari Agriculture of illicitly obtaining Corteva seeds from a U.S. depository and illegally shipping them to Europe. Corteva alleges that the startup made small changes to the plants’ genetics and now is seeking to patent the seeds in the U.S.

Corteva claims Inari began taking its technology in 2020 through a nonprofit depository of seeds called the American Type Culture Collection that makes them available for research. The suit alleges that Inari used a separate seed-distributor company to purchase hundreds of Corteva’s proprietary seeds from the ATCC and then had them shipped to Inari, which moved them out of the U.S. to Belgium.

If the below is true, it’s a very strange maneuver by Inari:

The company alleges that Inari tried to pressure Corteva into a “quid pro quo” agreement: Inari offered not to sell certain corn seeds containing Corteva’s technology, but only if Corteva agreed to pay Inari to use the startup’s soybean products, according to the lawsuit.

Whether Corteva wins the lawsuit or not, it seems likely that irreconcilable damage has been done to Inari’s name, hindering other companies’ desires to work with the company in the interim.

Key Takeaways

  • Harpe Bio is a bioherbicide company creating herbicides from Mint Family plant extracts.

  • Harpe Bio announced a licensing agreement with Corteva regarding gene editing tools for developing crops tolerant to Harpe’s herbicides.

  • It becomes apparent that there might also be an acquisition opportunity for Corteva in Harpe Bio to set themselves up in a solid future position, given trends towards bioherbicide and biological-based products.

Harpe Bioherbicide Solutions, Inc., an agricultural technology company focused on providing natural and sustainable herbicide solutions, announced today that it has executed a joint intellectual property licensing agreement with Corteva Agriscience and the Broad Institute of MIT and Harvard for foundational CRISPR-Cas9 and related gene editing tools to further research and develop Harpe Bioherbicide tolerant crop systems. 

I originally covered Harpe Bio in the April 23rd 2023, Edition of Upstream Ag Insights, breaking down their technology and it’s validity as a herbicide. Harpe is doing interesting things with extracts from the Mint Family to produce herbicide products.

What is interesting in this news is the effort to make tolerant crop systems to the molecules that Harpe is building— this, in theory, could replace (but more likely to augment) the traditional synthetic herbicide-tolerant traits available today.

Corteva has stated publicly that they see biological products becoming 25% of the crop protection market by 2035. To date, their acquisitions in the physical space have been biostimulant in nature (e.g.: Stoller acquisition), not biopesticide.

Corteva has also stated that they want to get to net royalty neutrality surrounding their seed and trait business by 2030— it seems they are on their way already (see Corteva investor link below) with Enlist, for example, but with ever-evolving regulatory demands and trends surrounding crop protection, it makes sense to build out the capability to put tolerance to next generation, environmentally friendly herbicides into their leading seed business.

Given all this, I wouldn’t be surprised if Corteva is looking at Harpe Bio for acquisition. With glyphosate tolerance, value accrued disproportionately to the trait company. I expect this to be the case with future herbicide-tolerant traits as well; however, being able to bundle an owned and differentiated herbicide with the herbicide tolerance in the seed can augment margin per acre— plus deliver control over supply for any product they begin to drive adoption of and rely on for the success of their seed business.

Key Takeaways

  • Corteva continues to expand its gene editing partnership efforts and augment its leading IP position in CRISPR and gene editing.

  • Gene editing will be the battleground for seed companies as the ability to integrate more into the seed for crop protection, crop health, and quality will grow.

Tropic, announced today a strategic collaboration with Corteva Agriscience, to harness the power of Tropic’s proprietary Gene Editing induced Gene Silencing (GEiGS®) technology for the development of non-transgenic disease resistance traits in corn and soybean.

Gene editing collaborations have become increasingly common in agriculture. The potential in gene editing is immense, and no company wants to get left behind.

Bayer and Pairwise recently announced a new five-year, multi-million dollar agreement focused on innovations in short-stature corn in this realm.

But is there a company winning in this space?

Who’s Winning with CRISPR and Gene Editing Technology in Agriculture?

My view, and I think consensus, is that in-seed technology is a crucial area for innovation in crop protection. There are several ways to do this, but CRISPR and gene editing are core technologies, specifically if the EU approves it as a non-GMO editing technology.

What exactly is CRISPR?

CRISPR-Cas9 (Clustered Regularly Interspaced Short Palindromic Repeats) is a unique technology that enables geneticists and researchers to edit parts of a genome by removing, adding, or altering sections of the DNA sequence.

This means CRISPR is used essentially as a set of molecular scissors to cut and delete (or replace) a gene expressing an undesirable trait with an “improved” variation of the gene (e.g., existing in the plant family already). In other words, CRISPR does not use classical GM crop production techniques, which insert foreign DNA from a vector into the plant genome.

Given the precise nature (and potentially lower regulatory challenges compared to traditional GMOs in geographies like the EU), this gives an incredible opportunity for companies to make essential tweaks to help them manage stress, disease, insects, and much more.

Given all of this, patents and intellectual property are likely to reign supreme, and we are seeing activity ramp up at the law office along with a notable runaway lead on patents (though it is applicants, not grants):

Source: Food and Drug Law Institute and Agricultural Technology Discovery Report 2023 - EDF

Dow Agrosciences LLC and Pioneer Hi-Bred Int are two of the top three, with Dow being a significant leader. Then, we can add Pioneer Hi-Bred Int Inc and DuPont.

That makes Corteva a leader in patents regarding CRISPR. They are augmenting this position with strategic collaborations.

Ultimately, patents aren’t a certainty to commercialization, but the fact that Corteva is launching new technology and working to enhance collaboration in CRISPR is a good sign that they are driving positive outcomes with their technology.

It’s important to note that CRISPR is only one component of a greater tech stack in seed breeding; however, a strong presence in CRISPR is a big hammer to swing, which means Corteva is well positioned.

Corteva CEO Chuck Magro and CFO Dave Anderson recently talked with Morgan Stanley analyst Vincent Andrews about their business.

One quick highlight below, but there is plenty to take in from the transcript.

If you look at our entire sort of IP portfolio, we would be one of the companies in the world that I'd say has the deepest and broadest IP in agriculture. Just to give you some numbers, we have somewhere north of 17,000 patents, and we have another 4,400 patents pending.

Key Takeaways:

  • Yara’s Atfarm platform enables farmers to monitor their crops and nitrogen uptake throughout the season, plus create variable rate application maps.

  • The AtFarm data can now be shared as a WorkPlan with the John Deere Operations Center.

  • Farmers can add operational details and wirelessly synchronize the plans, including prescriptions, to any machine featuring the John Deere Gen4 or G5 Display.

John Deere and Yara have joined forces to launch a partnership that will combine Yara’s agronomic expertise with John Deere’s precision technology and advanced machinery. The partnership will enable farmers to increase yields and optimize fertilizer use, helping them contribute to the ambition of the European Union’s Farm to Fork Strategy.

The announcement is focused on Europe, but this partnership makes sense for both parties.

Deere has made a point of emphasis that Deere wants to improve nitrogen use efficiency by 20%. While they have sense and act tools, having access to incremental software and expertise that shares models to inform proper nitrogen application rates will augment their equipment and precision tools.

For Yara, they have made integrations a deeper priority, and their tools need access to the systems that enable operational execution— it benefits farmers, and it benefits Yara technology to access accurate as-applied data.

Key Takeaways:

  • Agtech startups are in for more challenges over the next several months, including a “culling of the herd.”

  • Growth at all growth-at-all-costs mentality is ending, and companies need to show a clear trajectory to profitability.

  • Investors are looking for real returns, and they’re asking difficult questions about revenue growth, commercial traction, and profitability more than in years past.

The unfortunate reality is that over the next few months we will see a culling of the herd. There will be more down rounds, more bankruptcies and there will be roll-ups

Shubhang Shankar is one of the most thoughtful individuals in the agtech venture space. I always read or listen when he shares his views. This article is no different. If you want a quick background on where agtech is at, it’s worth the read.

Key Takeaways:

  • Biotaly’s CEO does not believe that biological products are intended to replace chemical products entirely. There is a fit for both, especially as decision-making tools and more environmentally friendly synthetics are brought to market.

  • Price, efficacy, and the mindset about how to use and when to use new products must be overcome effectively to see biological acceptance grow.

ABG: Can we get to the point where biological product can completely replace synthetic products?

Do I believe today that in the next let’s say, couple of decades during my lifetime. We will – more than that – let’s say, during the next 50 years, to put that into context, do I believe that we will be able to eliminate completely the chemical pesticides? I think no, no, no, and that’s not the purpose. The chemistry will make some breakthrough evolution in their innovation system that will allow them to select for better products as well with less impact on the environment. That’s one element. But also, we will be able to equilibrate the need for these products and to be able to use them only when required, which is not the case right now. So, a complete, different view, and moving into an agriculture that is not just using, because you are used to do that, or because you are protecting your crops, but by making sure that you use something that is at the right time, and with the right amount, which is today, maybe not the case everywhere.

I thought this was a great interview with Biotalys CEO Patrice Selles that is worth checking out if you are interested in the world of biologicals.

Key Takeaways:

  • Food and CPG companies have been making poor in-roads when meeting their regenerative ag commitments. A new company, SAI, is working to unite players to define regenerative ag and enable it.

  • Regenerative ag not being defined must stop being an excuse for these organizations.

  • Regenerative agriculture practices need to be unbundled, and success needs to be thought of on a continuum, not in a black-and-white way.

Food industry giants are aligning on a definition of regenerative agriculture as they face criticism for a lack of progress on efforts to address farming’s impact on climate.

It could be semantics, but I find the desire for a “definition” to be a fool’s errand.

I broke this down last week:

Let’s be clear: the principles of regenerative ag are defined. But principles of regenerative ag are just a bundle of practices to be used in a system. I went through this in Regenerative Agriculture Doesn't Have to Be Contentious, highlighting the most divisive question:

The question becomes, where does one become “regenerative” and where are they conventional?

Crops, geography, weather conditions, and more will influence this year to year.

If you unbundle “regenerative ag,” you get beneficial, stand-alone practices that can be leveraged for superior on-farm outcomes. They should be thought of like Lego or a game of Tetris in how they are integrated into an operation.

For example, the new financing company, Fractal, offers discounts per practice on an APR basis for their customer base.

Thinking about absolutes— regenerative or not doesn’t do the food companies, farmers, or environment any favors. It is a continuum and needs to be considered an evolution of practices. If there is a scoring system in place, it allows for progress, which should be the ultimate goal, not to fit farmers into an arbitrary box.

Key Takeaways

  • The often-cited nitrogen use efficiency number is ~50%.

  • This often gets assumed to mean that for every unit of N applied, 50% is lost. But things are never that black and white.

  • This study broke down that the first units of N are much more efficient than the last units of N applied and that as more N is used, the more inefficient it gets, with the last units of N added being only about 6% efficient, or losing over 90% of the N applied!

  • Results varied by soil texture and weather conditions.

We show for those last units of N applied to reach economic optimal N rate (EONR) iNUE for N removed with the grain is only about 6%. Conversely stated, for those last units of N applied over 90% is either lost to the environment during the growing season, remains as inorganic soil N that too may be lost after the growing season, or has been captured within maize stover and roots or soil organic matter pools.

This study is likely frequently referenced by N microbial companies, such as Pivot Bio or Sound Agriculture. There are a lot of valuable takeaways for anyone interested in nitrogen fertilization.

Non-Ag Video

This week, I highlighted the psychological dynamics behind farmer technology adoption. One of the most valuable videos to learn about influence, judgment, and driving outcomes is a 30+-year-old audio recording of a presentation by Charlie Munger, Warren Buffett’s business partner.

The original recording is over an hour, but this week, an individual grabbed important takeaways and created a shorter 15-minute video that is worth the watch/listen.

Other Ag Articles

Joyn Bio CEO Interview (very good!) - Culture Biosciences