Welcome to the forefront of agricultural innovation with the 216th edition of Upstream Ag Insights, where over 16,100 forward-thinking professionals start their week discovering the latest industry news and learning about groundbreaking innovations and business strategies shaping the future of agriculture.
With curation and analysis from Shane Thomas, each edition delivers unparalleled insights and expert analysis meticulously crafted for the practical professional, empowering you to be among the best informed in the industry.
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Index:
Q1 2024 Agribusiness Results, Themes, Highlights and Analysis
Is “agtech” a different industry than “agriculture?” and do you really need a farmer on your leadership team?
Lindsay Irrigation and their FieldNET Service
Aimpoint Research and CamoAg Partner to Bring Farmer of the Future to Digital Intelligence Platform
Investing in new technology featuring AI to detect herbicide-resistant weeds
David Friedberg’s Newest Breakthrough: Ohalo Shares News on Plant Breeding Approach
FMC Corporation and Optibrium Announce collaboration
Case IH ‘gatecrashes’ agricultural drone market with two models
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1. Q1 2024 Agribusiness Results, Themes, Highlights and Analysis - Upstream Ag Professional
Over the last week I consumed more than 40 analyst call transcripts and 30 quarterly agribusiness earnings results, synthesizing the themes, trends and key takeaways across the crop protection, seed, fertilizer, retail, equipment manufacturers (irrigation, tractors) and tech providers segments of agriculture.
This weekend I share six trends from Q1 2024, another six notable quotes, images and takeaways from the transcripts and highlights and analysis from more than twenty prominent agribusiness. The full overview can be found in the above link.
Key Agribusiness Themes from Q1 2024
a. Macro Farm Indicators in Decline
As has been discussed and forecast for several months by ag companies, there is a projection of continued decline in net farm income levels plus lower crop prices. This is topped off with some variation in weather impacts on grower sentiment, particularly in markets such as North America and Brazil.
The macro economic conditions have been contributing to lower farmer spending, increased uncertainty leading to decreased revenues and a more challenging portion of the cycle for many companies, from equipment manufacturers to input manufacturers.
Of the major crop protection, fertilizer, retail, and equipment companies looked at, 100% had their revenues decline in a YoY comparison of Q1 2024 to Q1 2023.
b. Just-in-time Input Buying
Higher interest rates and less supply chain uncertainty has led to farmers and retailers transitioning to a “just-in-time” purchasing approach.
I began hearing about this for industry professionals in ~February and receiving questions about it from many throughout the industry, and it played out consistently across input providers.
On investor calls Nutrien stated they are tightening up their inventory levels across their trade area, consistent with Brazillian retailers like AgroGalaxy and Lavoro, and had major input manufacturers such as Bayer Crop Science, Syngenta Group Corteva and FMC all commenting on this playing out as a hinderance to their Q1 revenue.
The sentiment was that farmer demand for inputs was still in tact and expect those sales to trickle into Q2.
A quote from FMC CEO Mark Douglas on their May 7th analyst call:
In the U.S., we’re still selling products that are used very early in the season, even in May, which is unusual. What does that tell you? It tells you that the inventories of those products have been totally depleted. We’re selling for products that will be used right now.
c. Inventory in Brazil/LatAm still Normalizing + Friction Between Input Manufacturers and Distributor Relationships
Brazil was topical for almost every segment of agribusiness— input manufacturers, retailers, equipment manufacturer (irrigation and tractor). The “destocking” was still occurring, but most forecast for it to normalize through Q2 2024. Corteva executives stated the following on their analyst call:
Available data suggests channel inventories are trending down in Brazil. While they're still higher than historical average, inventory levels have come down versus 2023 year round. So, the channels making progress towards a more normalized inventory level and the demand at the farm gate in Brazil remains healthy and the expected increase in planted area supports additional Crop Protection applications.
The increased inventory levels combined with declining input prices contributed to challenges for businesses operating in the LatAm region. This lead to some friction between input providers and retailer/distributors in the region. From FMC CEO Mark Douglas:
We talked before about being very careful how we do business in the Southern Cone and in Brazil. We’ve been very – extremely diligent in protecting our balance sheet. We saw an issue with a distributor that we had in Argentina, and we decided to take material back from that distributor and that relationship. So that’s the type of activity that, yes, it slowed down the top line. But from a balance sheet perspective, it was absolutely the right thing to do.
An exclamation point on this friction came when AgroGalaxy, the 2nd largest retailer in LatAm, and Bayer Crop Science decided to end their relationship:
The companies cease operating in the Brazilian states of Paraná, São Paulo, and Minas Gerais. In these locations, AgroGalaxy operated with distribution brands Agro100, Grão de Ouro Agronegócios, and Grão de Ouro Comércio de Insumos.
According to the companies, the end of the partnership is due to "different business strategies”
d. Tractor Sales on Low End of Expectations
AGCO, CNH Industrial and John Deere all have started their years off lower than their forecasted sales declines (for all three, revenues 12 to 16% down YoY in agriculture segments), or on the bottom end of their guidance, illustrating the challenges in the tractor market.
e. Employee Restructuring
Continued efforts to evolve cost structures and organizational design have been topical for many of the largest crop protection companies:
Bayer CEO Bill Anderson highlighted the reduction of 1,500 jobs:
Our senior leadership circle is already noticeably smaller than it was a year ago. In the first quarter alone, we've reduced 1,500 roles. Approximately two thirds of these were management jobs.
Bayer has stated these reduction will continue.
BASF Board Chairman Martin Brudermuller alluded to the need to trim the internal structure:
I think what is important that my team, which is very much also, to a large extent, Markus' team, we have been working on trimming the structures of BASF. And I think this is the basis also for going forward that we really have been looking how we get closer to the customers, how we get more efficient, how do we get cost out, how we differentiate between the businesses.
The commentary sounds a lot like that of Bayer CEO Bill Anderson on the rationale behind their DSO implementation.
FMC has committed to an 8% reduction in head count as well.
John Deere had a minor reduction at a manufacturing facility, as well.
For the full Upstream Ag Professional Highlights analysis that includes comparisons of Bayer and Corteva’s seed business, ICLs view on AngloAmerican’s Polysulphate mine and the viability of the market, Percent of FMC business derived from newly launched products, Mosaic MicroEssentials economics and future growth, new Nutrien Ag Solutions proprietary product strategy, how John Deere is shifting their view on market share and penetration along with their digitally engaged acres become a Professional member today:
Also included in the member only link are highlights and analysis of more than twenty agribusinesses Q1 2024 results, including easy navigation to their analyst call transcripts and investor presentations:
Bayer Crop Science
BASF
Corteva
FMC
Syngenta
UPL
AMVAC
Lavoro
Nutrien
Mosaic
Yara
John Deere
CNH Industrial
AGCO
Lindsay
Valmont
Planet Labs
Ginkgo Bioworks
Benson Hill
2. ‘This is agtech, not tech-ag’. Is the industry still ignoring the needs of farmers? - AgTech Navigator
There are two things that stand out to me in this article:
Alluding to “agtech” like it is something different from the “agriculture” industry itself.
The suggestion that “if you don’t have a farmer in your company leadership, go get one.”
Starting on the first point I find it funny that “agtech” often gets referred to as some sort of red headed step child to the greater industry.
It’s not.
It’s important to loosely define agtech.
In this instance we will stick with hardware and software technology that includes products like farm management systems, precision application tools and autonomous machines.
John Deere is the biggest “agtech” provider in the world. Bayer Crop Science has more than a decade of experience driving “agtech.” Two of the largest “traditional” agriculture companies by agriculture derived revenues.
When people suggest agtech is a subset from the traditional industry what they really mean is that many organizations building technology have done a sub-optimal job of building products that are easy to use for farmers, while managing farmer risk and providing an economic return, while failing to create value at various points in the value chain.
The reality is that all of this is very hard. For start-ups, and incumbents.
For an analysis of why “agtech” and “agribusiness” are one and the same and a breakdown of how start-ups can best think about obtaining farmer perspectives, along with four examples from companies operating today and what they have done, become an Upstream Ag Professional member today:
3. Lindsay Upgrades FieldNET Advisor™ to Improve Irrigation Management
Lindsay Irrigation Executive Interview - Gabelli TV (video)
The Gabelli YouTube video interview with Randy Wood, Chief Executive Officer of Lindsay and their Chief Financial Officer, Brian Ketcham is a good resource for those wanting to understand more on what Lindsay is doing with their approach to irrigation technology.
The interview came out just a week or so before Lindsay announced upgrades to their FieldNET Advisor platform (more below).
Some of the key insights shared by Lindsay executives include:
Just over 50% of US install centre pivots currently have remote control functionality (turn pivot on/off via a phone or tablet for example).
Average performance improvement with Lindsay’s FieldNET Advisor (irrigation scheduling and precision application of water) functionality is “17% less water, 17% less energy” and “better timing” which leads to improved yield outcomes.
I like how Randy Wood addresses the inherent bias when it comes to irrigation which is to just "put on a little more, just in case” and how they manage that with trialling efforts to gain farmer trust in the system.
The cost of FieldNET Advisor with irrigation scheduling is priced at $1000/year/field. In the words of the Lindsay executives, they are “priced for penetration.”
Lindsay calculates the aforementioned 17% savings number alone to equate to around $35-36/ac in savings for the customer, not factoring in yield gains from optimal irrigation timing. That means on a 100ac field, Lindsay calculated the savings as approx. $3,600, which means a strong ROI on any given year.
Farmer retention on FieldNET is 97% according to the interview, which is strong. That revenue is higher margin for Lindsay and also adds stability into the revenues Lindsay is deriving each year, helping their business when going through commodity cycles and likely contributing to an increase in loyalty on their pivot systems themselves.
Lindsay doesn’t currently breakout their software revenue from irrigation asset revenue, but just like John Deere, if they are beginning to emphasize the higher margins and durability of those revenue streams, they are likely to begin breaking them out in the coming years as they grow.
The numbers and opportunities shared by the Lindsay executives reinforce the rationale for the minority investment in Pessl announced in April:
Differentiate their irrigation solutions with assets to enable better on-farm decision making— including better weather, soil and field intelligence to inform irrigation timing, amount etc. and even support other decisions like fertilizer amounts and timing.
Increase sales of Pessl hardware through their market access and dealer network.
Expand recurring revenue opportunities to a higher percentage of their customer base.
This week Lindsay also announced FieldNET Advisor enhancements, including:
Easier enrolment for the whole operation and customized recommendations to grower management preferences.
Satellite imagery estimates crop water usage providing up-to-date data that automatically tracks how conditions change through the growing season; wind, hail, disease, and other factors are all accounted for.
Manage the whole farm at a glance, including crop canopy development, crop water use, weather, and irrigation recommendations, including enhanced mobile functionality.
Connection of Pessl weather stations to FieldNET to incorporate local weather data into recommendations.
For the full breakdown of how Lindsay is positioned with their hardware and software initiatives compared to other entities in agriculture, including images to illustrates, become an Upstream Ag Professional member:
4. Aimpoint Research and CamoAg Partner to Bring Farmer of the Future to Digital Intelligence Platform - Camo Ag
Aimpoint Research® and CamoAg have formed a strategic partnership to create a new tool for customers across the industry. Aimpoint’s Farmer of the Future psychographic and behavioral segmentation work will be digitized for the first time and offered as an add-on module through CamoAg’s digital intelligence platform.
This is a smart move from both groups.
For Aimpoint:
Aimpoint Research has done a great job building a renowned psychographic and behavioral segmentation for farmers in the United States based off of their Farmer of the Future Research:
Farmer of the Future 2.0 is a syndicated research platform that includes a new audience segmentation, current state intelligence, and future state predictions to enable deeper understanding of U.S. farmers and ranchers. Grounded in extensive research, Farmer of the Future 2.0 builds upon Aimpoint Research’s original landmark 2018 Farmer of the Future analysis.
They have primarily monetized their research through for-purchase reports, training sessions, speaking engagements etc. however, this next move of incorporating their research and the formula for assessing farmer behavior directly into software platforms becomes a new revenue stream, along with a way to further ensure their research becomes the default reference for farmer segmentation in the industry.
For CamoAg:
CamoAg is a vertical SaaS company that offers agricultural intelligence and workflow management tools to support sales, marketing, and operations teams in the agribusiness.
Offering a segmentation capability directly in their software is a value-added functionality that can help sales or marketing teams for example better assess their customer base for lead lists, follow-up and opportunity identification with farm customers.
Execution
The effective execution of this can be challenging, as there is likely a need for Aimpoint to assess farmer platform data (eg: how farmers interact with the system), the need to access company data (eg: purchase history, financing history etc.) along with the need for other forms of manual assessment (eg: farmer survey, or sales staff input) but I believe it can all add value to the teams using the platform.
Cool initiative from both groups, though the product is still in development:
The Farmer of the Future module is still in development and expected to be released later this year.
Assuming the development plays out effectively, we can see where other organizations, such as ERP providers (eg: Ever.Ag) could be Aimpoint partners, too.
5. Investing in new technology featuring AI to detect herbicide-resistant weeds - Financial Post
This article highlights the partnership between Precision AI (drone spraying company), Geco Weed Management and a consortium of other entities.
Geco is worth zeroing in on, specifically after breaking Jevons Paradox last week in:
Jevons Paradox, Complement Disruption and Precision Applications in Agriculture: Implications for Crop Protection Manufacturers.
Geco Engineering delivers predictive insight into one of the biggest problems on farm every year: weeds.
Geco delivers insight into weeds, such as when will they emerge, where will they emerge, and whether they are resistant— important factors for accomplishing high-efficacy weed control.
I first highlighted Geco Engineering in 2023 because they are working on an important problem in agriculture:
Herbicide resistance costs North American farmers billions annually
One palmer amaranth per meter of row can decrease corn yields by over 15%
Ten wild oat plants per square meter can reduce wheat yields by over 10% and cause further quality reductions
At first glance, we can see the opportunity with Geco models for use in precision spraying— whether see and spray on a full-size sprayer, using it to line up a spray drone route, or support broadcast spraying with increased product rates or water volumes where pressure is higher, or add another product to the tank where resistance risk is high for example.
But there is more.
For the full overview of Geco, the use cases, the revenue model and potential use of the company models and product, become an Upstream Ag Professional member today:
6. Ohalo Genetics Breakthrough in Plant Breeding - All-in Pod
Ohalo Genetics is a company that has been operating in stealth for close to 5 years with north of $50 million invested over that time frame. The current CEO is David Friedberg, well-known for being the founder of The Climate Corporation.
This week on The All-in Podcast, Friedberg announced what the team at Ohalo has been working on (check it out in the link at the ~40:00 min. mark).
In genetics, there is a concept known as polyploidy— where an organism has more than two sets of chromosomes. This, typically, leads to a more robust organism. In the instance of plants, it delivers a higher degree of genetic variation and traits that leads to better ability to overcome stresses.
Ohalo has found, and patented, a way to alter the genetics of parent plants, apply proteins that switch off the reproductive circuits that cause the plants to split its genes in the offspring so that 100% of the genes from each parent plant goes into the offspring plant. Effectively enabling polyploidy. During the plant reproduction process, typically 50% of the genes come from the mother plant and 50% of the father plant, always random. In the instance of the Ohalo technology, 100% of genes from each parent go into the offspring.
This gives the plants more genes, which increases the likelihood that there is a gene that allows for the plant to overcome or manage a stress, which helps to contribute to the yield increases that are alluded to on the podcast as “50% to 100% or more” compared to regular plants.
The patents published on May 9th emphasize potatoes and corn.
Revenue Models
There was no objective statement about revenue models, but alluded to on the podcast there are a couple routes Ohalo is currently exploring:
Breeding-as-a-service — Ohalo has unique technology, along with data and information about various crops and AI capabilities to identify the output of crossing two different lines. For organizations with proprietary genetics, Ohalo’s technique could help them not only improve potential varieties, but increase the speed at which those are developed.
Build a Seed Business — On the podcast, Friedberg talks about the potato industry and the opportunity for them to develop their own seed line, that interestingly, would be planted via a true seed vs. using a cut potato. There is a discussion about Driscoll’s berries on the podcast as well, including a mention of the talent brought into Ohalo from Driscoll’s.
There are still a lot of unknowns, so I will be eagerly awaiting to learn more about the Ohalo technology.
If the claims are true surrounding cost to execute, increase in yield, along with minimal 2nd order negative effects and ability to accurately support selection for specific traits, Ohalo becomes an interesting company to watch.
7. FMC Corporation and Optibrium Announce collaboration - FMC
FMC Corporation, today announced a collaboration with Optibrium, a leading developer of software and artificial intelligence (AI) solutions for small molecule discovery. The agreement is part of FMC's strategic plan to accelerate the discovery and commercialization of FMC's pipeline.
Utilizing AI to help small molecule discovery is a common trend within the industry.
Optibrium started in drug discovery and leverages techniques from the pharmaceutical industry.
This isn’t new to the ag industry though, either.
Enko was among the first to apply AI and DNA encoded libraries to the agriculture industry, screening billions of compounds against the site targets rapidly and cost effectively.
Companies like Bayer Crop Science and Syngenta have partnered with Evogene subsidiaries, which use novel Evogene’s platform for discovery of novel modes of action.
Bayer is building out its capabilities internally as well with their CropKey efforts.
Technology highlighted in last week’s Upstream edition like AlphaFold also have potential as well.
Related: A look at peptide products to protect against diseases and insects - Future Farming (a very well done article)
8. Case IH ‘gatecrashes’ agricultural drone market with two models - Future Farming
Case IH announced the pre-launch of its first Sprayer Drone as a complementary solution to the company’s portfolio. The company will import and distribute the Vtol in two models, 30 litres and 70 litres, in Brazil to all its concessionaries.
This news is specific to LatAm, but it is notable nonetheless of a Case drone based initiative.
I recently touched on the topic of drones in this article from earlier in May:
Is John Deere Losing Ground in Drones or Is the Market Just Not Ready? - Upstream Ag Professional
Non Ag Article (Video)
From PayPal Intern to Starting 4x Billion-Dollar Companies - Joe Lonsdale Interview - YouTube Video
Joe Lonsdale is an impressive individual who currently operates 8VC which has investments in unicorn organizations such as Anduril, Palantir, and Flexport. They do have one agriculture related investment: AgVend.
I think there are a lot of notable takeaways from this interview, including:
Importance of singular focus.
Ideas vs. Execution.
And sharing ideas vs. with holding them.
Benefits of being within two standard deviations of top talent.
Finding unfair advantages.
Importance of building a “talent apparatus.”
Other Ag Articles
Multiple Touchpoint Analysis: Boosting Ag Retailers Success Through Manufacturer Support - Stratus Ag Research
Seed treatment, without compromise? Cold plasma is ready for prime time, says Clean Crop Technologies - AgFunder News
Case Study: The Growers Edge Crop Plan Warranty Accelerates New Product Adoption for Phospholutions - Growers Edge
Big Dealer Consolidation Continues in 2024 - Farm Equipment Intelligence