Upstream Ag Professional - September 10th 2023
Essential research and analysis for agribusiness leaders.
Welcome to the 8th Edition of Upstream Ag Professional!
Illustrative AgTech Insights: Influence and the Retail Trusted Advisor
The Closed Loop Challenge in Precision Agriculture and Sentera's New Launch of Precision Weed Technology
DJI Agricultural Drone Report Highlights
Pivot Bio Revenue Numbers Impress. What Products and Partnerships are Next for the Organization?
Blue Orca Capital Shorts FMC
Biobest to Buy Biotrop for €532 Million to Expand in Brazil
KWS Seeds Aigen Collaborate to Develop Robotic Weed Control for Farms
In Case You Missed It: Indigo Ag: Analyzing What Went into their $3.5 billion Valuation and What Assumptions Went Wrong
Last week, I shared the Upstream Ag Professional member-only August Round-up Video. If you want to listen to some of the biggest news from August, check it out:
1. Illustrative AgTech Insights: Influence and the Retail Trusted Advisor - Upstream Ag Professional
Retailers lag in competence and confidence in new product segments and are at risk of lessening their influence at the farm gate, including in the realm of biologicals.
Survey data shows farmers are looking elsewhere to learn about farm management software and data analysis.
Ag retailers need to lean into strategy tax, not avoid it.
In the second edition of Illustrative AgTech Insights, I focus on an aggregation of survey information shared by Stratus Ag Research that illustrates trends in the influence of the ag retail professional and break down what this could mean for the ag retailer and begin laying out what ag retail decision-makers need to lean into.
Due to the image-heavy nature of the write-up, the entirety of the article is only available at the link above.
2. The Closed Loop Challenge in Precision Agriculture and Sentera's New Launch of Precision Weed Technology - Upstream Ag Professional
Sentera launched a precision weed control solution that can reduce herbicide application by up to 70%.
Sentera is a sensing and analytics company, currently disconnected from where the action of spraying to eliminate the weed occurs. This will make adoption and
Sentera is looking for partners, and there are currently no companies using the technology, according to the release.
Sentera, today announced the launch of its Aerial WeedScout technology, a precision weed control solution that reduces post-emergent herbicide application by up to 70% with no adverse impact on outcomes.
This is a fantastic new product offering from Sentera. I like the concept. However, I also deem it to be challenged in the market.
Aerial WeedScout is a selective herbicide application approach that enables a lower total use of herbicides by farmers who do not have actual precision spray capabilities, like John Deere See and Spray.
Sentera uses aerial imaging and artificial intelligence to detect weeds and create a map to generate machine prescriptions for herbicide applications. This means a step isneeded for the sensing and data collection, and then a concerted effort to integrate into the sprayer system to spot apply.
In the full article, I share images and charts to illustrate why Sentera’s new product offering will be challenged as a stand-alone product.
Related: DJI Agriculture Drone Report: Highlights - DJI
There are over 68 pages in this report sharing learnings from drones in agriculture worldwide
One macro takeaway: At the end of 2022, there was over 200,000 DJI units being used within agriculture on a cumulative area of more than 200 million hectares globally:
3. Pivot Bio Revenue Numbers Impress. What Products and Partnerships are Next for the Organization? - Upstream Ag Professional
Pivot released some impressive revenue, revenue growth, acres, NRR, and forecasted 2024 growth numbers (they can be seen in the next set of bullets)
Co-founder and previous CEO Karsten Temme is transitioning to Chief Innovation Officer while board member and investor Chris Abbott becomes CEO.
Partnerships with the new PROVEN OS seed treatment upstream are a likely significant growth trajectory for Pivot in the coming decade.
Their direct route to market and growing usage base make it compelling for them to establish unique new product innovations partnerships, or acquisitions to drive future success.
To read the full article, click the above link. To conserve space, only the first one-third of it is shared in the e-mail below.
Pivot Bio unloaded a bunch of news this week and I had the privilege to talk with Chief Innovation Officer and co-founder Karsten Temme and incoming CEO Chris Abbott last week to discuss some questions surrounding the news.
I first want to start with the numbers they shared surrounding their business in the release:
60% year-over-year revenue growth
Over $100 million in 2023 revenue
95% Net Revenue Retention in their 2022 cohort and 190% in their 2020 and 2021 cohorts
PROVEN on over 5 million acres in 2023
Forecast to have double-digit market share across U.S. corn acreage in 2024.
60% revenue growth, north of $100 million in revenue, and touching more than 5 million acres is no small feat in the biological world.
But what catches my eye the most is Net Revenue Retention (NRR). Last year, I emphasized in Upstream that customer retention is a crucial indicator to watch with Pivot.
NRR calculates total revenue (including expansion revenue) minus revenue churn (contract expirations, cancellations, or downgrades). Essentially, did current customers maintain spend/spend more, or did they churn/decrease spending on a year-over-year basis?
NRR is particularly useful in SaaS businesses, though it paints a meaningful story with a physical product that must be resold yearly. In other words, high retention says a lot with a product like PROVEN, and 95+% is an incredible metric for a physical goods agricultural product.
The earliest customer cohort has a significantly larger NRR than their new customers. My original interpretation was that this is a sign that as Pivot moves towards the mainstream, they are having a more challenging time with a new customer expanding their spending to more acres.
In my conversation with Karsten and Chris, they pointed something out to me, though— they increased their pricing from the original cohort to a higher amount per acre (closer to $20/ac) which means that is a big reason as to why there is such high NRR in early cohorts.
This actually signals something more substantial. Pivot Bio has some pricing power. Farmers seemingly like the product and its convenience enough to use it even with a higher price (Note: Fertilizer prices did increase over this time, too).
I checked the farmer market survey data from Stratus Ag Research to see how this NRR claim checked out (note: the below is 2022 data, not 2023, but I suspect relative consistency year to year):
Source: Stratus Ag Research
Pivot’s flagship PROVEN40 liquid-in-furrow product has the highest satisfaction of any crop-agnostic nitrogen fixing product on the market, with about 58% “satisfied or very satisfied” and another 28% in the middle. Only about 13% were dissatisfied.
The above and the fact that PROVEN had a reasonable intention to reuse in the survey reinforce the high NRR numbers.
Another thing that stood out to me with PROVEN was that the “Don’t Know” camp of farmers was very small. In my mind, that is a strong indicator of the strength of the Pivot Bio staff and approach. Ensuring they follow up with the farmer or that the channel they use does, illustrating that the product works, goes a long way in establishing successful outcomes. I will return to this point a bit later on in the future of Pivot Bio.
Lastly, Pivot forecasted “double-digit” market penetration in corn acreage. If we assume flat corn acres in 2024, that means ~94 million acres of corn (USDA number from 2023). Double-digit penetration means ~10% so we can speculate that Pivot sees itself touching over 9 million acres in 2024.
Considering their corn penetration and their 2023 numbers, this means they are forecasting ~75% acre growth year-over-year and revenue would then come in around $170-$180 million for 2024, and we haven’t even begun to see them tap into other crops (eg: wheat) with those numbers.
Given the revenue number, there are likely questions about whether they will look to go public soon. My suspicion is they will work to further build out two things first:
Partnerships in the value chain to reinforce their staying power.
More products to show a diversified revenue stream and leverage their unique distribution.
For a deep dive into patent commentary, their future partnerships, products, and more on their new CEO change, check out the Upstream Ag Professional article linked above.
4. Report: Blue Orca Capital Shorts FMC - Blue Orca Capital
We are short FMC Corporation because FMC has concealed from investors that it has suffered a recent string of stunning legal defeats around the globe that have enabled competitors to now launch competing generics at prices up to 80% below the price of FMC’s flagship insecticide product. Contrary to the Company’s claims, FMC’s process patents do not protect its flagship product from generic competition.
I am not an equity analyst. But when publicly traded agriculture companies have significant news about them, I think it’s notable. In the case of this news about FMC, specifically so because if the accusations are true from this short seller, it does have an impact on the global input market.
FMC’s patents surrounding their insecticide products are being questioned by Blue Orca Capital, a short-selling investment firm. This caused FMC stock to drop around 10%.