Upstream Ag Professional - February 11th 2024
Essential news and analysis for agribusiness leaders.
Welcome to the 28th Edition of Upstream Ag Professional!
Index for the week:
Highlights and Analysis from AgbioInvestor Agrochemical Product Discovery, Development, and Registration Report
Finding Asymmetric Upside in Ag Retail and Agribusiness & New Data Builds "Model Retailer"
2023 United States Technology Assessment Precision Ag Report: What the report illustrates more than agtech adoption is the reality of farm revenue and the lack of ability to invest in technology
The Agtech Disruption Myth and Disruption Through Complements
5 Ways Truterra Wants To Break The Carbon Market Adoption Plateau + What CPGs Can Learn from Precision Ag Companies
Dicamba Availability for 2024 Growing Season in Question
The Currency of Success
Edition Audio Summary and Search Functionality Access
1. Highlights and Analysis from AgbioInvestor Agrochemical Product Discovery, Development, and Registration Report - Upstream Ag Professional
Report: Time and Cost of New Agrochemical Product Discovery, Development and Registration - AgbioInvestor
The cost of bringing a new active ingredient to market has surpassed $300 million USD. The timeline to introduce new active ingredients now exceeds 12 years.
Stewardship costs associated with post-launch monitoring have increased by 330% in the last five years.
Chemical products account for about 93% of the agrochemical R&D budget, while biological crop protection products comprise roughly 7%.
The registration and chemistry segments of product R&D and commercialization saw the most significant cost increases.
In 2017, for the first time, there were more patents filed for biological pesticides (173) than for conventional crop protection products (117).
For the complete highlights and analysis of the report, check out the link above.
2. Finding Asymmetric Upside in Ag Retail and Agribusiness - Upstream Ag Professional
New Data Builds "Model Retailer" - The Daily Scoop
The article delivers insight into what the average retailer looks like surrounding acres served, employee base, products sold and more. The interesting aspect to me is looking at what the best retailers do well, which usually involves looking at asymmetric opportunities.
Asymmetric opportunities in ag retail come from embracing innovative practices and products not widely adopted or considered by the competition. Pursuing hard-to-implement solutions can lead to significant competitive advantages and market differentiation. Retailers who invest in these areas early can capture larger margins and establish themselves as market leaders before these innovations become commoditized.
Opportunities for asymmetric upside come from multiple areas, including “Doing Hard Things” and navigating Complexity.
The “New Data Builds Model Retailer” article gives insight into fascinating Farm Journal and Ag Retailers Association (ARA) work. The survey does a great job illustrating what the “average” retailer does, including acres services with custom app, employee base, growth in product segment sales, acres served and more.
Averages are great for some things, such as contextualizing a situation or looking at trends (one of the aims of this work).
Not mentioned, though, is the reality that the average ag retail doesn’t wow its customer base, generates single-digit gross margins (and declining), is fraught with inefficiency and high employee turnover, and struggles with effective capital allocation and ROIC.
I like to look at edge cases where possible vs. averages. The margins are where the real learning opportunities are. Getting into the psyche of an innovative organization offers incredible learning opportunities.
Throughout my conversations with agribusiness and leaders and best-in-class ag retailers, I look for similarities in how they think about problems, opportunities and what’s next. The best retailers look for asymmetric upside.
Defining Asymmetric Upside
An asymmetric opportunity is simply one in which the upside of a decision or action is much more significant than the downside.
Reading Nassim Taleb’s “Antifragile: Things That Gain from Disorder” was where I first encountered the concept and a definition for what he calls “Fundamental Asymmetry”:
Fundamental Asymmetry: When someone has more upside than downside in a certain situation, he is antifragile and tends to gain from (a) volatility, (b) randomness, (c) errors, (d) uncertainty, (e) stressors, (f) time.
Every asymmetric opportunity starts with a contrarian idea. If it doesn’t, there isn’t asymmetry.
Today, most retail and retail strategies look alike, which is one aspect of why margin gets competed away (for more, check out Influence Erosion in Ag Retail)
Asymmetric outcomes are a function of supply and demand. If everyone does something, the reward gets diluted because of large-scale participation. This commoditizes the action.
This can be brought to life very simply in ag retail. I often hear, “We’re high service,” “we scout fields,” or “we deliver chemicals at 11 pm during planting”.
Guess what? Those are table stakes.
Every retailer worth their salt does these things.
They aren't differentiators that bring disproportionate customer delight or monetary upside.
The upside is in doing things no one else is doing. Said another way, if a few groups do something, the reward will get concentrated to the few that took on the risk.
This concept gets talked about primarily in investing, whether investing in publicly traded stocks or venture capital investing.
The same is true in business settings: Invest in unproven capabilities and areas. Invest across different time horizons. Invest in complex areas. This can mean investing in assets, talent, services, or other infrastructure that your competitors arent. Asymmetric opportunities are hard to identify and even harder to execute. But that's the beauty of it. If it were easy, everyone would do it!
Where Does Asymmetry Lie?
Most asymmetric opportunities come from five different places:
Doing Hard Things