006: Innovating During a Crisis

DARREN FEHR: Hey Dan, our topic of the day is all change is preceded by a crisis. It’s sad to say, but it’s funny how innovation takes wild turns and only at the advent of a crisis. Tell me a little bit about what you think this COVID-19 business is going to do, in terms of transforming the way we farm.

DAN FRIEBERG: Well, for me personally, it’s reminiscent of the 1980s. I started my career in the 80s and plunged right into the farm crisis. And so, it feels a lot like that, Darren. I feel like credit is going to tighten people. Growers are having trouble getting operating lines extended to cover everything they need. So, it just feels like that 80s crisis. There are differences. We have cheap interest. At that time, we had really high interest and high inflation, and there were a lot of other dynamics. But when your operating budget goes upside down, when it gets negative, it causes dramatic change. I remember the 80s well, and I remember having to just scrutinize everything we did differently. I mean, just through that lens of how hard it was to make money.

DARREN FEHR: Do you think a farm gaped cash flow is the biggest issue? What do you think are some of the biggest issues that farmers are facing that are really going to reflect on their ability to either grow, expand or need to get out?

DAN FRIEBERG: There are about three or four big ones for me. One is just keeping your operating capital intact. It’s just so easy to lose operating capital, and it’s different. Nobody wants to touch your land equity or any of that. I mean, there’s a lot of equity, but it’s just about whether you have operating capital and having your operating capital intact while a lot of people expand. To me, there’s this real false narrative, and it just repeats itself over and over again that farmers are great producers and bad marketers. They may be bad marketers, but the idea that everybody’s a great producer is not true, either.

We see it in data. That’s what we do. We do a lot of data analytics, and we see huge swings in how efficiently people produce. So, to me, when you talk about innovation in the middle of a crisis, it’s about getting serious about producing efficiently. And producing efficiently is all in the details.

DARREN FEHR: It’s interesting that you talk about efficiency and production because we talk to so many farmers who say, ‘All I want to do is farm. Leave me out of the details or the administration because the data thing is complex.’ How do we work through this idea that I want to farm because of what I enjoy, but how do I do this efficiently? What does that mean?

DAN FRIEBERG: I totally understand exactly what they’re saying. Our experience as a company is that growers don’t want to do all the data work. Growers want us and their advisor to do the data work. They want to consume the output of their data analytics, and for us to provide analytics that are meaningful and advise. Then, the following step is to take action on it. So, it’s just that constant improvement cycle that we go through. They want to consume data analytics. I mean, all the detail that goes into having great data, that’s not what excites them. They’d much rather farm than they would be in the details of the data.

The Importance of Planning

DARREN FEHR: Do you think that there’s enough emphasis placed on pre-production planning? We talk a lot about the ag technology that’s been invested in in-season crop monitoring. A lot of the seasonal, cyclical buying lends itself to think that there isn’t this early season, robust planning process. What do you think is going to change here after we get through this crisis that we’re facing, in terms of this planning piece?

DAN FRIEBERG: There are exceptions to this. One of the exceptions is high value crops and irrigation. With high value crops and irrigation, you can turn on a dime. You can adjust everything because you can treat the plant and feed it like it’s on an IV. But most of North American production is rain-fed, so planning is everything. Just having detailed plans and not missing any of the details in that planning process is everything.

One of the quotes that’s battered around a lot is, “you don’t want the plant to have a bad day.” If the plant tells you it’s suffering, it’s too late. It’s like when people show these images of denitrification, and it’s like, ‘Okay, you’ve already lost yield. You’re right, you can correct that.’ But the whole goal is to never get to that place. And that’s the reason you do plans. The reason you spend that time making sure you got the plan right is so that you’re avoiding those train wrecks. You still have to monitor the crop. You still have to respond because there are things that happen. But even with plant diseases, you can plan for those. You can plan for insects. A lot of the decisions are all pre-budgeted.

When I talk about managing operating capital, there’s a lot of input dollars at stake and how you spend those input dollars is what I’m talking about with how efficient you farm. These really tight, upside-down economics that we’re in just screams that you have to stretch every input dollar absolutely as far as you can. You just can’t be wasteful. It’s all about investing every dollar at the right place at the right time to get the best return.

DARREN FEHR: You make a really good point here. By the time you see the problem, it’s probably too late. It’s probably because you missed some of the symptoms. Now, we spend a lot of time talking about what happens below ground, and we do a lot with nutrition and soil fertility. Is this an area that we can get better at or we can help people with more, in terms of the planning piece and planning to deliver, over time, higher organic matter or more efficient nitrogen use? What’s your take on our ability to help production efficiency below ground?

DAN FRIEBERG: We will look back a decade from now and think how crude we were in 2020. We will look back and think how crude we are. So, we’re going to continue to make dramatic advancements. For us, it’s all about how we characterize like-agronomic environments and how we treat them differently. We believe that the ideal rate of everything changes within geographies within fields. So, we are going to get better and better at all of this.

Darren, so much of crop production and so much of the science behind crop production is a little bit siloed. And in the real world, it’s all integrated. So, if you even think of it in university settings, we have etymologists and we have plant pathologists and we have nutrition specialists. And even in nutrition, they tend to be specialized by nutrients. But in the real world, it’s all those things colliding together. And so there are all these interactions, and that’s what makes real-world agronomy so complex. There’s just lots of room for improvement, and that’s what we’re going to do.

You share a common background that I have. We both grew up in the livestock industry, and sometimes it’s just shocking how much the livestock industry is so data-driven. People don’t realize just how data-driven it is. You come from the dairy industry, which was decades ahead of everybody else, even the rest of the livestock industry. The dairy industry was data-driven decades ago. And in many ways, with crop production, because of GPS and the ability to spatially measure yield in responses to different treatments, we’re playing catch up right now.

DARREN FEHR: So, does that mean that maybe the livestock business went through this kind of a crisis way sooner in its life cycle? I don’t even remember this digital transformation and the need of data in livestock, but it feels like we’re going to be very intentional here in transitioning to more of a data-driven industry in crop production. Is that the case, or is this just going to feel very normal to people who are farming, progressing and growing?

DAN FRIEBERG: Hopefully, it feels more normal. A little bit of what’s happened in livestock is it’s obviously become really specialized and consolidated into fewer hands and all that. But a lot of times, when we get in front of growers who are also actively involved and at risk in the livestock industry, they will draw the parallel. They’ll say, ‘Oh my goodness.’ It’s almost like a wake up call. And they’re not talking about just feed efficiency and rate of gain. They’re talking about knowing the economic numbers associated with that unit of production.

When we show them what we’re doing, they’re like, ‘Oh my goodness, you’re talking about treating my crop land the same as I treat a pen of pigs or a pen of cattle.’ And it’s like, ‘Yeah, that’s exactly what we’re doing.’ We’re tying all the pieces together, not just production efficiency or nutrient efficiency. We’re tying economics to every part of the field.

DARREN FEHR: Isn’t it the same, like in sports, where you want to improve performance? There are certain metrics that you’re going to do to improve your end result. My golf game is really crappy, and I measured the end score, but there’s a ton of other metrics that I could measure if I wanted to get a lot better in certain parts of my game. And isn’t farming sort of similar to that?

DAN FRIEBERG: It is. It really is. I obviously work too much and don’t golf enough, like you. There’s a saying in golf, at least among us really crude players, “you drive for show and putt for dough.”

DARREN FEHR: I have no dough because my putting is horrible.

DAN FRIEBERG: But sometimes, in crop production, high yields have become the show. They become what you do for show. And to me, it’s like, ‘Okay, that’s part of the game.’ I mean, yields are really key, but it’s not just about yields. It’s about return to land and management. How do I make more money? The metrics that we use to measure have got to have an economic component because not all yield is created equal. You can throw the kitchen sink at something and have high yields, but that doesn’t mean you’re improving your operating capital.

DARREN FEHR: You’ve got to get down the fairway, and if you can’t chip and putt, you’re probably not going to score real well. To all of our listeners here, this is sort of the final word: if the seeds of innovation are born out of a crisis, Dan, what should farmers be thinking about today?

DAN FRIEBERG: Just focus on how to be more efficient, how to produce more efficiently. Keep scrutinizing. Darren, the other thing is they’re managing multi-million-dollar operations. I feel for them because they’re constantly learning a new skill set. As a manager, you’re managing more complexity and more people. They’re all turned into financial managers. In some cases, it’s just finding somebody to help you manage the details. In our case, that’s our value proposition: let us help you manage all the agronomic and economic details associated with crop production.

DARREN FEHR: Awesome. It sets us up for the next podcast that we’re going to have, talking about big data. And we can talk about COVID-19 and how the delivery of this exceptional data has helped us think through this crisis and how agriculture uses big data. So, thanks Dan for joining me today on our podcast. Stay tuned next week for our podcast on big data.

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