Upstream Ag Insights - September 9th 2024

Essential news and analysis for agribusiness leaders.

September 09, 2024 • Read Time: 24 minutes

Welcome to the forefront of agricultural innovation and strategy with the 232nd edition of Upstream Ag Insights, where over 17,800 agribusiness leaders start their week discovering the latest 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. New Report! 2nd Quarter 2024 Agribusiness Earnings Results Report: Themes, Highlights, Analysis and Financial Data

  2. Exacto Announces Growth Investment from S2G Ventures and Skyline Global Partners

  3. Switch Bioworks Raises $17M in Series Seed Financing to Bring New Biological Fertilizer Technology to the Field

    1. The Insight is the Edge: Switch Bioworks

  4. Insurance in Agriculture: A Primer for Unpacking the Bundle

  5. Ceres Imaging Rebrands As Ceres AI, Reaffirms Focus on Ag Financial Services and Agribusinesses

  6. Gamifying Software in Agriculture: Unlocking Engagement Through Dopamine and Competition

  7. ‘The Rise of AI in Agriculture: A data heist threatening farmers?’

  8. Australian Agtech Cropify Raises A$2M in Seed Round for Grain Grading System

  9. FMC Ventures’ Mark Brooks on the next 10 years in agtech investment: ‘One of the risks is that we repeat the same mistakes’

    1. Start-ups crowd funding and closing doors

  10. Founder Mode

  11. Other Interesting Ag Articles (5 this week)

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1. New Exclusive Report for Upstream Ag Professional members!

2nd Quarter 2024 Agribusiness Earnings Results: Themes, Highlights, Analysis and Financial Data

Over the past month, I’ve meticulously compiled and analyzed the financial results of leading Crop Protection, Ag Equipment and Fertilizer manufacturers building a custom report for agribusiness professionals.

This report doesn’t just highlight numbers— it captures the overarching trends, key quotes, visual insights, and agribusiness results summaries that give you a robust understanding of the industry.

The report contains a distillation of dozens of hours of earnings calls, thousands of pages of financial reports, and market analysis from Q2 2024 delivering tangible insights, empowering you to save time and stay ahead of market trends.

With detailed executive quotes, insightful comparison charts, and full access to 2-years of financial data from all companies covered, you'll have everything you need to be the best informed professional in the room.

Purchasing the Report Includes Three Components

  1. 2nd Quarter 2024 Agribusiness Earnings Results Report

    1. Including macro themes, important quotes from agribusiness executives from crop protection, fertilizer and equipment manufacturers and key images about the current industry environment.

    2. The report includes more than 100 pages of agribusiness insights!

  2. Three Excel Workbooks that have Agribusiness Financial Results Data from Q4 2022 to Q2 2024

    1. Crop Protection and Seed Manufacturers Financial Data (Bayer, Corteva, Syngenta, BASF, FMC, UPL, Nufarm, Bioceres, KWS)

    2. Fertilizer Manufacturer Financial Data (Yara, CF Industries, Mosaic, Nutrien, ICL, OCP)

    3. Equipment Manufacturer Financial Data (John Deere, CNH Industrial, AGCO, Lindsay Corp., Valmont Industries, Titan Machinery)

  3. A complimentary 3-month Upstream Ag Professional membership that gets you full-access to can’t miss industry insights every Sunday.

Priced at just $299 USD, this report is more than just data—it’s your guide to navigating the agribusiness landscape.

(Images and examples can be found at the link within the blue button)

Exacto®, a full-service innovation partner in the agricultural, turf, and ornamental horticulture markets, announced today a growth investment from S2G Ventures and Skyline Global Partners. This strategic investment seeks to strengthen Exacto's leadership position and accelerate the introduction of new solutions, including in soil and water management.

This is really interesting investment news.

Who is Exacto?

Exacto, Inc. is one of the most influential crop input companies that many haven’t heard of.

They are a leader in formulation technology, enabling better performance of crop protection products that has been around for decades.

Exacto produces private label crop protection products for several markets, such as Agriculture, Turf and Ornamental, and Industrial Vegetation Management, including having a customer base of some of the largest agribusinesses and ag retailers/distributors in North America, plus touching other markets, like LatAm and Australia.

Exacto is not a basic generic formulator though— they have an array of IP surrounding adjuvant and formulation technology along with novel molecules for water use efficiency and soil performance. I view them as an integrator of crop protection and formulation technology to serve their customer base— input manufacturers, retailers and distributors that want private label products.

Investment

It’s not clear the dollar figure injected into Exacto, but the press release articulates that Exacto is profitable and that this is an offensive investment, suggesting it is significant enough to further catalyze the business:

The infusion of capital and experience from S2G and Skyline will help enable Exacto to scale its operations, with the goal of bringing new solutions to market faster and expanding its footprint in key growth areas while maintaining profitability.

The release goes on to state that the investment will enable capacity expansion, IP investments, and enhancing commercial and customer service teams.

IP investments is notable.

As mentioned, Exacto has IP, and I am certain some capital will go to internal development, such as positioning themselves for future customer needs (precision application formulation, enhancing biostimulant formulation etc). Some might also be external focused aka acquisition.

For the full breakdown on how Exacto is positioned, the industry segments Exacto can capitalize on, what it means to be a horizontal biological company, and why S2G Ventures makes sense as an investment partner, become an Upstream Ag Professional member today:

Switch Bioworks, a biotechnology company developing low-cost and sustainable fertilizers, announced today it raised $17 million in Series Seed financing led by Change Forces Capital and joined by Grantham Foundation, Astanor Ventures, Acre Venture Partners, Anthos Capital, Thia Ventures, Emerson Collective, as well as the farmer-led Ag Ventures Alliance and others.

In June 2024, I wrote The Insight is the Edge: Switch Bioworks, diving into Switch Bioworks*.

For a deep dive into what Switch Bioworks has done to develop a modular platform of “switches” that aim to improve the performance of precision-engineered biological products, including nitrogen fixing microbes, check out the full article from July:

The Insight is the Edge: Switch Bioworks - Upstream Ag Professional

This article is free for all Upstream Ag Insights subscribers at the link immediately above.

Trends in Microbiology published a journal article in 2023 titled Scripting a new dialogue between diazotrophs and crops that highlighted two important considerations for N fixating microbes:

Two insightful considerations comes at the intersection of these factors:

These are not of minor concern. They have significant implications to the viability of nitrogen fixing microbes and their in-field performance.

These are the foundational insights Switch Bioworks is built upon.

Microbes expending all their energy on making fertilizer will not survive in the competitive soil microbiome.

Yet, there is a need for microbes delivered to the soil to effectively establish themselves in the competitive soil environment, while also needing to be efficient fixers and releasers of nitrogen.

Tim Schnabel and the Switch Bioworks team asked, “is there a way to navigate this trade off and not have to select a microbe that has “okay” fitness and “okay” nitrogen fixing capabilities?”

Their view is a resounding, yes.

*Disclosure: In August 2024, Upstream Ag Ventures Inc. became an investor in Switch Bioworks.

Insurance can compensate for financial losses after such events, thereby contributing to less volatile farm incomes and ensuring sufficient liquidity for the purchase of field inputs for the next growing season. An emerging form of agricultural insurance is weather index- or parametric insurance. This product determines the payout based on a structure similar to a derivative, using a form of weather-dependent measurement, such as soil moisture, as the underlying index.

For decades, the insurance industry managed to tiptoe around the ‘digital’ elephant in the room. Now, not just in consumer industries, but in the agriculture industry, insurance is evolving into an increasingly digital business.

One opportunity in the ag insurance space is around delivery and execution of insurance, including the usage of on-farm data and the ability to “unbundle” traditional insurance.

Insurance Today

Insurance is crucial for the success of the agriculture industry. The risks in farming are immense and without strong insurance infrastructure, we wouldn’t have the thriving industry that we have today. Farmdoc Daily recently shared Crop Insurance as a Payment Program, which asked the following:

Maybe, it is time for a strategic reassessment of crop insurance and its role in the farm safety net before SCO subsidies are increased.

Structure

The insurance value chain is complex from the upstream reinsurers all the way down to the farmer. I was sent a useful image by my friend Damon Johnson to illustrate how it’s laid out:

Source: Damon Johnson, parametrics.ag

For the full Primer breaking down the different types of insurance, their opportunities and shortcomings, a framework for where they apply, why Index insurance has more potential today, and what bundling with crop inputs might look like, become an Upstream Ag Professional member today:

Ceres Imaging, the data and analytics provider that helps growers, lenders and insurers reduce their farming risk and improve yields, has announced its rebranding to Ceres AI.

Alongside the rebranding, Ceres AI also revealed a Series D capital raise led by Remus Capital, which specializes in applying AI in large verticals. The new funding will support expansion both domestically and internationally, as Ceres AI hones its focus on agribusinesses and financial services on its path toward profitability.

According to Crunchbase, the raise amounted to over $25 million, lead by Remus Capital, which brings their total raised to $83 million.

Ceres AI states that they:

Deliver precision agriculture solutions that help farming enterprises build more profitable and more sustainable operations. With more than 11 billion individual plant-level measurements captured over ten years and more than 40 crop types—we help you model yield impacts and investment ROI in ways other companies can't.

Ceres has historically had similar precision offerings to entities like Intelinair, Sentera, or Taranis.

Ceres has been looking to differentiate by focusing their solutions and efforts on larger enterprises such as land management companies that are backed by private equity or pension funds.

These land management groups have desire for a consolidated view of things like crop health, and practices used across their asset base.

Companies like Ceres AI and their competitors likely have $5+ million in revenue, however, my suspicion is that these revenues have unprofitable unit economics— the cost to deliver the service along with maintain and grow the business exceeds what they are currently generating in revenue. Combine this situation with the fact that Ceres AI knows that competing on precision ag solutions alone is a challenging space to breakout from the aforementioned competitors to deliver investor returns.

This leads to where they are heading evolving to.

Remus Capital CEO Krishna Gupta is now Chairman of Ceres AI and stated the following:

Verticalized AI opportunities extend beyond LLMs alone, as they unlock the next layers of massive value in a given vertical….Given the distribution challenges intrinsic to the agriculture industry, incumbent startups like Ceres AI are poised to capture most of the value. We will be very involved in incorporating the latest AI advances to benefit Ceres’ customers and scale the company’s business in insurance, lending and agribusiness companies.

Verticalized efforts seek to expand the total addressable market into areas that augment the software, and expand their revenue potential — payments, supply chain management, embedded finance and insurance etc. Ceres AI is seeking to expand their services into the last two of those areas.

Ceres AI would partner with financial lenders and insurance providers to offer new services to their customers and increase market access for these insurance and finance entities.

The vertical AI commentary likely comes in because Ceres will aim to leverage the data to augment the demand for their financial or insurance products from their customer base, and offer unique data sets for the underwriting process of financial institutions.

For example, to generate demand for these services on the agribusiness side, Ceres AI might leverage field level data of farm practices to connect with their partner financial institution that offers a discounted APR to the farm for specific practices.

On the financial institution side, access to better data about what’s going on on the farm can give them improved underwriting ability on the loan and using Ceres could theoretically provide them with access to a new set of customers (market access). Additionally, in the Insurance Primer, I talked about index insurance, Ceres AI is likely looking to offer their own index service via their platform.

My question becomes, is Ceres AI positioned to execute effectively on this?

For the full assessment of how the consideration of control points helps us understand the potential, what companies have tried this before, why it was challenging for them, what needs to be figured out and where efforts could go in the imagery and analytics space, become an Upstream Ag Professional member today:

In the realm of agriculture, where utility and value reign supreme, the idea of integrating the addictive qualities of gamification—common in consumer technology—into agricultural software is promising to increase engagement. While social media platforms and fitness technologies like Peloton have mastered the art of keeping users hooked through dopamine-driven engagement, most of agriculture software has yet to fully tap into this potential.

The Intersection of Utility and Dopamine

Agriculture, unlike social media, is grounded in tangible utility and value creation. Farmers and agronomists rely on tools that enhance productivity, improve decision-making, and ultimately increase yields and profitability. However, the relative lack of gamification in agricultural software presents an opportunity to harness the same psychological triggers that keep users returning to their favorite apps and devices.

Agriculture can benefit from these dopeamine driven elements. By incorporating gamified elements into agricultural software, companies can create platforms that are not only useful but also engaging, encouraging consistent use and participation.

For the full article, check out the link above breaking down what gamification is, the benefits, examples for that ag retailers, farmers and equipment dealerships can benefit from and learnings from Peloton.

This article is probably unhealthy concern at best and fear mongering at worst. With that said, I recognize that it is important to consider poor intent and second order implications in the realm of data and the impact on farmers.

I highlighted further opinions in Agriculture’s Misunderstanding of Data in July.

One of the suggestions from the Future Farming article is this:

Farmers could manage their own data cooperatives, where they share insights from their collective crop data and only grant third parties access for a fee. This is the only way for farmers to retain their autonomy and knowledge, and even gain an edge over their suppliers, buyers, and governments. It’s essential to prevent being swallowed up by the technological giants of the world.

I do not know the exact answer to his question (he explores in the post, too), the first part is likely because it isn’t easy, the second might be answered thanks to the conundrum that data needs scale, yet also needs regionality (in farming)— try aggregating enough farmers in a given area, with high quality data capturing abilities to actually make a difference in a farmers decision making and that likely gives us some indication of why.

It’s also important to state— variations of paying farmers for their data have been attempted with little success to date, including from Farmobile and the DataStore Exchange.

Farmobile, who’s IP currently lies within Ag Growth International, had an farm management software component and a passive uplink connection within the farm equipment to obtain telematics data passively.

They launched their DataStore Exchange relatively early on in their business and even patented the approach (Ag Growth International now owning the IP):

Farmobile’s DataStore is the world’s first online marketplace for agricultural data, created to fairly compensate farmers for their digital assets. The exchange facilitates transactions between a data buyer and interested farmer-sellers. Those who choose to participate can sell single-use licensed copies of their certified agronomic and machine data for use by the licensing party only after approving the buyer and all transaction details.

It didn’t take off. I don’t think it was a bad idea, either. But from press releases I read, the per acre guarantees were ~$2 for farmers data illustrating that most data even if cleaned, structured and high veracity is still only so valuable to most 3rd parties.

For more on what has been tried before, challenges of getting farmers to see the value of data including the The Fundamental Paradox of Information, aspects that make data valuable and why what the article suggests might be challenging, become an Upstream Ag Professional member:

Australian agtech Cropify, which is behind AI- and machine learning-powered technology to grade grains in the supply chain, has attracted A$2 million (US$1.3 million) to its coffers in a seed round, according to reports. Led by Australian and Singaporean VCs Mandalay Venture Partners and Hatcher+.

Cropify’s technology uses AI and machine learning to precisely test pulse and grain commodities with the aim of replacing the subjective human-based grading of these crops at grain delivery or at port.

The compelling part about Cropify, along with fellow Australian entity ZoomAgri and Canadian group Groundtruth Ag, is that they are operating in an area with a major challenge: consistency.

Grading grains in many instances, is highly subjective— relying on trained personnel to assess the quality visually, looking for things like imperfections or disease to determine the grade and, therefore the value of the grain the farmer delivers or to meet the specs desired by the end purchaser.

Humans are inherently inconsistent day to day, let alone person to person. This isn’t great for farmers and can be a financial hit for grain companies shipping too. For example, a railcar might be graded one way at the origin (the grain terminal or elevator) and then graded differently at port leading to downgrades and unforeseen costs for the grain company.

This grading problem is a good fit for computer vision to bring consistency to an inherently flawed process.

Cropify’s grain classification system focuses on a trio of objective categories, comprising defective, contaminant and foreign material, swapping out the conventional grading method with AI and machine learning.

One of the biggest challenges with these technologies is where they engage in the value chain— targeting the farmer is of little value based on who needs to have trust instilled in that grain grade (grain originators, end buyers) which makes the best target to be those entities (eg: Bunge, ADM, Viterra etc) or they need to establish an ecosystem at the combine/harvester level all the way to the originator to more effectively get grades from the combine to the grain buyer.

Over the last 10, 12 years or so, we have seen somewhere around $30 billion or $40 billion of venture capital money go into agtech, and most of that has been pretty much incinerated, with very few exits to speak of. The exits that have occurred are kind of weak compared to pharma or other kinds of categories.

This is a good interview with FMC Venture’s Mark Brooks.

It also reinforces that the investment environment is continually challenging.

I read the prospectus for Greenfield Robotics, a small robot weeding company and noticed the following:

As of August 31, 2024 the Issuer had an aggregate of $77,090 in cash and cash equivalents, leaving the Issuer with approximately 2 weeks of runway.

If you are interested in their business, they are currently crowdfunding.

Plus, carbon marketplace, Nori, which raised almost $20 million since 2017 including over $6 million last year, shut its doors last week:

Nori has officially closed its doors. In a heartfelt email, CEO Matt Trudeau acknowledged Nori’s vision and impact, but the challenges of a stagnant Voluntary Carbon Market and tough funding environment proved too great.

Nori has previously announced partnerships with the likes of Bayer Crop Science.

Non Ag Article

Founder Mode - Paul Graham

Y Combinator founder, Paul Graham, published his most recent article called Founder Mode. I find all of Paul Graham’s posts worth reading, though the post did not go as far as to explicitly define what it is.

Founder Mode received a lot of traction on X, however, what I found more compelling was Chamath Palihapitiya’s post (emphasis mine):

Founder Mode?

Manager Mode?

In my experience, after 25 years in Silicon Valley, there is first principles management and stupid management and I've seen founders and managers, alike, exhibit both. When your company isn't working, the only solution is to take the time, as laborious as it sounds, to break your business down to its core essentials and rebuild it from the ground up with zero nostalgia or loyalty to people or technology.

There is a certain ruthlessness that is required and it isn't borne in a title but in a psychological makeup. Some have it and some don't. And if done with high fidelity, it tends to work.

Everything else, in my experience, is praying at an altar of a false god that conflates correlation, causation, luck and timing.

Other Interesting Ag Articles