Sarah Nolet 00:02

Hello,and welcome to another episode of AgTech So What brought to you by Tenaciousventures. I'm your host, Sarah Nolet. And today based on the feedback from ourepisode a few weeks ago, I'm back here with my co founder Matthew Pryor. Andwe've invited Shane Thomas of upstream ag insights back to chat about some ofthe so what's we're seeing in ag tech and Ag News. Hey, Matthew, Hey, Shane,

J. Matthew Pryor  00:24

Hey, Sarah,

Sarah Nolet 00:26

let'sstart with some news coming out of the US recently that Dicamba is back underpressure. This is this selective herbicide originally from Monsanto now at Bayerthat's registration seems to have gotten pulled, which is maybe it's happenedbefore. The implications here I think are pretty interesting. I think morebroadly, what does this mean for pressure on crop protection for new productsthat might be coming down the pipeline for autonomy and other solutions? As wekind of bridge into digital and biological? Matthew, what's your take? I

J. Matthew Pryor  00:57

thinkthe thing that came into my head first was Yeah, so A, this is somethingspecific to the US. But what is the contagion of signaling like this, I thinkis super interesting. For other geographies. It's notable that ratings andlabeling vary significantly country to country. But if you were like, I don'tknow, the Australian subsidiary of a global food company, how are you feelingabout that backhand bar use in your local supply? Shed perhaps in Australia,when you know, it's a, it's chemistry that's banned elsewhere? So I thinkclearly, there's one element, which is what does it mean to you as farmers andtheir suppliers and their advisors? I'm sure Shane's better qualified to talkabout that. But I think I think what struck me immediately is just thedifference between a straight regulatory interpretation versus a kind ofbroader sense of the status of synthetic chemistry as an input intoagricultural production. And where does one country's regulatory kind offramework finish versus broadly, what does that mean, as a propelling forcetoward just continued consideration and removal of a lot of synthetic chemistryfrom production?

Shane Thomas 02:06

Yeah, Ithink those are good points, Matthew, on that, and I think, you know, I'm notin the US either. I mean, in Canada, and I know, there was a lot of emphasisthat this is a US thing in the Canadian markets here. But to your point, Ithink there's plenty of reason to think about what are the potentialimplications? And I know, at least from a large scale perspective, I start tothink about the companies that are call it researching or working to identifynew molecules, more sustainable molecules, or biological molecules, like, whatsort of tailwind do they get from the likes of Bayer and Corteva. And all thesedepartments, they've already been investing in it, they're trying to understandit, but does this urge them to go a little bit faster. And I think specificallywhen you're not to get too much into bear, but you could go down a lot of linesof the challenges and the things that are navigating today with glyphosate, andthey're losing market share already in their seed business when it comes tohaving Dicamba as their core secondary molecule on top of glyphosate that's intheir trait stack, whereas Corteva is using 240 choline. So all of a sudden,they're in list product probably has a much better fit and a total flippin inmarket share and market dynamics there. But I think if I'm a lot of theseorganizations, meaning the Corteva is or Syngenta or whoever, there's probablya lot more push to start to think about this, because not only does itreinforce the pay, there are these challenges at bay, it also shows that, hey,the rug can be pulled out from underneath you at a moment's notice in season oralmost in season, because there is product in the channel and I think of theagronomist in me in the retailer and me is thankfully the EPA has some dynamic,or call it new initiative in place where if it's in the channel, already, itcan be sold to the farmer, but nothing more after that. So I know some farmersand retailers and the Bayer themselves and BASF will be happy about that. But Ithink there has to be a lot more urgency to have a plan B and start to get someof these other potential products and tech stack initiatives in place fortraits.

J. Matthew Pryor  04:07

It's gotto have a depressive impact on investment in additional chemistry to surelyit's probably a terrible analogy, and maybe you've never had this experience,but a bouncer would turn your way and you're like I don't know the exact reasonwhy you weren't allowed in, or that's the way I'm dressed or so. The point ofthis stupid analogy is just there has to be some concern that any new chemistryis just gonna meet similar resistive force. And so what will the appetite be ofjust continuing to replace with more conventional solutions versus doublingdown on things for reasons that probably have already happened? Just have willhave better acceptance.

Sarah Nolet 04:53

It justmakes me think of like the current toolkit that we've seen so far is sort ofpushed back or argument of like, why these things are safer or why these thingscan be used or why these things are necessary, which there's some decent goodarguments behind that in terms of tools in the toolkit for farmers and thingslike that. But at some point, it's gonna become too expensive to push back andkeep fighting for the status quo. And so then you go, Okay, what else is in thepipeline? It doesn't seem like there's that much and then you're like, Okay,maybe biologicals. Or there's other kinds of solutions. I don't know if you'veseen much change in the way of bio herbicides in particular, it seems likethere's not a ton and that it's pretty challenging. But then from a ventureperspective, we look at a lot of these biologicals companies have raised lotsof money to theoretically get all the way to discovery plus regulatory approvalplus trials plus scaling up and that means their valuations are very high, whichthat doesn't seem particularly viable for these companies, either. So I don'tknow what you make of what is Plan B, like, what Where are people looking next?

Shane Thomas 05:55

Yeah,it's probably two pronged in a lot of sense. But I think the one is on thebiologicals, to your point, if you look at, I think you guys just recently hadSam Taylor from Rabobank on your podcast, and he talked about that the biocontrol market is okay, sighs when you factor in fungicide and insecticide andherbicide, but the bio herbicide, I think he said something like 2% of thatmarket is bio herbicide. And I think often there's talk that's a performance oran efficacy or control issue, but a lot of it actually comes back to the costto synthesize that molecule and actually be able to create a product that isgoing to be able to go on a broad acre corn, wheat, canola, soybean crop out aseven to $15 an acre range. And I think that's one of the biggest challengesand one of the outbreak hence, not even apprehension, there's just the economicreality of it today. And so that's where maybe there will be some synergy orsynthesis of these products coming through with all the collaboration going on.But I tend to go lean towards the other kind of dynamic that you guys alsotalked about on that podcast of the equipment manufacturers and precisionapplication, which still doesn't necessarily get by if you have a call itproduct that's maybe not that environmentally friendly, but you're using 60%Less is that better? I guess everybody's gonna have their view. But I think atleast from an efficacy and a cost perspective of the bio herbicide even all ofa sudden does that make it more relevant when you start to factor in theseprecision technologies? And so that's where I get really interested and curiouson what does that mean for how crop input companies work with equipmentmanufacturers, and what does that look like? But those are the two things Ithink about in that regard.

J. Matthew Pryor  07:36

Doesthat fascinating three fold thing? I think also, I would just do the kind ofventure model around biologicals Sara, I think Joel Lipsitch made aninteresting comment on LinkedIn, to your post where he was asking a questionabout have we got the kind of operating model wrong here, it's just the ideathat like only invest far enough to prove the efficacy of the functionality ofit, not the go to market part, which is a pretty big difference.

Sarah Nolet 08:04

I thinkthat's an interesting challenge for the startups and the venture model. Becauseespecially in current markets, there's pressure for companies to prove revenueand show a path to profitability, which means it's expensive, right? And Ithink you'd imagine you're biologicals company, you've raised money based onsome kind of discovery and maybe early trials you've done. And then your pitchto investors used to be, you know, this markets, so huge capital's relativelycheap. Let's just go all the way and keep investing to do the deep discoverywork. We don't need revenue, markets have flipped, and it's Wait, we need apath to revenue now. So then it's regulatory approvals trials, which countriesare you in? That's also expensive, but at a different factor? And so then areyou pulled more into Okay, let's commercialize the thing we have, even thoughthat maybe isn't the big molecule that is going to replace something bigger inthe market. And so you're split between what is the go to market model here? Howfar down the path do I have to go? And whose expectations am I serving for acustomer, my server, the channel, am I serving for an investor and can getpretty expensive and then out over the skis from a valuation perspective. Theother one, I think, on the equipment side chain, where you are going swarm farmrobotics in our portfolio has done some really interesting work collaboratingwith crop protection companies to say what can we do in the digital realm andnow that we have autonomy to actually make use of these products safer and moreefficacious. And so they've done work with spray drift where the robots plusweather stations, they know exactly under what conditions you can use certainproducts. And so you can imagine, you scan the QR code on the label of aproduct and the technology handles the efficacious application in a moreprecise way as well. And so I think that kind of breaks the trade off a littlebit of who's taking whose margin and it's more like in the digital world, youactually open up new types of collaborations between these otherwise seeminglycompetitive companies, but you can actually create more value for the user whenyou think about different collaborations. Yeah,

Shane Thomas 10:07

that'sreally interesting. Now I want to go back to what you call on the, on the otherside of things with it, because it's a good point, Sara, just on the VC side ofthings in the funding, where if you're these organizations that if yourbiological base company and you have the r&d of the discovery, then thereyou get into all the commercialization, marketing, and all that side of thingsas a Venture Capital Group, how it because there's companies out tell us, thisis not a private company, but every gene has a subsidiary called egg penis. Andthey essentially have a bunch of like, AI capabilities to be able to identifythe specific molecules and the active ingredient, and all these differentthings. But they do not want to commercialize the product at all, they want tobe able to go get these collaborations with Bayer or with Corteva, or with UPL,or whoever. But if we take that to a private base company, obviously you havelower margins, you have lower overhead and those sorts of scenarios. But ifyou're a Venture Capital Group, as if you're getting pitched by these organizations,how do you guys think about what makes a company like that exciting or not? Isit Do you want to have a fully integrated group that's going to market becausethat's the biggest ability to 10 or 20? Or 50x? Or is it like, hey, we want toplay for a double and we want to only 5x? or money or just curious how you guyswould think about that? Yeah, I'm

J. Matthew Pryor  11:22

fascinatedby the interaction between time period and like the way the market looks at themoment. And that is one of the challenges as an early stage investor. And it'sinteresting, I was at the Australian citrus conference last week, and reallyjust hearing the room very focused on say, a labor issue, which is verypresent. Thinking about well can automated, you know, harvesting, solve thatproblem. And the consensus generally being that proper automated harvesting is15 years away. And so just that difference between the scale where the problemis filled versus the scale over which early stage companies actually given themarket with a solution. And I think you made a fascinating point in yournewsletter when you were talking on the market for biologicals. And I thinkthis is the mistake that a lot of both investors and early stage companies makeis when they think about the go to market part of their business, they pay toomuch attention to the way the market currently looks. And the point that you madethere, which I think is very important to be able to understand is the marketwon't look like that right? When biologicals to zero as example before whendigitally enhanced biologicals enter the market, it won't be the case thatyou're simply looking at, this is the conventional herbicide budget, thatconventional nitrogen budget, and so there'll be fractionalization, creatingnew opportunities, and they might be more verticalized. And I think your otherpoint, which is super interesting is however, if it happened to be a bioherbicide, for example, then you are directly targeting the current market forconventional herbicides. And so that goes all the way back to the kind of widelens, which is who's going to be incented, to completely eat their own margin,on via herbicide versus who would like to chew away at somebody else's nitrogenbudget, because they've got this kind of bio digital combination product thatjust works differently than conventional application of a nitrogen basedfertilizer. So I think that's what we look for, is a founder who's got aninsight about that part, as well as how the product does what it does,

Sarah Nolet 13:33

and alsoleads to one of the challenges with trying to invest in a future that doesn'tyet exist, or founders solving for a future that doesn't yet exist is dependingon who you're talking to, that can just seem so out of whack. And how do youget traction? Who are the right partners? Who are the right investors? Ifthey're not looking at agriculture and see things shifting and finding theright balance? I think for us, that goes back a lot to communication, like howcan they clearly paint a picture of why things will look different than they donow? And how they might fit into that system? But it's a fine line, right? Likeyou want to be contrarian and right. But the more contrarian you are, the moreyou're thinking about a system that doesn't yet exist. Today, the harder it isactually to get traction. I think it's particularly in this case, because ofthe massive investments on the seed side and the relationship between seed andchemicals. Some of these conversations are cannibalizing so much of theexisting way things work, that it's pretty tough. So finding those use caseswhere it is more collaborative or there is a sort of wedge to work together. It'spretty key to get the traction that investors need to be confident to invest inthis future that doesn't yet exist. I wanted to ask you one thing, Shane, onthe kind of equipment piece you had wrote about this, and it made me think ofthe Swarm prime example with spray drift. But do you see other examples wherethere are sort of new collaborations between equipment whether it's incumbentor startup Companies and crop protection that start to break these trade off ofwho's eating whose margin but actually who like how new collaborations areforming? That's very different. What was the best example I could come up with,but there might be others that you've seen?

Shane Thomas 15:11

Yeah, itwas probably two there are similar in the same vein, I think one you have thisis maybe not so much with the manufacturer. But you have Solinftec  who's partnering with the retailer in terms ofa novel called go to market business model, which is really interesting interms of them having their solix platform that's essentially a solar poweredrobot that lives in the field constantly can spray fill itself autonomously,all those sorts of things, no different than swarm farm in a lot of regards tothat. But they essentially are trying to work with the retailer to have a novelproduct offering to that farmer where it's a clean field or a disease for a urineoptimized field is where I would think about it. So that's maybe one exampleand then the other. That's similar as InnerPlant, John Deere and Syngenta, theyhave their three way call it collaboration going now which is essentiallytrying to leverage the to your point is on a future that doesn't exist you haveinter plant that has the bio sensor that essentially can help an individual andagronomist, the farmer be able to assess what a plant is feeling from anutrient deficiency or an insect or a disease or what have you. And the realityof the way diseases is sprayed today. As we spray everything proactively, ithas to be a prophylactic application, the collaboration between those groupsis, hey, if interplant can actually identify that there's a spore germinatingon the plant and we can see that there's a disease before the disease actuallybecomes prevalent can a collaboration with John Deere and Syngenta, where wenow have the piece of equipment going across the field capable of sprayingthose specific plants, but then also a potential product formulatedspecifically for efficacy, once that call it spore is early germinating, so youcan have an interesting collaboration going on there where it's intended toreally remove broad application of a fungicide and move towards a more preciseapplication based on where a disease or a potential disease infestation is,versus just saying, Yeah, let's approach it like a vaccine and just applyacross everything. So another interesting one there.

J. Matthew Pryor  17:16

I lovethat the picture in my mind, Virginia is structured collaboration is what gotme thinking about was, I don't even remember where the video was, I think itwas on LinkedIn, somewhere where someone had grabbed a Burro and stuck a PA ontop of it, and we're driving it around their vineyard is a bird scarer. And Ijust thought that is classic, right? If you think about autonomy in acompletely different way, and then you just open up this possibility ofunstructured solutions organically emerging in the field. And again, I thinkit's something that a lot of people don't appreciate, when you break stuff downto different modular configurations that the market is going to construct bothstructured and unstructured solutions in completely different ways. Which issuper exciting. And B is one of the reasons that we think the market foragricultural autonomy is much, much larger than most people think. Becausethere's just like, every single job that was ever done is a potentialopportunity area there.

Sarah Nolet 18:14

One ofthe things we saw when I last was out a SwarmFarm for visiting some customerswas they were worried it was raining and fields were muddy. And they were like,oh, is the robot going to be able to run and it turns out that the trucks orUtes actually were getting soccer bogged and the robot could go out and pullthem out. So again, it was just different configurations of when you break downexisting boundaries, like new things that you didn't think were possible becomepossible. And I think that's starting to get pretty exciting. One of the otherthings we want to talk about today, changing gears was around sustainableaviation fuel and that kind of energy world right now us policymakers areconsidering a major tax credit or sustainable aviation fuel powered bysoybeans, and it looks like it's gonna be a pretty big deal. Although detailsare a little bit blurry. We're hearing numbers as high as $1.75 a gallon. Andthe conversation indicates that farmers will be advantaged somehow this kind ofdemand side policy, but also many ethanol plants are grower owned, so couldaccrue some other benefits there. And it seems like there's a linkage toclimate smart practices as well, the USDA has identified something like over200 practices that might be included as part of this program. I think this isparticularly interesting. It comes in a time when overall our energy usage andenergy system and climate smart energy is under pressure. And the New YorkTimes this week was talking about how the growth in artificial intelligence andtherefore server use is really straining our energy grid. And so you get theseintersecting forces of like pressures on existing systems, but also policylevers and incentives for sustainability and economic viability. So something Ithought we could dig into, Shane, any reflections is on sustainable aviationfuel and energy.

Shane Thomas 20:02

Yeah, myCanadian might show. But I think I think the interesting part here is thatthere's fundamentally some potential for farmers to be able to access newpremiums make the production of soybean, more profitable. And the US just lostthe largest exporter crown, so to speak to, I believe it was Brazil, there'salso just constant market fluctuations and challenges with commodities and allthese different things that are challenge for farmers to overcome and beprofitable year to year. And so there's all of a sudden the potential to beable to tap into a new market and have the access to that market and get thedollar 75 A gallon. I think that's really interesting and really compelling ifI'm a farmer. And I think the other interesting part is like 200 practices.This is the agronomist, me now coming out as that's like everything I got, itsounds like you can basically just put the crop in the ground, and you're gonnaget it. But I would be really curious to learn more on what are thosepractices? And is it more not? Like, sometimes it's not so much about what youadd, but what you take away? And I think sometimes we focus on adding differentthings all the time. But sometimes it's just about doing less of something liketillage, for example. And yeah, it'll be interesting to really see what whatcomes up. But I find it really interesting. I

J. Matthew Pryor  21:19

like theway that it challenges the idea of actually what is a commodity? Like, why dowe even have commodities and just wind the clock back and like, it makes a lotof sense, if you standardize the system of production. And intermediateinfrastructure is expensive and centralized, then there's like a physicaleconomic element of treating something as a commodity, or increasingly, as afactory has no roof. And it's infinite information associate. The other elementwas information, right? It was just like it was a particular variety of corn orsoy, or whatever. And so you could treat it like a commodity as well. Now,increasingly, were in the information dimension, there is no such thing as acommodity anymore. Like, we know every single thing about every single acre,yada, yada, yada. So do why do we keep this idea of a commodity partly isbecause that's the way the market works. And economically, we need to supportit. And so in that context, creating additional incentives makes sense, rightfor our government, is we've got all these people who know how to produce thiscrop in this very specific way. But the other element of it is, what does itmean to D commoditize. All these things. And that, to me is where those kindsof practices come into it as a intermediate aggregator of some kind. There'slots of vectors there where you can D commoditize, where you can get yoursupply chaired. So it just feels this kind of small curve is going to continueto emerge where you've got people who really are doubling down on informationis going to be my way out of continuing to operate in the commodity market. Andthat could be verticalized. in a financial sense, you've got your own storage,you do your own marketing, you do transport, or you focus on practices that canallow you to sell product to someone else who understands how you'redifferentiated. Or you rely on the government or the big initiatives to say,no, it's going to keep doing what we're doing and find somebody else who wantsto take all this stuff and do something with it. And obviously, large scaleenergy is a good thing to think about. I don't know whether sustainableaviation fuel is exactly the right way to go. Maybe thinking more about on farmenergy production would be just as interesting, if not more, thing,

Sarah Nolet 23:34

Matthew,we're talking about tea, like just the all out attack on commodities, which Ithink is both true in all the ways that you say it. And yet people have triedto do things in this realm and run into I think, in particular, the capitalrequirements of different physical infrastructure to keep things separated. Soit's one thing if you're talking about like carbon, where you can separate thedigital from the physical because they can exist in different realms. Whereasif it's like this grain, that was produced in this way, specifically goes intothis mouth over here, like you need physical infrastructure, and then it's whopays for it? And how does that work? Do you think that we need that newfinancing models? Like when you paint that picture of the smile curve? How doesone or what are the characteristics of someone that can get up that Dcommoditize? side because it just seems like the changes in the physical worldare so expensive.

J. Matthew Pryor  24:26

Yeah,they are in like volumetrically, I think it's still likely that most of thestuff goes in a common direction for the reasons that you've highlighted. So Ithink on the smile curve on the left edge, if you want to say it's largenumbers of small kind of operators, and those are the ones that I think they'rereasonable to expect, participating in a lot more vertically integratedopportunity, it remains to be seen and the other three, you could call thereisn't on the right side on the commodity side. To the degree to which thatcan't stay still, the emissions intensity of all of that corn and soy and othergrains is going to come under continued pressure, although maybe not in the US,we'll see what happens with the kind of scope three argument there. But yeah, Ithink more just in terms of how are individual farmers thinking about theirpathway through and again, thinking, what will that market look like in 10years from now, it's not going to be participating in so simply saying thatwe're going to create demand through a subsidy for a sustainable aviation fueldoesn't feel like a complete solution, I suppose, is the point that I wasreally trying to make.

Sarah Nolet 25:40

What itmakes me think of is how, as a policymaker, or as an innovator, the challengebetween near term logical intervention based on how things work today versussystemic change when you get into systemic change, you have interrelatedfactors and forces. So they made me think of producers that are under climaticpressures, weather variability, and droughts and floods and things to actuallygrow different crops. And so then you're not just talking about premiums ordifferent markets or things for the current thing that I grow. But what elsemight actually need to grow in the future, whether that's because it's too hotto grow the grapes, and I'm tearing out vines and looking at a differentmarket, or there's commissions intensity, pressure, or whatever it might be,there's a bunch of overlapping forces. And I just don't see a lot of thecurrent sort of research and like system being set up to support those longerterm or like even medium term, like I don't think it's 50 years in terms of howsome of these production systems and value chains might change. Because

J. Matthew Pryor  26:42

that's avery interesting kind of almost perverse outcome, right? If we accept thatadaptation and resilience requires us to be more flexible than continuing toinsane, very large numbers of growers to grow the same commodity crop andignore the fact that it might be increasingly difficult to continue to growthose crops in a commodity sense, simply because of what's happening aroundclimate adaptation. Yeah, like it could be a perverse outcome, concentratedrisk. But then again, if you're also the insurer for that crop, it could geteconomically complicated there.

Sarah Nolet 27:19

We havecovered a ton already, I would love to quickly get a takeaway from each of you.My takeaway was obviously that Matthew was trying to get into clubs when he wasyounger, getting tossed out by bouncers. So I appreciate all the intellectualcontributions you guys have made. But that's what I'll be leaving with. Shane,how about you?

Shane Thomas 27:36

Yeah, Ilike that one. But I think my big takeaway was another point Matthew made, Ilove this comment on modularity. And I think that's something that all of uscan do more frequently is to just rethink it from a modular perspective, beingable to piece things together from the bottom up and not necessarily come atthings always the way you normally think about autonomy, or or using a tractorthat now is autonomous. I think being able to think modularly. And to breakthings apart, I think is such a useful mental model just to apply, no matterwhat you're doing. So that I think that's my biggest takeaway. I

J. Matthew Pryor  28:10

think,for me, it was the idea of not thinking about replacement of kind ofconventional inputs with biological versions of them of actually thinking aboutthe way that will change the kind of size and shape of the opportunities and Ithink, for founders, looking at those markets, it's not sufficient to thinkabout the mode of action, but to think about, okay, where are the complementsand therefore don't think about go to market as whoever is working with theconventional, but who will my complements and that really must shape your go tomarket as much as the biological does what it says on the tin. Think about theway it changes the opportunity to with something different to the market. Well,

Sarah Nolet 28:56

that'sit then for another so what episode of ag tech so what with our friend ShaneThomas, so thanks again, Matthew and Shane for joining us. massive shout out toSarah Mach for helping us with some of the things in the news we should becovering. And again be heard a shout out to Joel Lipsitch, who commented on theprevious episode and got some light here today. We love hearing from listeners,so hopefully hear from more of you in the future. For more information on anyof the resources mentioned in this episode or for feedback on how we did andwhat we should be doing in the future. Please get in touch and please visit ourwebsite Tanisha stop ventures I'm saying I'll catch you next time

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