Upstream Ag Insights - December 11th 2022
Essential news and analysis for agribusiness leaders
Welcome to the 148th Edition of Upstream Ag Insights!
The December 18th edition (next Sunday) will be the final edition of Upstream for 2022.
The first edition of 2023 is scheduled to come out Sunday, January 15th (Note: If there is any major events or topics the first week of January I will send out the first edition January 8th).
Index for the week:
CNH Industrial Tech Day 2022
CropLife Magazine Unveils 2022 Ranking of Top 100 U.S. Ag Retailers
FMC Corporation and Micropep Technologies Announce Strategic Collaboration to Co-develop Bioherbicide Solutions
Corteva Investor Presentation on Stoller Acquisition
AgTech Fundings for the Week
Sound Agriculture Raises $75 million Series D
Amvac Interview: Acquisitions are a Key Part of Our Growth Strategy
ChatGPT and Agriculture
Finding Asymmetric Upside in Ag Retail and Agribusiness
Expertise and the 10% Rule of Professional Development
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1. CNHI Tech Day 2022 - CNH Industrial
This week CNHI had their 2022 “Tech Day” in Arizona. The video linked is approx. 2 hours. They did have outdoor equipment and technology demonstrations as well, but I could not find any recordings of it.
This might be a me thing, but what stood out to me the most was the executives tones, chosen verbiage and general vagueness when it came to the opportunities for CNHI more than getting excited about the opportunities themselves. I’ll elaborate more below.
The numbers that caught attention surrounding their technology business were these ones:
When this all rolls up within our Ag revenues for 2022, we estimate that Precision Technology will account for over $900 million. And we expect that number to continue to grow at about 10% to 15% annually, and in the near term we expect to deliver in excess of $1 billion in 2023.
$1 billion in 2023 is impressive. While CNH was hesitant to state margins, they did allude to it being “in the 30% range” in their video, which is a bump up from their traditional margin levels (<14% EBIT margins).
There was a statement from Derek Neilson, President of the Agriculture Business Unit on margins:
Honestly our attention is focused on unlocking value for our customers and then the margin for sure will come in after
This was the constant point of emphasis…”unlocking value for customers”. But it was vague around how this would actually occur. The executive team would emphasize open architecture and connected platforms, but they did not bring to life exactly how this value creation would come about for farmers. Is it through agronomic insights and decision support? If so, what are examples of products coming to market? How would they optimize equipment efficiency and turn that into new revenue or margin opportunities? Is it through delivering novel see and spray capabilities through their partnership with Augmenta? I could go on. Nothing was explicitly stated in any tangible way during the two hour event (Note: In their defense, this may have been gone over at the outdoor demo event afterwards). It’s possible to infer and assume, but there wasn’t a clear, explicit picture painted.
The tone from the CNHI executives was even what came across to me as dismissive of some of the questions, especially those when it came to the market opportunity and the recurring revenue nature of technology.