82. Curb your de-commodification
Technology trends for food & agtech leaders
“Software is Feeding the World” is a weekly newsletter for Food/AgTech leaders about technology trends.
Programming note: Next Friday, I will team up with DJ McCauley to talk with Shane Thomas (Upstream Ag Insight) about his writing process and the craft of writing. The registration link is in the read, listen, and watch section.
The reader survey is still open, and I would appreciate your feedback.
Analysis: De-commodification and the spice trade.
Technology trends: How will the farm machinery of the future look like?
Research review: Azoles are a major fungicide class which has escaped the threat of fungicide resistance so far, while being an important element of crop protection regimes worldwide.
Tidbits from the world of Ag/Foodtech:
Read, Listen, & Watch: My upcoming podcast about writing with Shane Thomas, and the movie Dune which was inspired by agricultural experiments from the USDA.
Analysis: Curb your de-commodification!
💡Key takeaway: De-commodification is not always easy to do. It is especially difficult for producers, if they are not connected with, and do not have a clear pulse of the end consumer demand.
Last Friday, I went to attend my cousin’s 15th anniversary party. It was a beautiful northern California evening, with good music, and great food. They had contracted with a local restaurant to recreate a street-side food vendor scene from New Delhi (capital of India).
One of the items on the menu was called “Ram Ladoo.” Traditionally, the word “ladoo” is reserved for a sweet spherical delicacy. “Ram” is a mythological character from Indian mythology, and the main character in one of the main epics of Indian/Hindu mythology.
I said to the person manning the stall (PMTS), “So, it is sweet, right?”
PMTS: “No, it is not. It is savory.”
Me: “Oh so it is a vada” (A vada is a savory spherical fritter snack made from ground flour of different grains. There are many varieties of vada, and it is a common way to refer to the category. It is often topped with sweet/spicy chutneys. The Ram Ladoo is made from the flour of a slightly different grain, and garnished with turnip shavings, which is unique.)
PMTS: “No, it is not a vada. It is a Ram Ladoo.”
A parallel would be to serve a hamburger type preparation, but to call it the “Peter Pancake.” I ended up having a silly argument. It could have turned into a “Curb Your Enthusiasm” type situation, though my wife intervened to make sure it didn’t happen!
As we were driving back from the party, I realized that I was trying to “commodify” the dish by insisting it was a common dish. To his credit, the PMTS stuck to his guns, and educated me on the preparation, to convey the added value over a standard preparation. He made sure the dish stayed “de-commodified.” One of the guests, who had grown up in New Delhi, gave me a better historical context.
There are some interesting lessons in this incident, which apply to agriculture.
De-commodification to get more value is not easy.
You need to communicate the value of your product, and how it is different from the commodity product in clear terms.
You need to have a clear understanding of what the customer values and why, and how, when, where, and how much more is the customer willing to pay for your de-commodified product.
You will have naysayers (like me) and everyone will not value your de-commodified product the same way. You need to find your tribe of customers who will value it appropriately.
Producers should collaborate to communicate the product differentiation.
The same evening, I learned about an inspiring and young entrepreneur, Sana Javeri Kadri. Sana is the founder of the spice company “Diaspora Inc.”
Diaspora Co. is a direct trade, single-origin spice company dedicated to growing a better spice trade. We put money, equity, and power into the hands of Indian farmers, to disrupt an outdated commodity spice trading system.
Through extensive taste testing, farm visits, and collaboration with the Indian Council of Agricultural Research, we source the very best spices that South Asia has to offer.”
Image: Westend61/Getty Images
Turmeric is one of the most common spices used in Indian/South Asian cooking.
Turmeric is a bright yellow spice powder that is made from the root of a plant in the ginger family (Zingiberaceae), Curcuma longa. It has been used in Asia for thousands for years as a dye, food coloring, and in Indian traditional medicine.
Even though it is a spice, it is very much treated as a commodity. I rarely see the most common way to de-commodify by using the “organic” label. Almost three quarters of the turmeric production in the world happens in India. India is the largest exporter of turmeric in the world.
A common bag of turmeric powder at my local grocery store here in California costs $ 13 to $ 15 / kg. The price of turmeric powder in India is $ 1 to $5 / kg. The price oof turmeric from Diaspora is $ 100 / kg.
Sana Javeri spent time traveling in India, meeting with turmeric growers. She did this from 2017 (she was only 23 then) and has been featured in the Forbes 30 under 30 list.
Through sheer persistence (and literally just showing up at their offices), Javeri Kadri was able to create a partnership between herself and the Indian Institute of Spice Research, who helped her not only learn about turmeric cultivation, but also introduced her to some organic heirloom turmeric farmers in need of a market.
Today Diaspora Co. works with nearly a dozen small family farms across India, paying an average of six times more than the commodity price, and sells seven spices including coriander and cardamom. Kadri has bootstrapped the entire operation while going beyond the norm, like paying for healthcare to farm laborers on some of its farms, with the goal of growing enough to be able to provide it to all workers on its partner farms.
Sana is able to support farmers with additional benefits and higher pricing, because her customers value the single source heirloom spices, and are excited about the story behind it.
What are some of the lessons from Sana Javeri Kadri?
Farmers need help to find the right markets for their product.
It is important to understand the needs of the customers, what they value, and what they are willing to pay.
Telling stories is important, and powerful.
Human persistence and determination to do the right thing is a powerful force, and all of us have it in us. We need to find the right causes/issues that motivates us and go after it.
How will farm machinery look in the future?
💡Key takeaway: New tech like autonomy, machine learning, computer vision, etc. can have profound effects on the form factor, and function of existing agriculture equipment.
A smart phone has taken many devices of the past and has combined all of them into one - a calculator, a boombox, a compass, books, notebooks, cameras, fitness devices, and many more. Very few people could have imagined this convergence a few years back.
Today a planter, a sprayer, a combine, and other equipment fundamentally do different jobs during different times, and look very different. Will that continue in the future with autonomous equipment with many sensors? How will the equipment look and behave, when it is powered by data and ML algorithms?
Will equipment get bigger or smaller or will size won’t matter? Companies like Sabanto Ag and Smart Ag are betting they will get smaller. Smaller scale equipment has certain advantages over large equipment, though they might not be as efficient on a per acre per equipment basis.
Each individual unit will be cheaper, and it will be easier to scale up or down.
Smaller equipment will make it easier to share with other users, and will create better conditions for different business models.
Smaller equipment provides more resilience from an operational standpoint. If you have one big combine and it breaks down, you cannot harvest. If you have 10 small combines, if one of them breaks down you only lose 10% of your capacity.
A fleet of smaller equipment will give you more flexibility, as you can combine it with other smaller form factors like drones, robots etc.
Smaller equipment will accelerate the iteration, testing, and innovation cycle compared to large equipment.
In edition 69 (The Unbundling of Humans in Agriculture) I wrote the following
Noted political strategist, Peter Zeihan provides one view for the US Midwest. He imagines a future in which automated equipment with cameras will take photos of each individual plant. The equipment will identify if the plant is a weed, or a crop and assess the health of the crop. It will give it a little jolt of whatever is appropriate (herbicide, pesticide, fertilizer, water etc.). He believes we are on the verge of production increasing by a factor of 2-3 (“on the verge of” is subjective, though within the realm of possibility.) It will turn conventional farming into conventional gardening, with a lower pollution rating and a far lower carbon footprint. (Highlighted by me)
Monarch brings tech to vineyards
When I had a conversation with Jehiel Oliver, CEO of Hello Tractor, he had talked about the beautiful convergence of a low horsepower, electric, automated, and solar powered tractor that will work in Africa. Monarch Tractor is moving towards that goal, with a different trifecta for now.
Unveiled in 2020, Monarch Tractor bills itself as the first to offer a “trifecta” of electrification, automation and data analysis that empowers sustainable farming, increases efficiency and safety, and maximizes grower profitability, according to a release. The machine’s enhanced data capture could help a grower improve practices and enhance yields, the company asserts.
The machine collects and analyzes over 240GB of crop data every day it operates in the field. The tractor is backward compatible with existing equipment and is supposed to work with the next generation of smart equipment. The data is collected by sensors, for real time actuation, to understand growth stage, plant/crop health data, and yield estimates. The 40hp continuous power rating is interesting, as the sub-40hp tractor showed the most growth in 2020 according to the US data from AEM.
Electric tractors can offer farming-as-a-service options. This will be true in places like Africa and south Asia, where the level of mechanization is low, and capex investment is challenging. According to Bain’s Farming-as-a-service report for India (2018), only 40% of farmers in India in 2011 (95% in the US) had access to mechanized equipment.
Currently the price tag for the tractor is at $ 58,000 and so is not affordable for smallholder farmers, but it is more suitable for high value crops like vineyards, whereas a 42 HP tractor from Mahindra costs about $ US 10,000.
One more grain marketing platform
GrainBridge, which was initially billed as a grain marketing platform and a joint venture between ADM and Cargill was acquired by Bushel a few weeks back. GrainBridge’s CEO Mark Johnson had penned an interesting article as to how grain marketing was dead in the context of North America. Mark Johnson’s thesis (which I agree with for North America row crops) was based on two main facts.
There are only so many possible buyers in a region, due to transportation costs.
There are only so many farmers in a region and a grain buyer likely knows all of them.
He argued that above two facts do not create conditions for a marketplace which typically require fragmentation on supply and demand side, and information asymmetries.
It is interesting to see the B of the ABCD, launch a grain marketing digital solution, called Bunge Ag.
Bunge efficiently connects North American farmers to the global marketplace using innovative solutions built on 200+ years of agribusiness expertise.
BungeAg is positioned as a not just a grain marketing solution, but also as a risk management, and sustainability solution.
Bunge’s financial risk management solution provides different contract structures for farmers, market insights, trend analysis, and risk planning expertise.
The sustainability page gives you a 404 error, which I am quite sure will be fixed soon.
Bunge has partnered with Illinois Corn Growers Association, PepsiCo, The Nature Conservancy and Environmental Defense Fund for the precision conservation management innovation project from Field to Market. It provides aout 300 farmers across 325K acres with financial and technical assistance to adopt conservation practices, while mitigating adoption risks.
The grain marketing platform does not seem to solve for some of the challenges inherent in trying to build a marketplace in North America. It is not clear how deep are the ancillary insights, and whether the sustainability programs are to make the grain marketing programs more sticky, improve the customer experience, and create additional value for producers.
Research paper: Azoles as a fungicide class and its impact
💡Key takeaway: Modern agriculture is reliant on fungicides to guarantee high yields and product quality. Azoles are a fungicide class used to control fungal plant diseases, with a market share of 25%. They are categorized to have moderate risk for developing fungicide resistance.
Plant pathogens reduce the yield and quality of agricultural products. Crop losses are significant, and two independent studies found that for the five most commonly grown commodities (wheat, rice, corn, potatoes, and soybean) losses are in the 20% to 30% range. (Oerke, 2006; Savary et al., 2019).
One of the greatest success stories in plant disease management represents the use of fungicides as a seed treatment. A very high proportion of cereal seed used for drilling is treated with effective treatments to avoid possible problems with seed-borne diseases.
Azoles are widely used in cereal crops, such as wheat and barley. More than one third of all fungicides applied in cereals globally are azoles.
Figure 4 Azoles share of the total fungicide market (%) measured as both volume and market value in different crop segments. Data from 2019 (source: Bayer Internal Source).
The use of Azoles has intensified across different crops, with more than 100% increases in soybean, banana, and corn in the last quarter century.
Table 3 Data illustrating the intensification of agricultural production during the last 25 years (FAOstat).
Fungi pose a constant threat to food production and have proven to be highly adaptable. Issues are fungicide resistance and new diseases have been a constant challenge to production. Despite resistance issues, azoles have provided stable control, though this behavior is not guaranteed in the future, if any unknown inflection point is breached.
Disease control in modern agriculture has developed over decades as a complex system of solutions that contribute to an overall goal of producing high-yielding, quality crops. None of the control solutions developed can stand alone and none was proved indispensable individually. The use of fungicides has developed into an integral part of modern agriculture and will continue to be so. Azoles have played a significant role in effectively managing plant pathogens and minimizing losses caused by plant diseases worldwide for almost half a century.
Jørgensen Lise Nistrup, Heick Thies Marten, “Azole Use in Agriculture, Horticulture, and Wood Preservation – Is It Indispensable?” Frontiers in Cellular and Infection Microbiology. Vol 11, 2021, pages 806, DOI=10.3389/fcimb.2021.730297, ISSN=2235-2988.
India’s leading agritech startup Arya launches the BNPL (Buy Now Pay Later) program. The program is available to every buyer who buys roughly 150-200 tonnes of agri commodities such as grains, oilseeds, pulses traded annually, and will help mitigate the age-old challenges of finance in the commodity buying space.
Bayer showcased how it invests in ag research of the future
EWG Study and Mapping Show Large CAFOs in Iowa Up Fivefold Since 1990
Farm fires create a pollution crisis in New Delhi (India’s capital). You might have to eat those “Ram Ladoos” in your home.
In Africa, the Heifer International survey found that 40% of agriculture organizations were forced to close at least temporarily due to the pandemic, 38% experienced a reduction in average purchase amount per customer, and 36% still do not have the financial capital to grow back their businesses. Fourteen percent of respondents said technology barriers have had a detrimental effect on farmer productivity.
Dr. Evil: “Machines with fricking laser beams.”
Computer artificial intelligence mimics human sight through 20 cameras used to identify, track, and target weeds. The trained AI recognizes a given crop and then directs eight lasers on any other vegetation in the field—weeds or volunteer crops. Vehicle movement, image processing, and laser firing all happen in real-time, allowing the Autonomous LaserWeeder to blast weeds while moving at average speeds of 1-2 mph. Seek weed; kill weed.
At 9,500 lb., 80” track width, 110” wheelbase, and roughly 7’ in height, the Autonomous LaserWeeder is diesel-powered with a 74-hp Cummins QSF2.8. (Photo by Carbon Robotics)
Funding for African agri-tech startups grows by 25%, but it is still very small.
Read, listen, and watch
📚 Computing machine ownership cost analysis from Illinois Farm Doc daily. Machinery ownership costs are a major proportion of machinery cost per acre (approximately 41 percent). Because of this fact, it is imperative that a farm carefully consider how machinery ownership costs are computed for benchmark purposes and when comparing ownership costs to custom rates.
🎧 I will be doing a live podcast with Shane Thomas (Upstream Ag Insights) on Friday, Nov 19th at 9 AM Pacific time. You can register for the live event here. It will be released as a podcast episode a few days after the live recording.
📺 Dune by Frank Herbert is available on HBO till Nov 21st. Dune was inspired by a real desert experiment by the U.S. Department of Agriculture in the ‘50s.
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My name is Rhishi Pethe. I lead the product management team at Project Mineral (focused on sustainable agriculture). The views expressed in this newsletter are my personal opinions.