Strength in numbers

ADM’S Benson Hill collaboration reflects a spirit of cooperation among food and agribusiness giants that Rabobank says is shaping new production markets.

“When do we make the decision to invest today for something that we won’t see returns on for five to 10 years?”

That anonymous lament helped introduce a July report from Rabobank’s FoodBytes unit examining new forms of collaboration being pursued by food and agribusiness companies. The report detailed how large, established companies throughout the supply chain have responded to pressure to keep innovating by embracing collaboration on investments in new production methods like biological inputs, fermentation and cellular ag.

That spirit of cooperation was on display last week, when ADM announced a partnership with Benson Hill to commercialize the analytics and seed breeding company’s ultra-high-protein soy varieties. Given the path Benson Hill has travelled – receiving infusions of private capital from Google, Bunge, S2G, CDPQ and others before going public via a $625 million SPAC transaction in May 2021 – any impact this new partnership may have on its so far lackluster performance as a public company is bound to be watched closely.

“For the first time, we are hearing really active discussions where corporates are saying: ‘We want to work with this start-up and this other company is interested in the start-up, maybe we should be aligning ourselves so we have shared knowledge and understanding and there is something in it that’s different for both of us,’” FoodBytes head of start-up innovation Anne Greven told Agri Investor. “Those are new types of discussions.”

She explained that a spirit of collaboration discussed before covid was brought closer to reality by communication patterns established during the pandemic, and re-enforced by recent challenges related to Ukraine and ongoing supply chain difficulties. Still, she said, investors and corporates teaming up to back pioneers of new agricultural production are doing so with profit potential squarely in mind.

So far, pioneering start-ups have not yet been widely embraced by public markets – in part, Greven said, because of communication challenges inherent in being at technology’s cutting edge; specifically, the difficulties of modelling and communicating clearly to investors the various impacts of ag-related technology products that are unlikely to be profitable for a while.

“Part of what I’ve talked to our corporates about is the same conservations I’ve had with our PE partners: ‘Once you [start-ups] start creating those measurable indices that you are going to share with your investor group or the public markets, those will actually drive value for you. The problem is, it’s too complicated and it’s not clear in how they are messaging it, so it isn’t having an uptick yet,” said Greven. “I think it will have an uptick starting next year.”

Given food and ag’s well-entrenched incumbents, partnering with giants to help them peer beyond the technological horizon has always been an important part of moving the industry forward.

On an earnings call last week, Benson Hill chief executive Matt Crisp confirmed that scope of exclusivity was among the criteria used to evaluate the deal with ADM against other offers, but declined to directly answer an analyst’s question about terms of the deal.

If collaboration with ADM proves the first of many, public markets will be provided with a more straightforward metric for growth than the complex indices Greven fears have so far weighed on food-tech valuations. That, in turn, will influence managers’ views about exits from early-stage investments. And if the agreement proves a first step towards an eventual acquisition by ADM, Benson Hill’s path through public markets will offer investors a very different lesson.