Farmers Business Network – Technology Adoption in US

Farming – 10 June 2021

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Specialist:

Title:

Moderator: Nyree Hinton (NH), Third Bridge Sector Analyst

Tjarko Leifer (TL)

Former SVP, Strategy at The Climate Corp

Agenda:

1. Farmers Business Network strategic update

2. Farmer adoption of vertical-specific tech innovation

3. Agtech competitive landscape

4. Lending, financing and other market opportunities

5. Farmer-to-farmer network outlook

Contents

Q: How has technology adoption within US farming evolved over the years? What were the challenges

associated with this?

Q: Which major agricultural tech players lead on innovation?

Q: What trends were you monitoring pre-coronavirus? How did coronavirus-driven demand impact farmers

and their willingness to try new technologies?

Q: Could you give an overview of FBN [Farmers Business Network] and its categories and offerings?

Q: Could you define farmer-to-farmer networks? You mentioned you can access other farmers’ performance

data. How granular is that data? How do you think FBN secured this data feed from these farmers, given that

every farmer has their own little touch to how they produce their products and they may perceive their

information as proprietary? How do you think FBN overcame that hurdle?

Q: What are your thoughts on FBN’s key marketplace offerings, such as FBN Pharmacy and FBN Feed,

targeted at dairy and meat farmers?

Q: Do you expect farmers to become wary as FBN expands its offerings, given the supply chain control it

continues to possess over some farmers’ networks? Would some farmers perceive it as a conflict of interest? 6

Q: Does FBN dominate the farmer-to-farmer network market share-wise, or are new entrants or other firms

offering similar products?

Q: Would you say there are other retailers who may be interested in improving their own products, or are

there other ways for FBN to capitalise on the data it has aggregated from so many farmers?

Q: What are your thoughts on FBN potentially going public

Q: FBN is talking about providing funding and data aggregation and so many other tools for farmers. Do you

think there is a dilution risk? Could it be in too many different markets? Is there value in focusing on core

products, or do you think the name of the game is to diversify and scale?

Q: How has agricultural production of soy beans and wheat transformed from an industrial way of farming to

being more nimble and sustainable? Where do you think the industry is headed on that front?

Q: What are your thoughts on the traceability of inputs and how it relates to seeds and genetics? Could you

talk about consumer demand? Consumers want clean labelling. Are you aware of the effect of modified seeds

that are used to grow some of the soy and products that ultimately end up in our bodies and the demand for

transparency on that in the front end of the supply chain all the way to end consumer?

Q: Is there any one goal that you think is most important around ESG issues that you believe agricultural tech

can innovate and provide solutions for?

Q: How many of the new technologies are offered to farmers? Have they been sufficiently proven or are we

still in a trial-and-error phase? Could you outline that whole ecosystem of trying, failing, trying again and

continuing to innovate?

Q: Could you talk about how running experiments in controlled environmental farming may give insights into

what may not be picked up due to the constantly changing environment? How has the industry learned from

a controlled environment and applied some of those practices and tried to replicate it on a large scale in an

uncontrolled environment?

Q: What should investors focus on when it comes to FBN or agricultural tech in general? What do you think

is the next big thing?

Farmers Business Network – Technology Adoption in

US Farming

Transcription begins at 00:00:01 of the recorded material

NH: Welcome to Third Bridge Forum’s Interview, entitled Farmers Business Network – Technology Adoption

in US Farming. I am Nyree Hinton and I will be facilitating today’s Interview with Mr Tjarko Leifer, former

SVP Strategy at The Climate Corp.

Tjarko, before we start with today’s Interview, please state I agree or I disagree to the following statement: You

understand the definition of material non-public information and agree not to disclose any such information,

or any other information which is confidential, during this Interview.

TL: I do.

NH: Thank you, Tjarko. Could you start by giving the audience an introduction of your background and

various roles you’ve held in the industry?

TL: The most relevant in my career to the conversation today are the six years that I spent at a company called

The Climate Corporation. I joined when it was about 20 people, as a Series B private company in San

Francisco, and, about two-and-a-half years later, Climate Corporation was acquired by Monsanto and, at the

time, we were about 200 people. A few years after the acquisition, through some tack-on acquisitions, organic

growth, we grew to be 600 people at The Climate Corporation. I was the SVP for Strategy, which included

corporate development, business development, international expansion and a more typical strategy function.

Since leaving The Climate Corporation, I have founded a company and sold that to a big CPG company. I’m an

active angel investor and sit on the board of two private ag tech start-ups.

[00:02:04]

Q: How has technology adoption within US farming evolved over the years? What were the challenges

associated with this?

TL: I think it’s important to, whenever we’re talking about either competitors or technology adoption, etc, do

a bit of segmentation, so we’re going to focus today’s conversation, I guess, on the US market, and, even within

the US market, I would broadly split it between broadacre or sometimes row crop is another term that people

use for it. This is really corn, soy bean, wheat, primarily grown in the Midwest, and that’s to distinguish it from

speciality crops, so nuts, fruits, vegetables that are often grown in the Pacific Northwest, parts of the north

east, parts of the south east, many areas in California. These are pretty distinct markets with their own

technology ecosystem and trends. I think if you look at row-crop farming over the past, depends how far you

want to go back, but if we really zoom out at a 100,000-foot level, the first big innovation was from farmers

using saved seed to buying seed, especially in corn. This is called hybridised seeds, so you get a boost in yields

but you give up some of the self-sufficiency of being able to retain seed, so that happened probably 60-80

years ago, then you have a big boom in the use of synthetic fertilisers, so applying ammonia to fields. That

really happened in the ’40s and ’50s and led to another yield boost. Just the big picture again is things like

corn and soy beans have probably been compounding at 1-2% yield-per-acre increases for almost 100 years.

As you get into more recent technology changes, as you get into the ’90s, things like auto-steer, so GPS and

precision GPS, RTK GPS, allowed essentially bigger machinery more accurately operated in the fields. As we

get towards the end of the ’90s and into the 2000s, you get the biotech traits and marker-assisted breeding.

Private and confidential 3

That was, again, a yield boost and productivity enhancements and better both weed and disease management,

and then as you get into the 2010s, we get into the ag tech era of digital agriculture, so the use of data and the

digitisation of observations of the field. All of what’s now called ag tech, but might be more precisely digital ag,

to exclude the biotech revolution and some of the breeding activities, is really about how farmers can optimise

and improve the function of trying to generate yield sustainably as a function of the genetics that they’re

planting, the environmental conditions that they’re facing, which are, of course, dynamic, and then the

farming practices that they’re employing and understanding how to get the most out of every acre on their

fields.

In terms of the question about technology adoption and the challenges, especially for businesses trying to

bring innovation to farming, farmers are an experimental bunch. There’s a lot of innovation that gets pushed

towards farmers and there’s a real conservative bent of, “Let me try this on my fields and see how it works for

me,” approach to this, which makes sense. It’s a capital-intensive, low-margin business, so the downside for

the farmer of adopting a technology if it doesn’t perform for them is quite high, and so the effect of this is that

the adoption curve for different technologies is elongated because I might try a technology on a part of my

farm in a year, and then take a whole other year. We’ll see how that part of my farm performed and then I’ll

make a decision to expand or hold steady or reduce my adoption of that technology in the following year, so,

given the seasonality inherent to agriculture, there’s a rate limiter on how fast even fantastic innovations with

very visible and demonstrable ROI can be adopted.

[00:07:23]

Q: Which major agricultural tech players lead on innovation?

TL: First, I’ll categorise the segments of companies that exist, and then list the companies, and then we can

talk about who owns them today. There’s a set of ag tech players that are focused on agronomic improvement,

so that’s helping farmers optimise genetics by environment, by farming practice decisions. That’s the decisions

that the farmers face every year. That’s one piece, the agronomic piece. The second one is operations and

logistics. Especially in row-crop farming, almost all the work is done by farm machinery and over quite large

areas. My tractor is over here doing this task now. Which field does it need to go to next and what task is it

going to be doing there and what labour is going to be with it, and then just take that over a several-thousand-

acre farm with many pieces of equipment and staff, and that operations management. The third area I would

characterise is cost accounting or management accounting. What were my input costs into a particular field,

what yield and then ultimately what revenue through marketing my crop did I generate there, is the third

category, and then the fourth category I would say is how do I select and procure the inputs that I’m using?

Those are the four big categories.

Go back and take the agronomic piece, the leaders there are probably Climate Corporation, which, as I

mentioned, was acquired by Monsanto. Monsanto was acquired by Bayer, so that’s now owned by Bayer. The

second one is Granular, which was acquired by Corteva and merged with their in-house product called

Encirca, so may go by a mix of Encirca and Granular. Those are the leaders in supporting agronomic decision

making. In the operations space, probably the biggest player there, that hasn’t been a smaller company that

has been bought up, is the John Deere Operations Center. CNH and Agco, the other big equipment makers,

have less robust product offerings in the telematics and task management space. The financial management

space is a little bit smaller pie. Conservis is a Minneapolis-based start-up that’s focused on that, and Granular

has quite a bit of functionality in that area as well. In the input-sourcing space, that’s where Farmers Business

Network is, which we can spend more time on or will spend more time on it this conversation, and then there

are either in-house developed efforts or smaller acquisitions that have gone into the major ag retailers and

their farmer-facing capabilities in that input-sourcing category.

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[00:11:15]

Q: What trends were you monitoring pre-coronavirus? How did coronavirus-driven demand impact farmers

and their willingness to try new technologies?

TL: Couple of comments on that, so the long-term trend in farming in the US is that there are fewer larger

farms. That’s a consistent trend over the last 100 years and it continues today, that there are fewer farmers

and the farming operations that remain continue to get larger. The fact of them getting larger necessitates

moving to more professional management and data-driven decision making. It’s no longer the typical practice

of an owner operator sitting in their tractor making all the decisions. As the operations get bigger, they need to

have the kind of managerial reporting and decision support tools that you would expect a company with a USD

20m-30m balance sheet, maybe several million dollars per year of turnover and thin margins to have in order

to make that business work. That’s at the core of what continues to drive technology adoption, is those farmers

that are in a position to consolidate have to be fantastic operators. They are continuously looking for an edge,

whether that be in the acquisition of additional land, either to purchase or lease, the inputs that they choose,

the farming practices they employ, how they market their crop, what financial tools they use to finance

themselves and mitigate risks.

To your question or your comment about COVID that was made before we hopped on the session, especially

row-crop farming does not involve a lot of people in close proximity in enclosed spaces. In terms of the

operations of the farm, there’s not a ton of impact from COVID on farming. In terms of consumer and the

demand side shifting, obviously a ton of demand shifted from institutions and restaurants to home

consumption through grocery. That was really a challenge for some sectors in ag, in terms of a very rapid shift

in channel mix and product demand mix, but I think that was most acutely felt by the fresh produce producers

and less so by major row-crop farmers. Their output is both shelf-stable, in terms of the grains, and most of it

goes into things like animal feed and things like ethanol production, which are just much larger markets.

There’s more time in the supply chain and I think the consumer demand profile did not shift dramatically in

those spaces.

[00:15:28]

Q: Could you give an overview of FBN [Farmers Business Network] and its categories and offerings?

TL: Again, this is an outside-in perspective, but Farmers Business Network probably started 6-7 years ago. It

started really with this idea of great farmers sharing data about their operations and their performance in

order to be able to benchmark each other and generate insights about maybe how they could operate their

businesses better. The idea was that that software platform could be directly monetised by charging farmers

for that. The model has really evolved and this is pretty consistent across most of the digital ag space, which is

that charging farmers directly for software has been pretty challenging, or companies have realised that they

can capture more value with less friction in indirect ways. The way that has played out for Farmers Business

Network is it’s really evolved into a digital ag retailer or a digital co-op.

For people who aren’t super familiar with the ag space, I think a business like Costco might be a good analogy,

where there are a lot of SMB clients. They pay a membership. They get to buy great products across a wide

range, from retail products to financial services. There’s a really wide array of products available at a Costco,

and so same with FBN. It’s all the big inputs, so with crop protection probably being chemistry for controlling

weeds and insects and diseases, but also fertiliser, seed and then financial services that might go around that,

both lending and insurance. The data co-op aspect of Farmers Business Network remains a core and

important piece because, as you can imagine, a benchmarking exercise around how different varieties of seed

that you planted last year performed on your different parts of your farming operation and being able to

benchmark that against all the other farmers that are in the FBN network, that have maybe comparable

farming operations to yours, naturally it leads to some decisions about what seed or other crop protection you

might want to use in the following season, and then a purchasing opportunity around those.

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[00:18:45]

Q: Could you define farmer-to-farmer networks? You mentioned you can access other farmers’ performance

data. How granular is that data? How do you think FBN secured this data feed from these farmers, given that

every farmer has their own little touch to how they produce their products and they may perceive their

information as proprietary? How do you think FBN overcame that hurdle?

TL: I think FBN’s positioning of by farmers for farmers, of being independent and not owned by one of the big

ag input companies, has been part of their positioning and part of the way they’ve established trust with

farmers. You’re absolutely right. Farmers, they’re in competition with their neighbours, essentially, to acquire

more land and to grow and so they do treat their information about their farm as proprietary data, so it’s not

the level of granularity of my neighbour is also an FBN customer and I can see how their performance is and

see how I match up, but it could be at a county or regional level. What is the 50th percentile and what is the

80th percentile for people who have the similar soil type that I do, and then I can see what the yield outcomes

were at those different percentiles and compare my own performance to those benchmarks and, through that,

get some insight into what products others are seeing perform well in similar conditions to mine. That can

inform maybe a product decision or a farming practice decision that I would want to do going forward, so I

would call it aggregated and anonymised, but allowing benchmarking and comparison around dimensions of

similarity, which is often environmental similarity, so similar weather conditions that are faced, similar soil

type and maybe a topography profile.

[00:21:17]

Q: What are your thoughts on FBN’s key marketplace offerings, such as FBN Pharmacy and FBN Feed,

targeted at dairy and meat farmers?

TL: To me, it’s a natural expansion of their market, from starting in row-crop farmers in the Midwest who are

doing corn and soy bean. There are some of those farmers who also are raising livestock, and so it’s a natural

market expansion to begin servicing the data co-op pieces in terms of benchmarking and insights in those

areas of a farming operation, and then allowing people to purchase inputs in those areas. Once you’ve got

hybrid operations that are doing both and you’re servicing them, then you can further expand into serving

farmers that are only livestock farmers. I think it’s a further playing out of the playbook, which is provide some

benchmarking insights and then essentially monetise those through making inputs available to farmers in a

way where they’re getting high-quality inputs purchased in a more direct manner than through their local

retailer.

[00:22:54]

Q: Do you expect farmers to become wary as FBN expands its offerings, given the supply chain control it

continues to possess over some farmers’ networks? Would some farmers perceive it as a conflict of interest?

TL: I think farmers will continue to shift their share of wallet, especially existing FBN users, to other FBN

product categories where they feel like they can get great value. I don’t think, to date, FBN hasn’t gotten so

much market share that they’ve displaced in any geography alternatives for the farmer to buy from. While

people may feel like, “Okay, I’m now sourcing a large share of my inputs through FBN, but I don’t feel like I’ve

got some vulnerability to my business because of that, because if FBN were to go away or become much less of

a value proposition in terms of a place to buy, I have alternatives to buy from,” so I don’t view that as an issue.

I think farmers will pick and choose, so I may use FBN to buy my crop protection inputs because I’m making

my own decisions about what inputs I need. I maybe have an agronomist on staff, but when it comes to crop

insurance, even though FBN offers that, I’ve got somebody in town that I’ve worked with for the past 15 years.

They understand my operation, so I prefer to continue buying insurance through that channel, or I prefer to

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get my loans through a local banking relationship. I just don’t see value in that part of the offering and I think

that’s natural, because it’s sort of a decoupling or unbundling of advice from the input purchase, which is what

FBN is doing. They don’t have boots on the ground and they don’t have the same level of customer support.

Back to the Costco analogy, it may be the difference between going into a Costco and buying a flat-screen TV vs

going to a hi-fi dealer where they can talk to you about all the differences between the models and provide a

bunch of recommendations and expertise to help you set up your home theatre. There’s a different level of

service and for that value proposition in different categories will appeal to different farmers in different ways.

[00:26:21]

Q: Does FBN dominate the farmer-to-farmer network market share-wise, or are new entrants or other firms

offering similar products?

TL: I think that FBN is the new entrant in the space that’s gotten to some scale. Who they’re competing with

are the traditional ag retailers, so you can think of this as a big-box store in a small town where, as a farmer,

you can go and you can buy your seed and the chemicals you need for your farm and the fertiliser. Those

companies are responding to the general digitisation we see throughout our society but also the threat posed

by FBN’s growth and they’re making different efforts to provide more data-driven insights, along with the local

knowledge and expertise that they provide through their on-staff agronomists. I don’t have outside-in

information on market share by geography, by input type, which is what you’d need to be able to make more

detailed statements about that, but they are the only real entrant into the space that’s got scale. They’re

competing with the incumbents, who are responding by trying to become more digitally enabled themselves,

but, of course, have a higher cost structure given the physical footprint that they have, but the flip side of that

is you can also go down to your local retailer and you can pick up something you need today because they have

that physical presence. They have inventory, etc, whereas with FBN, they are doing fulfilment from further

afield.

[00:28:42]

Q: Would you say there are other retailers who may be interested in improving their own products, or are

there other ways for FBN to capitalise on the data it has aggregated from so many farmers?

TL: I think that they’re running their playbook, which is if a farmer contributes data, they can benchmark

their performance vs others. If you see a place where you’d like to improve your performance relative to those

benchmarks, you can dig in a bit to what kinds of inputs people are using, and then that’s a natural selling

opportunity, so the playbook is getting rolled into more categories and maybe seed is an interesting one to

double-click into. Just to understand the dynamic here, the big ag input companies like Bayer and Corteva and

BASF and Syngenta, in the US market they primarily sell to farmers through ag retail. Because of that, they

have chosen not to allow FBN to distribute their seed products, essentially not appoint FBN as a distributor

because that would alienate and frustrate their existing channel of the traditional ag retailers, where they’re

competing within that channel for market share with each other. They don’t want to disadvantage themselves

within the existing channel that’s the vast majority of the volume in the marketplace by supporting the upstart

and so, in crop protection, FBN is able to source essentially generic crop protection chemistry that has the

same active ingredients as the branded products and offer great value to people.

In the seed business, that’s not really possible. FBN has been able to use its benchmarking data to show that

often the top-of-the-line branded seed products, from the big ag input companies, in many cases over-serve

farmers in terms of the technology that’s included, and the biotech traits that are in them, it’s more than some

farmers need in some situations. Having that granular farmer data has allowed FBN to identify segments or

areas or fields where, let’s call it store brand, like the Kirkland brand of seed that they’re able to provide, that

they’re able to sell, where those would perform well, and so to give people confidence to not go with the

branded product but instead go with the store brand, because they’ve got the data to show that the

performance is equivalent or even perhaps better with the store-brand product.

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[00:32:40]

Q: What are your thoughts on FBN potentially going public? Do you have any potential valuation ranges?

Everyone seems to be going public via SPAC [special purpose acquisition company] these days, such as

AppHarvest recently. What are your thoughts on the capital market and how that may or may not benefit

agricultural tech companies?

TL: Let me take FBN specifically. I think given the nature of the industry dynamics between the major ag

input companies and the major ag retailers, FBN has set itself up, I think, that the most likely outcome is to go

public, either through a traditional IPO or a SPAC, because any of the incumbents buying them, either at the

input provider level or at the retailer level, will just be massively disruptive to people’s existing businesses and

other business relationships. Therefore, I think it probably makes sense for FBN to pursue an independent

pathway that’s also consistent with their positioning with their own customers, so that’s the pathway I would

expect for them. In the era of mean stocks and so forth, I would not try to venture a guess as to what value

they’d be able to reach in the marketplace.

[00:34:36]

Q: FBN is talking about providing funding and data aggregation and so many other tools for farmers. Do you

think there is a dilution risk? Could it be in too many different markets? Is there value in focusing on core

products, or do you think the name of the game is to diversify and scale?

TL: I think the playbook here is to systematically go through all the categories that farmers need to buy for

their operations, and determine where they can get traction and scale. The playbook of you have relationships

with farmers in the network, you’re able to do some benchmarking, the benchmarking leads to a decision

about what the best product is to buy and then you can try offering it to people. The question is how much

local hands-on sales and sales support and advisory needs to go along with that, and how much can you

unbundle those and just sell it in a more e-commerce motion? I think that’s the name of the game. I think

they’ll have more success in some product categories than others and with some segments or geographies than

others and it’s probably not possible to totally figure that out beforehand, and so I think you’re going to see,

and already have over the last few years, just a lot of experimentation in terms of the breadth of the offering.

Adding more things in and probably shutting down some that don’t get to scale.

Ultimately, I think you’d like to see some synergy between those and you already do to some extent. If you’re

loading up some of your yield performance data for seed benchmarking, that same data is necessary to

underwrite crop insurance and so you can see a case how the more business you do with FBN, the easier it gets

for the farmer to do more business with them and that there’s some synergy between the products. I think

that’s the best case because then it’s really reinforcing. Otherwise, it’s really just taking that existing customer

relationship and building it out into more product categories, once you have that relationship, so I don’t see it

as a fragmentation risk. I see it as a natural growth pathway for this kind of business. Go back to the Costco

analogy, you can buy your eyeglasses now and your food and a whole bunch of other categories of stuff out of

Costco, but it’s a broadening of that relationship as opposed to a fragmentation for the technology-enabled

retailer.

[00:38:10]

Q: How has agricultural production of soy beans and wheat transformed from an industrial way of farming to

being more nimble and sustainable? Where do you think the industry is headed on that front?

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TL: I think we’re probably coming to the end of a golden era of broadacre farming in the US, where some of

these biotech traits came out, Roundup Ready, Bt for insect management, where control over weeds and

insects was exceptionally high and it was pretty easy. Plant the traded crop, treat with some chemistry and

you’ll have a good outcome, and then apply enough fertiliser to make sure your crop reaches its full yield

potential. In some ways, things got a lot simpler for farmers and I think we now have growing weed resistance.

We have regulatory pressure and better environmental understanding of the consequences of nitrogen run-off

and so, to me, the golden or easier era, of row-crop farming at least, is ending and it’s becoming more

complicated again. More interlocking layers of practice, more that can have durable weed control, durable

insect control, are going to become more the norm. It’s going to become more complicated to manage in an

environment like that. The environmental understanding and regulations are going to continue to tighten. The

S in ESG, a lot of that’s going to come from the CPG companies and the food retailers who are translating

consumer preferences into requirements for their supply chain. You’re going to have both from the

environmental regulatory side, as well as the consumer demand side, the bar just continuing to be raised in

terms of what the expectations are. I think the fear is that this is done in a way that passes more cost to

farmers, but doesn’t create more value for farmers, so that’s probably the fear side of it.

The opportunity side I think is that things like carbon sequestration and farming practices, for example, that

contribute to carbon sequestration, that contribute to soil health, that contribute to water conservation, that

boost organic matter, that mechanisms can come into play where farmers can get paid for those things, I think

those could be really powerful mechanisms to drive win-win. It would be a win for consumers because people

are getting what they want in terms of how the food and fibre that they consume is produced, but the farmer

has opportunities to do well by doing right. I think there’s a bunch of probably opportunities for ag tech

players to facilitate that happening, whether it’s things like tracking and monitoring of practices, whether it’s

traceability of inputs, whether it’s marketplaces for things like carbon credit, so there’s a lot of opportunity in

that space but it’s on a knife edge between it being the fear of risk and unlocking that opportunity.

[00:43:06]

Q: What are your thoughts on the traceability of inputs and how it relates to seeds and genetics? Could you

talk about consumer demand? Consumers want clean labelling. Are you aware of the effect of modified seeds

that are used to grow some of the soy and products that ultimately end up in our bodies and the demand for

transparency on that in the front end of the supply chain all the way to end consumer?

TL: A couple of comments about this. Yes, there’s this tension between price and the attributes that people

want with their food, so price continues to be a huge winner for such a large segment of the consuming public

that that is just continuously there as a way of how we do produce and deliver quality food more

inexpensively? There are definitely niches around pasteurised beef and organic meats, which means that the

animals were fed grass and grains that were farmed organically, but if you’re just wading into this space, it’s a

huge morass. What is defined as organic vs conventional, because inorganic is not the right term for it, is not a

bright line. It’s a super messy space. I think that the ag industry has really got wrong, in the early going, the

consumer messaging and communication around biotech traits, so that it’s seen as something unnatural or

different. I think there’s a real opportunity to do a lot more public education around this because the evolving

consumer preferences and what’s on trend from a food standpoint and what the actual science is around some

of these technologies, is just not always well-connected so I think there’s a lot of misunderstanding there.

Many books have been written about the flaws that happened for many participants in the value chain as the

first generation of biotechnology was brought into the food system. Who knows? Maybe things like CRISPR

and the successful COVID vaccines will create a new opportunity and a new openness among the public to

learn a bit more and maybe appreciate some of the benefits vs what, from my vantage point, I think is more of

some of the fear-mongering around some of these things.

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[00:47:16]

Q: Is there any one goal that you think is most important around ESG issues that you believe agricultural tech

can innovate and provide solutions for?

TL: I think if you look at the big arc of agriculture, people have continued the Malthusian argument of we’re

going to run out of food because of population, or producing food is going to ruin our environment. The ability

of the food value chain to continue to, through optimisation, improve breeding, biotech traits, chemistry,

fertiliser, digital ag tools, to continue to produce more with less, to improve the efficiency around that, I’m an

optimist around that. The data is pretty compelling. In fact, I think at this point, the land area in the US under

cultivation is actually declining, so marginal farmland is being taken out of agricultural production because

farmers are just getting better at producing more out of the existing farmland or subset of the farmland. I

think that’s a really good news story and I think that trend will continue. We’re going to continue to produce

calories inexpensively and increasingly more environmentally sustainably.

I think there are some issues with externalities, whether it’s things like nitrogen runoff or payment for

practices that maximise carbon sequestrations, where externalities can be internalised or monetised in a way

to incentivise better practices. Enabling that process to continue and to try to accelerate it in ways, like I said,

with those externalities, I think that that’s the motivating mission for people in many different parts of the ag

value chain to be involved with, is to do things in a way that is sustainable, whether that be from a water

standpoint or a soil health standpoint. That’s the march of technology and I am an optimist about what’s

possible, and ag tech companies are going to play parts of it and have to work together with societal

acceptance, as well as, in some cases, regulation around it.

[00:50:36]

Q: How many of the new technologies are offered to farmers? Have they been sufficiently proven or are we

still in a trial-and-error phase? Could you outline that whole ecosystem of trying, failing, trying again and

continuing to innovate?

TL: I’m not sure I 100% understand the question but let me address it this way. Running experiments in

farming as to whether some practice or seed selection decisions created value, or worked or didn’t work, is

incredibly challenging, for the following reason. I’m sitting there in March or April. I make a decision about

what variety to plant and how to fertilise it, and I make a dozen other decisions over the course of a season,

and then, at the end of the season, I get a yield outcome. I get it for my whole farm. I get it for a field. I get it

with high spatial resolution off of my combine, and then you have to disentangle this cause and effect. Did the

field perform better because of that decision I took, or was the weather better this year? It’s a complex system

with a slow feedback mechanism, or a long lag between action and observation of the outcome, so there’s a lot

of inherent uncertainty in the system and, a single farmer, if they’re farming for 40 years, they get 40

observations of they did stuff and then they saw how it came out. Rarely are two years the same, so the

weather is always changing. The varieties are always changing so the genetics is different from year to year,

and so the ability to experiment and learn from your experimentation gains so much power when farmers are

able, in different mechanisms, to consolidate data, or learn not just from their own farming operations but

from other farming operations.

This has happened for a long time with the land-grant universities in the country running field trials. They

might have a trial across 50 fields, spread out across the whole state, which can learn more than just one

farmer in one county experimenting on some of their fields, and so all of agriculture is moved forward by more

data being collected about what was done and then what was the outcome. Whether any particular experiment

was, as you said, successful or not successful, or whether it was the right decision or the wrong decision, it

always has to be conditioned on the weather I had that season, the other things that happened that season.

That’s a fundamental challenge in outdoor agriculture and it’s one where I think digital agriculture and the

digitisation of agriculture can have a positive impact on that. I don’t think it’s as simple as saying, “Seed

variety A was experimented with and was found to not be better, but the other variety was better.” It’s always a

more complicated answer than that. Sometimes the answer might be, “This is a universal failure and it doesn’t

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work anywhere.” It’s more developing a more nuanced understanding, which is like, “In these types of

conditions, this is the best decision that we can make, and in this other type of situation, this is the best kind of

decision, and here is the data that supports how much conviction we can have around that.”

[00:55:46]

Q: Could you talk about how running experiments in controlled environmental farming may give insights into

what may not be picked up due to the constantly changing environment? How has the industry learned from a

controlled environment and applied some of those practices and tried to replicate it on a large scale in an

uncontrolled environment?

TL: Definitely all the big seed-breeding operations use greenhouses and so forth to do year-round growing or

growing in controlled conditions or ideal conditions. It’s part of the R&D process, but the translation of that to

performance in the real world is not a direct line. There are 200 million acres of row crop farmed in the US.

It’s not a situation where, in our current food system, that’s going to convert to controlled environmental

farming. The land is so cheap, the capital costs are so low, it’s just never going to move indoors. You have to

think of wildly different food system, where there are bioreactors growing algae that are directly used to create

artificially grown meat, for you to cut out large segments of the need for row-crop farming to turn solar energy

into calories for the food system. There are lots of people working on sci-fi projects around that but, to me,

that’s pretty divorced from the ongoing mission of just continuing to make row-crop farming more productive

and sustainable. It would represent just a step change and a whole bunch of changes in consumer behaviour,

and that would probably play out over a 50-year timeline, not year in, year out.

[00:58:41]

Q: What should investors focus on when it comes to FBN or agricultural tech in general? What do you think is

the next big thing?

TL: I think the thing to understand is, given these processes that exist, where can the digitisation of those

processes accelerate the processes and how can indirect monetisation be used to grow or defend the profit

pools that exist already in the marketplace? From a public equity’s investment perspective, I think that’s the

important piece to keep an eye on. Where is digitisation putting existing profit pools at risk and where does it

actually create opportunities to get even more value out of other IP that companies have?

[01:00:13]

NH: Let me close by saying thank you, Mr Leifer, for your input. Clients, if you would like to speak to Mr

Leifer in a private call or meeting, please let your relationship manager know. Thank you again for joining

Third Bridge Forum's Interview today, this now concludes our meeting. Goodbye.

TL: Thank you. Bye.

Transcription ends at 01:00:23 of the recorded material

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