Upstream Ag Insights - January 29th 2023
Essential news and analysis for agribusiness leaders
Welcome to the 153rd Edition of Upstream Ag Insights!
Index for the week:
2022 Global Food & Agribusiness Annual M&A Review
Greeneye Technology Precision Spraying System and FBN® Announce Strategic Collaboration: FBN to Invest in Greeneye and Partner as a Sales Channel
NuWay-K&H Cooperative Invests in Greeneye Technology System to Offer Precision Spraying for Members
Global Farmer Insights 2022 from McKinsey
Farmer Panel: Climate-Smart Program Rewards Must Outweigh Risks To Earn Grower Participation
A Conversation with Maarten Elferin, CEO of Vosbor
Netflix and 10x Talent
Other Ag Articles
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1. 2022 Global Food & Agribusiness Annual M&A Review - Verdant Partners
Once again, the Verdant Partners have curated an excellent summary of the 2022 M&A activity across the entire agribusiness landscape. From agtech, to seed, to biologicals and global activity in agriculture there is insight no matter your area of interest.
As a part of the Verdant advisory group, I contributed commentary to the publication surrounding ag retail M&A from Canada to Brazil.
2. Greeneye Technology Precision Spraying System and FBN® Announce Strategic Collaboration: FBN to Invest in Greeneye and Partner as a Sales Channel - Globe Newswire
Greeneye Technology, the pioneer of AI precision ag spraying technology, and Farmers Business Network (FBN®), the global AgTech platform and farmer-to-farmer network, today announced they have entered into a long-term strategic collaboration agreement to help farmers reduce weed control costs and drive profitability by combining Greeneye’s retrofit precision spraying systems and FBN’s Precision Spraying Packs–customized crop protection and nutrition plans which FBN is developing for use specifically with the Greeneye technology–and financing offerings. The program will launch first in the U.S for the 2024 growing season.
News of FBN collaborating and identifying a new product offering to take to the market is not surprising. They have shown since their founding in 2014 that they are not going to stick to norms when it comes to building their business. Couple this with the fact that FBN announced a strategic collaboration with Solinftec and their smart spraying autonomous robot last summer and it makes a lot of sense for FBN to pursue a novel service and product selling approach.
Greeneye is a smart spraying after-market product for sprayers. For more on Greeneye, I highlighted them in July of 2022.
Two years ago was the first time I meaningfully touched on smart spraying. In See and Spray Technology Implications for Agribusiness I suggested all input agribusinesses should be identifying novel ways to differentiate for a future market where smart spraying is the default. Through that lens, this is a great initiative from FBN.
How FBN is positioned as an integrated, direct to farmer company (for a breakdown on this see this February 2022 edition of Upstream) makes this offering interesting too. In the implications to agribusiness article I highlight the potential for previously too expensive of herbicide products on a field wide application to be used to manage resistance or tough to kill weeds in a smart spraying setting. For a traditional herbicide manufacturer this can still be tough to justify in the initial stages of smart sprayer adoption as they are far removed from from the data and practical use cases. But with FBN being integrated from the farm gate to the active ingredient sourcing, it theoretically gives them the insight and agility to be able to identify active ingredients that are a fit to bring out. This is a potential win for FBN.
In one of the most popular Upstream articles of 2022, John Deere to Crop Input Companies: “Your Margin is My Opportunity”, I discussed margins and “choke points”:
In 2002 Joel Spolsky identified and began highlighting the pattern of companies commoditizing their complement. Companies would seek to own a “choke point” in the value chain where they were a necessity and they could commoditize the layers above or below them in the value chain.
Note: For brevity I will not re-write or copy and paste the entire “Your Margin is My Opportunity” article, but to fully understand the concept give it a read.
In the article I illustrated the fact that smart spraying technology commoditizes the herbicide, leading to the point of differentiation not occurring at the herbicide, but at the equipment application layer which leads to more value accruing to the equipment company with the differentiated smart spraying hardware/software.
The only way under these circumstances for the herbicide company, or FBN, to dodge this risk to volumes and margins in the herbicide segment is to re-bundle their offering.
There is a famous line from Jim Barksdale, co-founder of Netscape, who on his way out from an investor meeting one time said that “there’s only two ways to make money – bundling and unbundling”.
I hit on this subject in The Bundling and Unbundling in Ag Retail. FBN has taken their integrated offering and identified a novel bundle that starts with the FBN Acre Packs (for clarity, this is FBN’s branded way to say “crop plan”). What’s notable within their Greeneye offering is that there is a required “pack” purchasing for two years according to their website (along with a requirement to run trials):
two residual herbicides (one pre-plant, one post-plant)
one non selective herbicide (eg: glyphosate)
either an insecticide or fungicide
The bundling makes sense for FBN’s business, but the farmer then limits their optionality to purchase products elsewhere for the following two seasons. How this will be perceived by farmers will be interesting. FBN has been adamant about not using rebates in their business and being transparent about pricing. While this isn’t a rebate, and it is transparent (they up front state the requirements), it comes from the same realm of business tactics: