Indigo Ag Inc – Strategic Update & Competitive
Positioning within Agtech – 23 July 2021
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Specialist:
Title:
Moderator: Nyree Hinton (NH), Third Bridge Sector Analyst
Barry Goldman (BG)
Former VP, Research & Head, Discovery at Indigo Ag Inc
Agenda:
1. Indigo’s product mix, tech offerings and innovation
2. Carbon storage trends across agriculture
3. Competitive positioning vs Farmers Business Network and other key players such as ADM (NYSE:
ADM)
4. Seed treatments innovations
Contents
Q: Could you segment out US agriculture regarding how their tech ecosystems differ? How does the agtech
differ from the different types of US agriculture?
Q: Where has the most innovation been in seed treatments and different technologies to enhance the yield,
where is the most adoption? Can that span different crops?
Q: How has coronavirus impacted the urgency to be innovative and adopt these technologies in ag farming,
particularly with the increasing demand for soybeans and almost every commodity? How has that impacted
the landscape in US agriculture?
Q: Could you give us an overview of Indigo’s business model, some of its offerings and the different
categories it operates in?
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Q: Could you explain why this technology is not as promising as it seems to be? Are there different crops that
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it works better on?
Q: You mentioned microbes and the inconsistency of the technology, and that farmers are less likely to try
again if it doesn’t work. Could you speak to their alternatives? What else do they have that is able to give
them 20% increase in yields, albeit not consistently, that they can afford throughout the product?
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Q: It seems like a farmer-to-farmer network where Indigo is having many of the farmers upload some of its
data or their yields to the platform in real time. How does Indigo monetise that data to other farmers?
Q: How do you think that marketplace differs from other types of farmer-to-farmer networks where pricing
is readily available?
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Q: Could you speak to some of these big players such as ADM, and their impact and control over the market
generally for agriculture? What does that do for farmers and their ability to raise pricing and be more
competitive?
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Q: The goal is to cut out the middleman which are the big processors, such as ADM and Ingredion. What do
you expect or foresee to be the challenges to making that happen? Is it because a company such as General
Mills needs much more than just getting the raw product? Why might that model not be as simplistic as it
seems?
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Q: What are your thoughts on these big players’ control over the market, because they’re such market
movers that it doesn’t really matter? What have some of these huge ag producers done to stifle competition
for some of the farmers, and the process to the manufacturers? We talked about the regulatory landscape
and how it’s harder to get some of these technologies approved and the strictness, but why hasn’t that
applied necessarily to some of the producers or processors who have a stronghold in the market?
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Q: What do you think it takes for some of these farmers to be more competitive and take advantage of some
of this environment having higher yield but without really capturing it from a P&L standpoint?
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Q: Where else are the opportunities for technologies to develop throughout agriculture? Where do you
expect the most investment to go for agtech?
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Q: How do you balance consumers with these microbes and ways to innovate with an increasing yield or
making products safer, healthier or better, if you have a big, educated consumer who wants nothing that’s
modified? They want everything natural. Where is the right balance or do you think the consumer is still
immature in its thinking regarding whether a revolutionary product comes to market and if they will take it
anyway?
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Q: How does plant-based factor into your approach about modifying some of these crops to make them
higher-yielding? We have this huge explosion of alternative products, plant-based products. What is the
macro impact that’s had on US agriculture?
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Q: You talked about the likelihood of Indigo being a target, but if you had to compare, do you expect Indigo
to be acquired or go the public route? What are your thoughts on either or?
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Indigo Ag Inc – Strategic Update & Competitive
Positioning within Agtech
Transcription begins at 00:00:00 of the recorded material
NH: Welcome to Third Bridge Forum’s Interview entitled Indigo Ag, Strategic Update and Competitive
Positioning within Agtech. I am Nyree Hinton and I will be facilitating today’s Interview with Mr Barry
Goldman, former VP, Research and Head, Discovery at Indigo Ag.
Barry, before we get started 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.
BG: I agree.
NH: If you start by giving the audience an introduction of your background and various roles you’ve held in
the industry.
BG: My background is I have a PhD in microbiology and then moved on to a postdoc studying biochemistry
and just beginning of genomics. I was hired by Monsanto Company in their early days in genomic sequencing
of corn and in Arabidopsis and rice, and then I led teams involved with data science. I have led teams in
competitive intelligence, in tech scouting, and I led teams in microbiology over a 17-year career. I was
recruited by Indigo Ag in the fall of 2016 to help lead their discovery and was there for about three years,
leading their discovery platform and eventually lumping all of their research. I left to go to a company called
Pluton Bio. Pluton Bio works on microbes but not on endophytes, and we do not do seed treatments which is
what Indigo does, so we tend to focus on the chemistries of the microbe, so it’s similar in that we both use look
at microbes but we don’t apply them in the same way and we don’t look for the same products.
[00:02:10]
Q: Could you segment out US agriculture regarding how their tech ecosystems differ? How does the agtech
differ from the different types of US agriculture?
BG: Every product in ag is a different product, so while you think about row crops, and about five organisms
fall into row crops, so that would be corn and soy, wheat, cotton, rice. Those are the five main row crops, but
each of them is its own product with where, how it’s harvested, who sells the seeds, where it goes to, how the
commodity markets run. They’re all five different groups, so even though they’re large, and so, for example,
corn is a roughly 90-million-acre product with yields that range from 100 bushels an acre to 300 bushels an
acre, it’s very different than the soy. Growers have to make decisions early based on what they know about
them and what the markets are going to be in order to decide what they’re going to grow and how they’re going
to grow it.
[00:03:46]
Q: Where has the most innovation been in seed treatments and different technologies to enhance the yield,
where is the most adoption? Can that span different crops?
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BG: I’ve tended to work most on the row crops. 20 years ago, the biggest change was in the adoption of
genetically modified organisms, and that means taking the whole gene, usually with resistance to insects or
tolerance to herbicides, and moving that into an organism via agrobacterium. It gets taken in, you look for
variants of that that don’t have any impact on yield and then you can sell that and essentially spray the
herbicide at the same time.
The next big change that occurred was in germ plasm, where two companies in particular, Monsanto and
Syngenta, really improved the quality of their germ plasm through molecular breeding, where they invested
heavily in figuring out how to find the genes. Instead of just traditional breeding where you follow it by the
structure of the plant, you were really trying to figure it out by markers associated with yields, and so there
was a huge transformation. That really happened over the last 15-20 years. There are technologies now that
are changing that, so one of them is Crispr, where instead of breeding for that, now you can actually go in and
if you know the gene that needs to change, you actually go in and change those genes, and so that’s a new one.
Those are just hitting the market and I think the regulatory paths, while they look good, have not been
approved. The next one is in microbes or biologicals, where they are putting live organisms in there to see if
they can make improvements. The beauty of them is it’s a lot less to bring to market. The regulatory path is
low.
However, there has not been consistency. While there have been microbes put onto plants, usually as seed
treatments, put onto seed treatments, you just haven’t seen consistency from the results. While there has been
some associated with improving protection against fungi and improving overall growth from relatively old
strains, Trichoderma, Bacillus, etc, that have been sold by Valent and some of these companies that have been
around for a long time, they don’t make a lot of profit. Companies like Indigo have come in and Marrone and
AgBiome have come in and gotten a lot of funding to find new microbes to improve the overall quality of the
plants and to bring things like resistance to the seeds or resistance, tolerance to heat, and there’s some positive
data from it but there haven’t been consistent results. The growers themselves, they’re not necessarily ready to
believe this is all going to work, so there’s some doubt in the industry in that space, so that’s the state of the art
right now. Those are the latest trends.
NH: Why do you think there’s so much optimism in this unproven technology vs going towards some of the
things that you mentioned earlier that had a less likely regulatory path, and also, if you could just specify
between GMOs and what you just said, when they’re changing the actual genes inside?
BG: A GMO, it’s been regulated this way, when you put an actual gene from another organism into a plant
that has been designated as a genetically modified organism, and, as a consequence, it has been regulated that
way and so there’s a high regulatory bar for that. It takes about eight years to bring it to market and it costs
about USD 100m-150m to bring to market. For a new chemistry, of which there have been very, very few, that
can take about eight years and about USD 200m-300m, so there have been very few new chemistries in this
space. One of the reasons they like bacteria is they understand that there’s a huge amount of diversity
associated with bacteria but the regulatory bar is very low. Crispr, which is a single base changes, there are
suggestions that it’s not so bad, that reg could be quite low in that space and that, as a consequence, you can
make a lot of similar changes to what you’re trying to do but just the regulatory cost could be low. That still
hasn’t been totally designated but it seems like it’s heading in that direction. As a consequence, companies like
Calyxt, Inari, Pairwise, let’s see what else, there are a couple other out there, that are now making these
changes as well as the big companies are moving down this path, so they see a lot of positives. For example,
there’s a trait called white corn, and white corn is one base change.
You can cross it from yellow corn, you can make white corn, but because of where the location of the gene is,
it’s a single base change, it’s too close to other genes and so it’s very hard to actually intergraft it, that is cross it
in, and it’s very valuable. In Africa, they only want white corn. If you could just make the single change, then
that would be trivial and you could make all corn white corn, and so that would be tremendously valuable, and
you can assume there are dozens and dozens of traits like that, so there are many ways to make improvements
without all of the hassle. You make the one base change that can be done, you sequence it, all fixed and
finished and so that could be very valuable, but, again, it’s unclear whether that’s going to get a low regulatory
path. That said, all the data and all the information coming back suggests that’s what’s going to happen. It just
hasn’t been done yet.
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[00:11:37]
Q: How has coronavirus impacted the urgency to be innovative and adopt these technologies in ag farming,
particularly with the increasing demand for soybeans and almost every commodity? How has that impacted
the landscape in US agriculture?
BG: It’s been very weird because nobody has been in the office. Basically, everybody has been doing their job.
As a consequence, lab work really hasn’t gotten very far. When lab work doesn’t get very far, then nobody runs
modes of action, you can’t set up your experiments as well and so research has taken a hit during this period, if
you were actually out doing things out in the field, just because it was very hard to coordinate. They’ve been
doing more about figuring out how to interact remotely, which can be good, but it hasn’t slowed it down a huge
amount and nor has it accelerated. It might have slowed things down by six months or so for everybody, but I
don’t think there’s been an embrace that says, “Now we know this, now we’re going to totally accelerate this
space.” It hasn’t been impacted in ways that some companies have. There are probably some efficiencies that
have been gained just in terms of, “We don’t have to be in a meeting anymore to solve this. We don’t have to be
in meeting in person to solve this anymore,” but I don’t know that it’s really massively changed the efficiencies.
[00:13:34]
Q: Could you give us an overview of Indigo’s business model, some of its offerings and the different categories
it operates in?
BG: They have about four or five different. They say they have three business units but there are variations, so
there’s the microbiome still, but it’s selling microbes that alter the physiology of the plants because they are
endophytes, that is they grow inside the plant. When we put them on the seeds, they enter into the plant and
alter the plant’s metabolism in some positive way, so they sell those. Growers are still a little sceptical of them
because they don’t tend to be consistent. In my conversations with my buddies at Indigo, they don’t tell me
specifics but they say things seem to be working well. You can take that for whatever that’s worth. They say
there are some positive things they’re seeing. I believe them because they are trustworthy folks, but I don’t
have any data to demonstrate. The second piece is the marketplace, which enables growers and sellers to find a
better price for their products. The inputs industry, the microbes, it impacts the standard inputs industry of
other people who are doing it but, of course, they have no access to germ plasm and germ plasm is really what
generates most yield and so if you have to go to a different germ plasm and you don’t have consistent access,
and we don’t know whether the microbes are specific for germ plasm. That is there are genetic impacts of the
plants that like or don’t like specific microbes, so I don’t know how much.
There is data coming out from people like Maggie Wagner at Kansas or Kansas State, who are showing that
there are specific interactions between microbes and corn plants, and so I don’t know how much data has been
done in trying to understand those pieces. The next thing is marketplace, and marketplaces, it just enables
growers to get a better price because, forever, growers had been at a disadvantage. They’re dealing with
companies like ADM and Cargill and Bunge who are the buyers and they have asymmetric information. They
know what the prices should be and they know how to go with the lowest price and so they’re buying from the
elevators and the elevators are locked into those prices and the elevators can only charge so much to the
growers and you can’t drag your seeds very far, and so marketplace just changes that asymmetric information
and makes it more democratic. That has a lot of value to the growers and some value to Indigo. The next piece
is the Telus piece, where they’re actually doing visualisation and able to start understanding where there are
good yields and bad yields and making predictions in that space. Again, that can help growers if you share that
data to know, “There are bad yields. What I have is a good yield so my stuff should be worth more, because I
have more of it and the prices should be higher because there have been some bad yields,” so it gives more
information to that.
There are several of those pieces, and then there’s trucking which can allow you to get your stuff to a place
where it can sell at a higher price. All those things help growers a little bit more. To me, they seem to fit right
Private and confidential 5
into, and competing with, the ADMs and Cargills and Bunges of the world, who are essentially using leverage
and hedging to really make most of their money when they’re buying the seeds and selling them at commodity.
They get the price but hedging is where they make their money, and marketplace enables them to do this and
it takes that asymmetric information that only they knew to more than that. You could imagine that, and
again, this is just my speculation, you could imagine that one of those companies, instead of building this
themselves, would just buy Indigo so they could have the technology. The final piece that they’re looking at is
this idea of carbon and bringing in companies that want to make a difference in carbon, and a carbon market,
and bring that to growers. They’re paying growers USD 15 an acre to sequester a tonne of CO2. The biggest
problem with that, of course, is measuring the CO2. It’s not a lot of money, it’s USD 15 per acre. The grower
has to spend a lot of money.
Right now, the simplest way to do that is to use a plant cover crop, which costs more than USD 15 an acre, in
the area of USD 40 an acre plus special equipment, so it’s not clear how they make money on it. To measure
that, you need today elemental analysis, so that’s actually taking soil samples and you take them to a special
place where they physically burn the samples and you get the elemental carbon and nitrogen, phosphorus
(inaudible 18.54) you can measure that. There’s a shift right now going on between this measurement of
elemental analysis to doing it by satellites and by drones and see if you can measure it by measuring what’s in
the atmosphere and if CO2 is being given off. The belief is they can drop that cost to, instead of USD 75 a
sample, and you have to sample all of your fields, to pennies per acre and you’re just figuring out some way to
guesstimate and compare it to the elemental analysis. I haven’t seen any data that shows it can be done, but
there are so many companies working on it, and it seems possible, that I suspect that will be done, so those are
the major pieces that are happening for Indigo.
NH: Out of those different business models, which one would you segment as the biggest opportunity for the
firm?
BG: That’s a great question. I don’t see microbiomes as being the biggest opportunity for the firm, unless they
get a breakthrough microbe.
[00:20:06]
Q: Could you explain why this technology is not as promising as it seems to be? Are there different crops that
it works better on?
BG: That’s a great question. We were seeing much better yields from cotton and wheat than we were seeing
from corn and soy, and one of the reasons we hypothesised, and we did talk about it, when I was with Indigo,
we talked about why we thought that might be, was that corn and soy have been bred to a pretty high level and
perhaps in some of the breeding you’ve bred for, because it’s almost a blind breeding. You just say, “I need
better and it’s got to get better yield.” If all you’re measuring is yield, you don’t know why so it becomes a bit of
a black box. It could be some of the reasons why you had better yield was that you were picking up microbes
and you’re already doing some of that and it becomes harder and harder to increase yield once you keep
turning, essentially. It’s like making a Formula 1 engine. You’ve got to keep improving it, improving it such
that it’s leaned out, it’s no longer a corn, it’s some race-car-like organism, whereas wheat and cotton, they’re
not too different than what they were 50 years ago. They’re a little bit better but they’re not much better, and
so the opportunity to see if microbes could have an improvement seems pretty high, and some fields looked
really amazing and quite believable in seeing 20% improvements in yield. The problem was it didn’t seem to
be consistent and it was hard to figure out why it wasn’t consistent. The issues are, is it that the microbes
aren’t what we think they are? Is it that they’re not growing in the right way? Is it the wrong interaction with
germ plasm? Do they go on at the wrong time? Are they getting killed by being where they are? There are just
so many variables.
This is a very nascent field and nobody really understood why we weren’t seeing it. You put it on and then it
just wasn’t as variable. Unless you can show that increase in yield, it’s just tough to figure out how to make
money and, for a grower, grower says, “I’ve got 30 seasons to figure this out.” If he tries it and it doesn’t work,
he’s not going to be excited about trying it again, so if you don’t understand consistency, you have an
Private and confidential 6
inconsistent product, and maybe their product is now more consistent, but if you have an inconsistent
product, you’re going to lose faith of your customers and they’re going to tell everybody else they know that it
didn’t work. You’re going to lose that opportunity for many years until you can improve that and prove to them
it works, so that’s one of the issues that I see with it. Marketplace seems like there’s more possibility there, but
the margins aren’t very big because you’re just in a commodity market. On the other hand, the potential to be
bought by ADM, Cargill, Bunge or to have a hedge fund come in and say, “I want to be in this space”, that
seems phenomenally large. That seems very, very big, because they’ve got something that other people don’t
have that other people clearly need, that is knowing what’s going on in the marketplace in real time.
That seems pretty important and something that they’ve built, as well as the ability to use satellites to
understand what’s happening broadly as well as locally, and so, together, those two make that, to me, a very
powerful opportunity, but I don’t know the big companies to know if they see it as an interesting piece. The
carbon market could be interesting. That market is supposed to grow up to USD 38bn by the end of this
decade. That’s pretty good size, going from essentially zero to USD 38bn in the space of 8-9 years, and Indigo
was really the first to move in that space and there are companies working with them, so there may be more
potential in that space than I understand. I don’t understand the business model enough to know how much
money they make. I know the idea is American Airlines says, “We want to make sure we are giving in carbon
credits. You pay the growers.” The growers somehow magically are able to figure out how much carbon is there
and then Indigo get some sort of a percentage off that. I think the idea then is to sell things that sequester
carbon and that allows them to hit both ends of that, and that’s as much as I understand about the model. I
think that’s where it is, but again, if I look at all three and I say, “What’s the biggest value capture,” to me, it’s
the marketplace because of that, but I’m a scientist. I’m not a business guy.
[00:25:24]
Q: You mentioned microbes and the inconsistency of the technology, and that farmers are less likely to try
again if it doesn’t work. Could you speak to their alternatives? What else do they have that is able to give them
20% increase in yields, albeit not consistently, that they can afford throughout the product?
BG: Yes, but if they get +20 on one and they get -5 on the other, which they sometimes see, if it works, then it
could be pretty good. In yield in cotton, that can be somewhat valuable, but the cotton market has been
somewhat depressed. In wheat, that market has been somewhat depressed as well and so it’s been tough to
just make that sort of money and they just haven’t seen those numbers associated with corn and soy where
there’s real value capture, so corn two years ago was selling at USD 3. Now it seems to be selling close to USD
5. Soy is selling north of USD 10 a bushel, and so that’s where the real margins are. That’s where you can really
make money, but it hasn’t been consistent. You haven’t seen those numbers associated with that. In terms of
other things, if Crispr can do it, they would take those technologies. There is always something out there that
people want to talk about. There are groups like Pivot Bio that take a microbe and they alter, that normally
lives inside the plant and fixes nitrogen.
It normally doesn’t give up its nitrogen. It normally keeps it, so you get sugar from the inside of the plant but it
doesn’t give up its nitrogen, and so they’ve altered it so it gives up its nitrogen, so it fixes nitrogen, that is you
don’t need nitrogen input, and it releases more nitrogen because they’ve altered what are called the repressor
genes, and so it just keeps spitting out more and more nitrogen. They showed that they’ve got an increase in
yield. That’s pretty impressive for corn, and so that seems to be an interesting play, and, in fact, they just got
USD 430m the other day. There are other microbial treatments that are not being done in exactly the same
way that Indigo has. Again, I haven’t been associated with the pipeline for two years so I don’t know the
quality. It could be that the quality of their pipeline has improved dramatically and is much more consistent. I
do know that right now, growing the microbes and finding manufacturers who can make the microbes
consistently has been very, very difficult, such that companies are trying to grow their own and build their own
fermenters, but those can be very expensive.
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[00:28:28]
Q: It seems like a farmer-to-farmer network where Indigo is having many of the farmers upload some of its
data or their yields to the platform in real time. How does Indigo monetise that data to other farmers?
BG: I think they get a flow if there’s a sale, but I can tell you, I don’t know what it is now, but at one time there
was 100x stuff that was going up and it wasn’t getting traded, so the value for them was on the flow. It could be
they’re now monetising the knowledge of what’s out there, but, at the time that I was there, they weren’t doing
that, or at least it wasn’t clear they were doing that. It’s like eBay, so you can have lots of stuff up there but
eBay only makes money when there’s a sale. If it flows from a seller to a buyer, then they make some money,
but if it’s just up there, it’s just up there, so there’s a lot of stuff up there looking for sales but I didn’t see a
whole lot of sales were occurring. That may have changed in the last two years, so there could be lots of sales
there now, but I don’t know that.
[00:30:09]
Q: How do you think that marketplace differs from other types of farmer-to-farmer networks where pricing is
readily available?
BG: I don’t know that it would. The issue with most of the farmer networks is there’s an asymmetric amount
of information, where one side knows something, the other side doesn’t, and so you’re just guessing, so you
can never get a maximal price. Anything that creates a network where everybody knows the prices and it’s
community like that, so if anybody else builds that, then there will be little competitive other than the first-to-
market play that Indigo built. I know one of the ideas was if people buy the microbes, they buy the original
microbes, then they get a better rate on the marketplace, so I know they’re trying to pull those pieces in
together. I don’t know how well that’s working.
[00:31:30]
Q: Could you speak to some of these big players such as ADM, and their impact and control over the market
generally for agriculture? What does that do for farmers and their ability to raise pricing and be more
competitive?
BG: What you have is 3-4 private companies, ADM, Cargill, Bunge, Dreyfus, usually do A, B, C, D, so ADM,
Bunge, Cargill, Dreyfus, and they really work on the idea of asymmetric information of buying a commodity
and trying to sell it, but if they have a better sense of what the price is and what the price is going to be, then
they can drive that a little bit better. This has been talked about for years that the seeds and the tractors and
the input fertilisers are all being sold at retail, but they have to sell their products at wholesale, so farmers buy
at retail and sell at wholesale. These groups are what enable that because they have to buy at the lowest
common denominator and, as a consequence, they take most of that profit, and they’re very profitable
companies. They’re all private and they’re all in the USD 30bn-50bn range, and so they do quite well in that
space of being able to take the commodities and move it along to the next space where they eventually end up
with the producers. One of the things Indigo wanted to do was to have things go directly from consumers
through marketplace, and trucking was to have things moved directly from producers to the consumers and
the product manufacturers. I don’t know how successful they were at that. I just don’t have a good sense of
that, but if you can produce a wheat that’s of a high quality or a high protein and General Mills wants a wheat
that’s high-protein, and they can deliver it, then the farmers should be able to get a better price for it, so that
was the idea and I don’t know how successful that’s been. I just don’t know. It could be tremendously
successful, it could have failed, but the idea seemed good. I just don’t know what the answer is and how
successful it was.
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[00:34:18]
Q: The goal is to cut out the middleman which are the big processors, such as ADM and Ingredion. What do
you expect or foresee to be the challenges to making that happen? Is it because a company such as General
Mills needs much more than just getting the raw product? Why might that model not be as simplistic as it
seems?
BG: I think there are a lot of places where it could totally work, but I think any you’re trying something new,
there are going to be things you don’t expect. A farmer may not understand exactly what General Mills needs,
and General Mills has been working with one of these other companies who know, “I’ve got to remove all this
kind of grain and only give them this grain,” and a farmer is saying, “I’ve got great grain. I’m going to give it to
you when maybe 10% isn’t what he wants.” Now, and again, I’m just making this scenario up, General Mills
says, “This isn’t the quality we were looking for and we’ve got to now figure out a way to get rid of the 10% that
doesn’t work,” whereas they had been getting it at 100%. They’ve been paying higher for it, but it’s not exactly
what they needed and now they’ve got to make some changes. In any new enterprise you just have some
communication gaps where you think you’re saying the same thing but you’re not, and so I could see that’s
what’s going on, but if you could get it to that place where the farmers understood what they had to deliver, I
don’t see why it wouldn’t work. Where the farmers become producers as well, then I don’t see why it wouldn’t
work. In terms of ADM, Bunge and Cargill, having this marketplace would be massively competitive, and then
combining what else they do would be hugely competitive over what the other guys are doing. Let’s say ADM
could buy Indigo. They would be much more competitive than Bunge or Cargill, because they would have this
tool and then they would have all the other pieces. To me, that would be a real advantage.
NH: As total, I’m assuming you mean pricing?
BG: Yes, the marketplace and being able to track those prices, and as they’re a hedge and triage, not triage,
leverage company on this, that would be even better because then they can say, “This is happening in this area
and it’s not in this area. I can really change my costs and structures and I can see what’s going on,” so they
would just know what all the prices were everywhere.
[00:37:19]
Q: What are your thoughts on these big players’ control over the market, because they’re such market
movers that it doesn’t really matter? What have some of these huge ag producers done to stifle
competition for some of the farmers, and the process to the manufacturers? We talked about the
regulatory landscape and how it’s harder to get some of these technologies approved and the strictness,
but why hasn’t that applied necessarily to some of the producers or processors who have a stronghold in
the market?
BG: It absolutely does. In fact, you’ve got only a few. It’s classic. It’s econ 101. You have a few producers, there
are four seed companies, two chemistry companies, three or four tractor companies and you’ve got millions of
farmers, so they have to buy everything from just a few people, so there’s an asymmetry in terms of pricing
structure. When they’re done with their product, they can only sell it to three of them and so there’s an
asymmetry there and so they lose at both ends of the operation. When farmers are saying, “We’re not making
any money,” that’s why. They have no way to compete in that space because they don’t form unions to say,
“We’re going to hold onto our stuff and we’re going to work together. You’re going to have to buy them in 50-
million-pound lots.” They don’t do that and so since they’re all separated and they haven’t unionised in any
way, they’re at a tremendous disadvantage, at a price disadvantage. The producers and the input players are all
at a tremendous advantage and so, even though yields and productivity are up phenomenally, that’s really
gone to only a few companies. It hasn’t gone to many of the farmers, so while farmers, let’s say, in corn in the
last 25 years, they’ve gone from an average of 135 bushels an acre to 250, huge productivity gains, they’re
really not seeing a lot of that.
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[00:40:02]
Q: What do you think it takes for some of these farmers to be more competitive and take advantage of some of
this environment having higher yield but without really capturing it from a P&L standpoint?
BG: I thought marketplace was one way where they understood what their prices were and they understood
what prices were happening around the country. I certainly think that was one way to start looking at it. There
are generic chemistries, there are generic crops that are off-patent, where you can reduce your price. You’re
also likely reducing your yields, and so growers have to make decisions in that space. They’re trying to do what
they’ve always done, which is, “I’m a farmer, this is what I do and I’m not a commodity broker to make that
difference,” and so it’s unclear to me how that changes. I have not followed the ag econ to see, and broken that
out by are there certain growers, that is corn growers in Iowa, are they doing better than soybean growers in
Tennessee? I haven’t done that sort of work or broken it out by geography or broken it out by size of acreage,
etc, to see if some are doing better that way, so I don’t really know the right answers, but certainly having the
information they need should give you an access point and should improve what you’re trying to do.
[00:41:50]
Q: Where else are the opportunities for technologies to develop throughout agriculture? Where do you expect
the most investment to go for agtech?
BG: Investment had been going pretty strongly into the microbes and microbiomes. Right now, that
investment is right in at the Crispr and companies doing Crispr. If you look Inari, Pairwise, Calyxt, Benson
Hill, those are all Crispr companies, single base changes for that, so that seems to be right now where things
are going. There’s a little bloom off the rose in terms of the microbes just because they haven’t seen a
transformative product yet, so that’s the place where technology is changing. I can talk a little about what my
company is doing. In the microbe space, people are still looking at the same 30 microbes, so those microbes
have been sold for 30-plus years. What we were trying to do is look at the microbes. There are a trillion species
of microbes, is what we’ve learned in the last few years, and that we really haven’t mined very many of them,
so we were looking for new chemistries and new herbicides and new sorts of things from these natural
products and, instead of selling them as a microbe, isolate the active fraction from them and sell that as a
biological. It’s called the biochemical but it still can go to market like a biological, and then, as a backup also,
work towards a synthetic and a back end.
The issue with synthetics, because they’re so expensive to bring to market, nobody wants to go down that
space, but if you have a product that you can be selling already and then you’re also building toward a
synthetic, then you’ve got both things that you’re working towards. The synthetic becomes a much higher-
margin business once you can do it, if it doesn’t kill honeybees and all sorts of things that other people don’t
want, if it can be specific enough. Really, you want specificity with it, so the thing that my group is doing is
really trying to say, “We’ve been looking at these. There are a trillion species of microbes and we were looking
at 10 of them. Why aren’t we looking at the other 999 billion?” My company is saying, “There’s got to be more
out there than what we’ve been looking at.” Bt, Bacillus thuringiensis, through resistance to insects has
generated USD 100bn business. I can’t believe there’s only one of those in the world when there are clearly
nine orders of magnitude more microbes that people really haven’t looked at, so we’re trying to look into that
new space that people haven’t been looking and we believe that we can go there, so it’s kind of a biological but
really in a different space.
[00:45:44]
Q: How do you balance consumers with these microbes and ways to innovate with an increasing yield or
making products safer, healthier or better, if you have a big, educated consumer who wants nothing that’s
modified? They want everything natural. Where is the right balance or do you think the consumer is still
immature in its thinking regarding whether a revolutionary product comes to market and if they will take it
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anyway?
BG: I thought I understood but it’s clear I don’t. There is a lot of stupid out there. There are a lot of concerns.
You have people not taking vaccines that will clearly save their lives and their families’ lives, so you’d think the
consumer is getting wiser but I’m not really sure that it is. In terms of the microbes, it turns out that there are
not many organisms that, if you think about all those bacteria, there doesn’t seem to be a lot of upset. People
seem to like the idea of biologicals. These are natural products that are just found in nature. We’re just taking
them out and using them more. That seems to be okay. Don’t know if it’ll continue to be okay, but it seems to
be okay. It seems to be okay if you say, “I’m taking this.” People talk about probiotics all the time, “Just a
natural probiotic that we’re just using,” and so, if you continue down those paths, then the microbes can be
good. It’s just they haven’t been consistent as a product. The question then is if you start altering that a little
bit, as Pivot is doing, and saying, “We’re going to knock out a couple of the genes of this,” and are people
accepting it? So far, they are. Is that going to continue to be the case? Don’t know, but, right now, Pivot seems
to be on a good path that says, “We’re going to take this simple organism we’ve been working on for 20 years,
and no, it’s not pathogenic, and we’re just going to make a change in there and we’re going to put it inside the
plant and it’s going to increase yield.”
Is that going to get accepted? Don’t know. Could be too subtle for people to understand. It’s just an internal
fertiliser, so don’t know. I think that’s a tough thing to figure out, where consumer acceptance is going. It feels
like if you’d asked people 30 years ago, when they first started coming out with GMOs, you’d say, “Okay, you
guys are upset about chemistry and DDT and all these other chemistries. All we’re going to do is the only
insect that dies is the one that tries to eat the corn. That’s all. That’s all we’re doing. We’re just doing
something that nature does. We’re going to put a gene into a plant. That happens all the time. It’s not a big
deal,” yet people went nuts over it. If you’d predicted it, you would have said, “This isn’t so bad,” but people
decided it was horrible, so I wish I could predict consumer acceptance.
NH: How do you think that mindset, and you apply it globally, where people may just want the product to
work, where everyone is not as rich or financially secure as Americans, or picky, where we have so many
different options, but when you think about globally where they’re looking to increase yield?
BG: In fact, in South America, adding microbes to your plant is normal. That’s just done. You add everything
you can figure out to improve the quality of your plant, so in Brazil and in Argentina, that’s a very standard
thing. There are a bunch of companies that already do that. Everybody is using the same products. They all
have Trichoderma. They’ve all got Bacillus amyloliquefaciens. They’ve all got four or five different organisms
and everybody is using the same ones, so they’re all doing that and it just doesn’t bother them. Everybody uses
Bradyrhizobium to improve yields in soy, and it does improve yields in soy, so, in South America, it’s a done
deal. Australia seems to be more open to it. Unclear where to go in Europe, I think they’re a little more open to
it and, in America, could go, maybe not. If Americans actually knew, I’ve been told by people that they don’t
put pesticides in organic food and you look at them and you say, “That’s not even remotely true.” There are
plenty of pesticides on organic food, they’re just not synthetic, so there is misinformation just in terms of what
people think they know in that space.
NH: How does that get through some of these organisations that control that labelling, because there are
certain processes for some of this organic stuff, but you are saying it is just not synthetic pesticides, but they’re
still pesticides? How does that work? That relationship between the certification process vs what’s actually in
it and how much leeway, how much do the farmers and the chemists have to push the limits to get their
product into a much more friendly consumer perception marketing-wise?
BG: I think you’re out of my wheelhouse. I have friends who swear by organic and if you don’t buy organic
stuff, they think that you’re killing. If you bring over a jug of milk that isn’t organic, they think you’re killing
their children, and so, to me, it’s a religion. You can’t change religions, or people don’t, usually. They’ve bought
into something and they believe it so strongly that nothing is really going to change their view of it. You see
stuff, and I can explain, I have friends and I’ve explained why this is all nonsense, but it doesn’t change their
mind, so I don’t know that a label does that. I don’t know what education does, but there’s clearly a belief, in
certain kinds of foods, that only those foods are the right foods, and it seems to be mothers who are trying to
protect their children and you can understand that. It’s like, “I don’t know and so I’m going to default to what I
believe is the safest thing for my child.”
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[00:53:30]
Q: How does plant-based factor into your approach about modifying some of these crops to make them
higher-yielding? We have this huge explosion of alternative products, plant-based products. What is the macro
impact that’s had on US agriculture?
BG: I was just wondering if you were referring to germ plasm, the quality of the root stock, of the stock of the
organisms, so I’m not sure exactly. I just want to make sure I’m answering the question you’re asking.
NH: I’m talking more so about the needs of some of these alternative meat players, how their needs change
from down the supply chain. They’re all looking for protein.
BG: Yes, they’re all looking for protein, and so Benson Hill was sold with the idea that they’ve got a soy that is
higher in protein, but it’s going to be massively lower in yield, and they’re now with USD 2bn based on the
Crispr stuff, but really based on this high soy yield. Other people are saying, “There’s better protein than soy.
Maybe we go to pea,” but it has to be something with high protein content and it has to be easily amenable to
the manufacturing methods that enable it to be converted into the false meat. I think this is going to keep
growing like crazy because just the amount of energy consumed. Is it better for your diet? Not so much, but it’s
the amount of CO2 that is required that is generated from soybeans is dramatically less than it is from cows,
and so if you can make those changes, you’re actually doing some good things for the planet. I think people
want to do that way and they also want to believe it’s healthier, and to some degree it’s healthier, not huge
amounts but some degree it’s healthier.
The only question comes, every protein source you can think of, and so people are thinking, “Maybe peas are
better. Maybe other kind of things. Maybe quinoa.” What other protein sources are out there? I think all these
companies are thinking about every way they can convert protein into these systems and what will
manufacture the best, and I think they’re just at the beginning of thinking about that. The interesting place to
me is you have places in Canada that are making pulses and they’re becoming very good at making and selling
pulses and so you start wondering, is that the next gold rush, is a place that really knows how to sell pulse?
Lentils or chickpeas or whatever it is they’re growing are the next things that are going to get converted into
this, because there’s some magic thing about them that enables them to be converted into this protein matter
that makes it simpler, so I think that’s an interesting space.
[00:57:18]
Q: You talked about the likelihood of Indigo being a target, but if you had to compare, do you expect Indigo to
be acquired or go the public route? What are your thoughts on either or?
BG: My bet would be an IPO, but, if they don’t succeed in that, that things don’t go right, then my guess would
be an acquisition from one of those guys. Not from the inputs guys, but from the producer guys, the fellow
producers. I think that seems like a more likely play to me, but that’s just my own personal guess when I look
at the field. They could IPO and I think they want to IPO. I think that’s what the teams wants to do, but I don’t
get a sense, and I think they tried to go IPO. They tried to go a Spac and didn’t get the prices they wanted and
so pulled back and are trying it again. I don’t know whether that’ll be a Spac or an IPO, but I think that’s the
direction they want to go but, if they can’t get the prices they want for it and what the investors want, because
USD 1.2bn is a pretty big investment, can another company come along, but I do see it as a good place for
these other companies to come in and just say, “Now I own this space and I can lock out my competitors.”
That, to me, seems the simplest way. Many of these companies, they’ve never done something like that where
they’ve made a big purchase of something like that, so the downside of it is they’d have to see this as a value-
add and they’d have to understand that you’re cannibalising your own. What you do well, you’d have to be
cannibalising to do better in the future, and, if you look through history, almost no companies can do that, so
while I think it’s a better play, it’s very tough to get companies to see that.
Private and confidential 12
[00:59:45]
NH: We’re just about out of time, so we will end the Interview there. Let me just close by saying thank you,
Barry, for your time. It was a great Interview. We covered a lot of different topics, and thank you, clients, for
joining Third Bridge Forum’s Interview today. Clients, if you wish to speak with our specialist in a private call
or meeting then please let your relationship manager know. Have a good one.
BG: Alright. Thanks.
Transcription ends at 01:00:00 of the recorded material
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