Upstream Ag Insights - September 25th 2023

Essentials news and analysis for agribusiness professionals

September 25, 2023 • Read Time: 16 minutes

Welcome to the 10th Edition of Upstream Ag Professional!

  1. The Instacart for Agriculture and What AgTech Can Learn from the Instacart IPO

  2. Follow up on Indigo Ag: CEO Comments and Brazil

  3. Here’s What’s Driving Growth in the Micronutrients Market

  4. SwarmFarm Robotics Launches “Dock and Refill” Technology

  5. Food Sector Making “More Promises Than Progress” on Regenerative Agriculture: The Need for Unbundling the Term.

  6. The Story of The Climate Corporation

  7. Sollio Agriculture Inaugurates New Fertilizer Coating Plant

  8. Strategy and Integrative ThinkingSubscribe now

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1. The Instacart of Agriculture - Upstream Ag Professional

In the mainstream finance world, there has been a sentiment that the IPO window is open.

This has led to many traditional technology companies either releasing an S-1 or being rumored to release one.

One of these players is InstaCart.

Instacart is a delivery company that operates a grocery delivery and pick-up service in the United States and Canada. The company offers its services via a website and mobile app, allowing customers to order groceries from participating retailers, with the shopping being done by a personal shopper.

Recently, I watched a presentation from Steve Valencsin, CEO of GROWERS, talk about the similarities between their GROWERS App business and Instacart.

He’s right, there are similarities. If the Instacart S-1 is any indication, this also points to the challenged success of GROWERS (an ICL-owned entity) efforts that compound on the agricultural nuance that already challenges any marketplace-esque business.

For the complete Upstream Ag Professional member-only Instacart of Agriculture article highlighting what we can learn from Instacart about aggregator ag marketplaces in agriculture and what that means for the prospects of GROWERS, become a member today.

Please note this article out of Brazil was translated from Portuguese to English, so some vocabulary might not be exactly as quoted.

There has been a lot of buzz and talk about Indigo over the last few weeks, stemming from an Israeli article on the valuation drop.

I highlighted the challenges with Indigo’s business in Indigo Ag: Analyzing What Went into their $3.5 billion Valuation and What Went Wrong.

Last week, Indigo officially announced their $250 million raise and shared some numbers that gave insight into their carbon revenue and Market+ footprint, which I broke down into revenue and acres for them.

Now, Indigo CEO Ron Hovsepian was recently interviewed in an AgFeed article out of Brazil, where he shared a few interesting comments that included the following:

  1. New Raise Will Enable the “Conditions” to Reach Breakeven by 2024

  2. There will be a focus on biologicals in Brazil, with a manufacturing expansion being looked into there.

  3. “Indigo has 14 biological ingredients, while most start-ups have 1 or 2.”

  4. Indigo Carbon will expand globally.

In the Upstream Ag Professional member-only edition, I break each of these down in depth.

Become a member today.

There are two things to highlight about this article:

  • The stories we tell ourselves about the market.

  • Incentive, differentiation, and crop protection vs. crop health and its influence on micronutrient adoption.

The Stories We Tell Ourselves

Morgan Housel is one of my favorite writers, and he often talks about the stories we tell ourselves to make sense of the world. In business, often, these mean the stories we tell ourselves about the market.

The stories we tell ourselves about results is one that often stands out to me— often, you can’t contrast your results with competitors. This Crop Life article gives a subtle glimpse into the performance of different companies on a relative basis.

Take the comments from Tom Fry at Mosaic:

Mosaic experienced strong demand and increase over 2022 for Aspire and MicroEssentials. Spring exceeded expectations.

When it came to why, he stated the following:

Higher commodity prices drove a bullish mindset by growers looking to provide the balanced crop nutrition their crops need to optimize yield and profitability.

Other companies in the article, like AgroLiquid, stated similar to Mosaic.

Contrast this with the result from the Anderson’s:

This year’s crop season, we expected micronutrient volume to be slightly higher year-over-year,” says Chuck Anderson, VP and GM, Specialty Liquids, The Andersons. “However, the supply chain had more carry-over inventory going into the season than expected. Additionally, demand was soft, and farmers were slow to engage throughout the season.

Same market dynamics to navigate. Different results and views of how the market impacted the outcome.

Some companies view the market as happening to them. Others view the market as something in their control. The latter tends to win out in the long term.

If I am part of the Anderson’s organization and I read that article, I am questioning whether my team is engaging effectively with their customer base regarding crop nutrients. Specifically, with the last comment, “farmers were slow to engage throughout the season,”— waiting for the customer to engage is the surest sign that a company doesn’t have the view that outcomes are within their control.

To sell micronutrients, having the right mindset is important— that requires having the view that you can influence the market and not waiting for demand to magically appear.

For the rest of the breakdown on Incentives, differentiation, and crop protection vs. crop health and its influence on micronutrient adoption, along with a brand new chart for thinking about margin dynamics in the world of inputs, become an Upstream Ag Professional member:

Today, SwarmFarm Robotics launched its new “dock and refill” capability. This new technology enables robots called SwarmBots to autonomously refill and refuel themselves.

Many questions around autonomy have come around the labor needs for filling and refueling.

When I wrote Solinftec and the Solix Autonomous Platform: Reimagining Farming from First Principles, the most common question that came into my inbox was: How do they refill?

Solinftec is working on it, and SwarmFarm has now officially launched their capability.

Filling is one of the most time-constraining portions of spraying.

Consider current spray productivity with large ground spray rigs and what the most significant impact was on productivity to the point

From spray expert Tom Wolf at Sprayers 101:

For the base condition, the sprayer spent 15% of its driving time turning, and 37% of its on-field time stationary (i.e. filling).  For every hour spent on the field, less than half the time (48%) was spent spraying. This resulted in an average productivity of 82 acres/h.

Increasing the spray speed to 18 mph increased average productivity to 93 acres/h, but it also increased the proportion of time spent turning and loading, resulting in just 40% of the field time spent spraying.

Decreasing the loading time from 20 to 10 minutes reduced the proportion of field time spent stationary to 23%, covering 100 acres/h at 14 mph. Surprisingly, this was the productivity-winner, resuling in 62% of on-field time spraying.

Efficient filling is the most critical aspect to sprayer productivity. And while some might be saying, “if it’s autonomous, it doesn’t matter anyway,” it does. Given that everything else is autonomous (turning, driving etc.) and optimized, the biggest constraint in the system's efficiency is now even more predominantly the fill time.

The technology has three components:

A docking arm, a payload pod, and traffic control. When the SwarmBot senses low fuel or product, it returns to a fixed docking station to refill. Multiple machines can use the same docking station.

Unfortunately, there was no video to illustrate the capability further.

This aspect of autonomy stands out to farmers— in-field autonomy has significant benefits but still has timely labor requirements when it comes to tasks like re-fuelling, re-fuelling or moving equipment. This pulls back another apprehension about adopting an autonomous unit.

What this signals at a macro level for autonomy in agriculture is that the tedious actions and tasks surrounding the edges of operating equipment in the field are being worked on. I frequently think about the continued need for labor to move augers, move trucks, fill water trucks, and more. This announcement signals that certain actions and tasks outside the field are being successfully worked on.

I have touched on a framework for thinking through this in the May 7th 2023 Edition of Upstream Ag Insights.

What stood out at the end of the release was the following:

More than 2 million acres have been covered since the company began in 2015, and the current model is in beta testing in Australia. Orders will be open worldwide in spring 2024, with pricing to be determined.

Two million acres is an impressive total number of acres to have covered.

The stated intentions from major food companies sound great— encouraging regenerative agriculture, minimizing emissions, and supporting farmers along the way.

However, they are unlikely to make a difference. It’s primarily corporate rhetoric filled with false promises.

The following are examples of “regenerative ag” commitments:

  • PepsiCo set a target to reduce 4 million tons of greenhouse gas emissions through regenerative agriculture programs.

  • General Mills wants to implement regenerative agriculture practices on 1 million acres before 2030.

  • Nestlé has committed to sourcing 20% of its critical ingredients through regenerative agriculture by 2025 and 50% before 2030.

If I was betting, most of these will fail.

I touched on this in the 1st Edition of Upstream Ag Professional. Most of these food and CPG companies are too disconnected from the farmer, and they attempt to do most of it themselves, along with picking a complex concept to work with.

Take these poor numbers from the report, for example:

  • 64% of the 50 agri-food companies that publicly report on regenerative agriculture as an opportunity do not put in place any formal quantitative company-wide targets to achieve those ambitions

  • Only 8% of companies that publicly report on regenerative agriculture as an opportunity have financial commitments in place to support farmers in their supply chain to incentivize the uptake of regenerative agriculture

Instead of acknowledging the need for collaboration in the ag value chain or doing the diligence on what regenerative ag entails before the commitments, they committed and have been trying to figure it out since. Companies blame a “lack of definition” when the reality was it was their desire for a sexy term like regenerative ag.

For a deeper dive on what needs to happen regarding regenerative ag practices, and what companies are progressing effectively to deliver in this space, become an Upstream Ag Professional Member today.

The story of The Climate Corporation spans decades, multiple name changes, acquisitions, controversy, product pivots and more. Hear about the company that David Friedberg founded and sold to Monsanto for $930 million, plus the history and future of digital agriculture.

Covering the history of an organization from the outside, even one with a shorter relative life as The Climate Corporation can be daunting and incredibly challenging. However, Tim and Tyler Nuss at The Modern Acre did a great job highlighting the critical milestones and hurdles surrounding the divisive entity.

If you are interested in The Climate Corporation and learning more about the founder David Friedberg (one of the most influential individuals in farming whom many aren’t aware of), the history of digital agriculture, and much more, I encourage everyone to listen.

Sollio Agriculture, the Agri-business Division of Sollio Cooperative Group, inaugurated CRF Agritech, a new controlled-release fertilizer production plant in St. Thomas, Ontario. The project was launched in 2021, after Sollio Agriculture entered a joint venture with several of its cooperatives in Québec, its Agromart retail partners in Ontario and the Maritimes, and Pursell, a leading fertilizer technology manufacturer based in Alabama.

At present, CRF Agritech is the sole plant in Canada able to manufacture controlled-release custom fertilizer formulations using Pursell’s unique coating technology.

This is a notable announcement from Sollio and Purcell.

Instead of sourcing controlled-release products, the largest co-operative in Canada is focusing on being able to manufacture it themselves.

Purcell offers multiple products to be incorporated into fertilizers, including: Coatings that can be adjusted based on desired release longevity from 30-360 days and specific soil temperatures, along with the options of additives such as biostimulants.

Since reading about fertilizer impregnation in 2011 and working on trials after that, I have deeply believed that bulk fertilizer should be considered a critical application medium for managing the crop. This might mean a stabilizer, solubilizer, micronutrient, biostimulant, or fungicide. It is a relatively untapped tool to achieve better crop yields and quality outcomes that I believe will grow in the future.

Not only does this mean opportunity in similar routes like Sollio/Pucell, but the further increase in coating capabilities in fertilizer blending facilities.

Non-Ag Article

The ability to face the tension of opposing ideas constructively and, instead of choosing one at the expense of the other, generate a creative resolution of the tension in the form of a new idea that contains elements of the opposing ideas but is superior to each.

Roger Martin has been highly influential in my thinking. I quote him often within Upstream, and in this article, I believe he brings practical frameworks to approach strategy and generate better possible outcomes in a business setting.

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