Earlier this month, a Russian agtech startup called Intterra entered into a partnership with global agribusiness Syngenta to use its digital platform in Russia, connecting more than 100 farmers across 2 million hectares (nearly 5 million acres) of cropland in 2019 to its SkyScout Advisor tool.
SkyScout will aim to help Syngenta managers increase their productivity and the agronomic support they offer to their clients.
“The solution is first and foremost aimed at improving the quality of Syngenta’s customer support for those who use our products. It will be accessible for both, our field experts and agronomists at farms, thus, making it possible to build an instant mutual connection and promptly respond to changes in fields, while ensuring the best possible impact of our products. Eventually, this will increase profits for our customers. Our cooperation with Intterra will be a significant step forward towards the implementation of digital agriculture systems in Russia,” said Jonathan Brown, director Syngenta Russia in a statement.
We caught up with Intterra CEO and cofounder Vitalie Buzu to find out more about Russia’s likely biggest agtech startup.
What is Intterra?
Intterra is an agtech company focused on elaborating various digital services for different participants in the agriculture industry.
AgFunder Co-Investment Fund III is now open for investment. Closing June 15, Spots are limited.
Currently, we are focused on two main participants categories, such as Farmers and their Suppliers (seeds, chemicals, and fertilizers).
For farmers, we are offering a service that should hep them with three main aspects: pre-season, in-season and industry connections.
At the pre-season level, we help farmers decide what technology and inputs to choose, considering their field specifics, climate, machinery and so on as sort of customised agronomic advice that ends up in a detailed season (cropping) plan. During the growing season, we help them determine the best way to implement their cropping plan and how they plan and execute their operations. This includes precision agriculture elements such as variable rate fertilizer application, enterprise resource planning, and crop monitoring. The first facet of our service is important; it’s the instant and integrated connection with various agronomic experts and consultants through our system, both during the pre-season and in-seasons period — both independent and suppliers-related consultants — that help the agronomist choose the technology, monitor crop development, make fast and appropriate corrective decision within the season.
For input suppliers, we offer a service that helps them to organise their interaction and communication process with their clients, the farmers. It works on many levels, such as planing their visits, distant monitoring the crop development on the fields of their clients, making field reports, diagnose the problems in the field, issuing various recommendations and eventually additional sales that are dedicated to solve a specific issue.
What we are trying to do, is to digitalize our clients’ standard operations, without frustrating and getting them defensive. Initially we recommend to start with a deep understanding what are the internal and external business procedures, and what can be optimized. For example:
- Scouting and crop development monitoring
- Interaction with suppliers
- Planning operations
- Data recording
- Machine tracking
- Weather monitoring
We established in 2016 and have more than 50 people working at the company. We are not newcomers to the agriculture industry as we have more than 20 years of related experience, particularly in farming operations, and seed and chemical distribution. Therefore, right now under Intterra we are just trying to digitalize the expertise we have in the industry.
What is your strategy?
Our strategy is to build a digital ecosystem that will cross-integrate all main participants in the agriculture industry, such as agriculture producers, distributors, seeds & chem producers, traders, banks, insurance companies, and more. We target all these types of clients and one by one we are creating digital tools for each category. These tools are standalone effective services for each category but very importantly, they can integrate with each other.
While that may appear to lack focus, we see this as the only solution. Services targeting just one client category will not survive long term, at least in our markets, because clients don’t want to use many different applications; ideally they would like to have one application that will serve as a platform to integrate various technologies and with all participants in their supply chain.
How long will it take to implement this strategy?
I guess it may take about five years until it will be fully implemented. Right now we’ve already released on the market SkyScout Advisor that is a tool specifically dedicated to seeds & chems producers. By the end of this year, we plan to release SkyScout Advisor for fertiliser producers, SkyScout Distributor for distributors, and SkyScout Farmer for agriculture producers.
Then we plan to integrate traders, through an integrated trading platform, and financial institutions, such as banks and insurance companies. We do strongly believe in Agro-FinTech and will try to bring a solution on the market that will be as an alternative for the standard banking financing of the working capital facilities for farmers.
Why is it important for all the participants to be integrated?
To better understand how such an integration would work and what would be the benefits, I’ll give an example of one growing season. In autumn, the farmer has to plan the next season, choose the technology, elaborate the cropping plans, decide the inputs (seeds, chemicals, and fertilizers) and get financing (working capital) to buy these inputs. We want to help the farmer create his cropping plans in our system SkyScout Farmer, as well as check the technology options with consultants through our other application SkyScout Advisor. After deciding on the technology, the farmer can elaborate the inputs list to be bought and either place direct bids with a supplier through SkyScout Advisor, or place the bids on the Intterra Trading platform that connects various suppliers (SkyScout Advisor) and distributors (SkyScout Distributor) who can compete for these bids. As soon as the supplier is chosen, the farmer can create his final budget, also in SkyScout Farmer, and can place his requirement for working capital on Intterra Finance platform that connects various local banks that can offer him loans as well as insurance and price hedging services.
During the season, the farmer, his advisors, and his suppliers can all monitor the farm through the platform, and they can conduct in-season sales depending on his progress. At harvest, the farmer can connect with the trader that also uses SkyScout Trader and can place direct bids to the farmer, etc. That’s a simplistic case how such an integration works, of course, there are many other interconnections and higher complexity.
It is very technologically challenging, expensive and takes a lot of time to do it, but that’s the only way to do it. Of course, we don’t have illusions that long term we will create the best solutions for all these types of clients. Our goal is at least to succeed to be good enough in order to get all of them onboard on our platform, and after that, we will be ready and happy to integrate any other solutions that will be better than our in-house developed ones.
What technologies are you using?
At this stage, we are using quite a lot of so-called “standard” technologies, such as weather-based services, remote sensing, diagnostic tools, and planning tools. So far, we didn’t integrate any external technology, everything is developed in-house, and I would say we are good at this. For example, in remote sensing alone, we have more than 50 different services and algorithms in our pipelines, many of which are patent pending right now. They include field monitoring, crop detection, yield estimation, crop development, disease detection, fields rating, claims management, field trials performances.
I understand that many startups are trying to use fancy technologies, such as machine learning, artificial intelligence, and so on, but as far as we can see it, it is more about marketing than real technology. Even if it real technology, the industry is not ready to embrace such technologies simply because for any AI to function, it needs data and currently, there is not enough reliable data.
There is potential for other technologies in the future, however. As soon as the client learns how to use at least one digital service, you can give him another one, and increase the complexity.
How big is your company now and what is your plan to grow?
Currently, we operate on slightly more than 2 million hectares, mainly coming from the partnership with Syngenta, but by the end of the year, we may have another one to two million coming from other partnerships. Generally, we plan to achieve 10 million hectares in the next two years, which is more than realistic considering the current situation of the market, our competition, and our resources.
How different is your market to the US and others?
Our market — Russia, Ukraine, Kazakhstan, Belarus — is very different. Traditionally it has been created on different premises that other markets, including the following ways:
- Size of the clients: currently, our smallest client is operating on 5,000 hectares and our biggest client is operating on 1 million hectares.
- Business procedures: such sizes impose a totally different internal business procedure — the way the business is organized and managed — and external business procedures — the way the companies interact with inputs suppliers and output buyers.
- Technology adoption levels: generally speaking, technology adoption is at a very low level, management is more focused on how to operate such massive areas and is quite defensive towards any innovations that may endanger them.
- Low-intensity agronomy: the cost of inputs per hectare is much lower compared to the US or the EU, and they also use about 5-10 times less machinery per hectare, but as they generate lower yields and smaller margins these companies cannot afford high prices for digital tools and also due to lack of machinery cannot implement man recommendations coming our from such digital tools.
That’s why, it is a huge challenge for any foreign agtech company to penetrate our market and adapt their technologies to be suitable in these countries, largely because they don’t understand how our markets are functioning. It’s also important to have a local presence, and I don’t mean an office with two to three people, but a well-established office with various staff members including IT, agronomists, technical support, sales managers — at least 30 – 40 people, otherwise, they will freeze forever at the level of testing their technologies and never implementing at commercial scale.
This local presence is important in encouraging tech adoption, because clients will not learn it by themselves, regardless how genius the technology is that you have. We have to come to every client and have at least three to four teaching courses before they really start using the tools. You need to have 24/7 technical support that can answer the questions and ideally in 24 hours to come to the client and fix the problem or explain to him how to use the tool. It is impossible to do it remotely.
So far we have been able to grow without facing any serious competition. I guess it will stay the same for at least the next five years. Only after local companies like us break the ice will technology adoption increase and ready clients integrating other external technologies, including from foreign companies. Still, foreign companies will likely have to find local partners like us and use our digital relations with the client — the last mile — to channel their technologies on a per fee or revenues sharing business model. I imagine it would be the same if I wanted to take Intterra to the US.
The market is absolutely open for anyone who is ready to operate on it; there are no legal or technical barriers to do it. Actually, I would say that for the last five to seven years we’ve seen many big names testing something here, but none of them managed to get their roots in the ground yet.
What’s the farmer profile in your region?
Very different from the US or EU. In Russia, I would say we have about 15,000 agriculture producers operating on about 100 million hectares.
- 30% of the area is under huge national or regional agriculture holdings (agroholdings), with the smallest about 50,000 hectares and the biggest about 1 million hectares, and they are very well established and hierarchically-managed companies, where control is quite often more important than operational result
- 30% of the area is under strong medium and big farms, ranging between 10,000 and 30,000 hectares, usually these companies are one of the most effective and ready for technology adoptions
- 20% of the area is under small farms, ranging between 3,000 and 10,000 hectares, very different by quality
- 20% of the area are all the rest, including very small farms and farmers itself.
Everyone of these four categories has quite different operating model and needs and therefore the digital tools should be quite different for each one of them. IN WHAT WAY? There is no “magic solution” that fits all of them.
Russia has about 100 million hectares of arable land, Ukraine has about 40 million arable, Kazakhstan has about 25 million, and Belarus has about 5 million. Altogether, it is about 170 million so that’s a huge market to play on. Of course, not all this area is ready for digitalization and it will not happen overnight; it may take about 10 years I guess. But even today, at least 20% of this area, in one way or another, is ready to embrace digital tools.
Also, we need to pay attention to an important factor. Generally speaking the agronomy level in our regions are quite low and crops yields can be two or even three times lower than in the US and the EU. Of course, there are many objective reasons, such as the weather, but there is also a much lower level of agronomic knowledge in these countries and often bad farm management practices. Therefore, any technology that will help increase that knowledge and execution will see results quickly considering the current low base. As soon as it happens, the clients will overcome any credibility issues and technology will start being implemented at a higher rate.
How much can you charge for your services?
Another reason why we focus on offering tools to many different participants is so we can charge less per each client group and therefore scale much quicker. If you connect to one farmer and then to his seed company, his fertilizer company, his chemical company, and his trader, and each is paying $1 per hectare, then you have $5 per hectare, and that’s already an interesting financial goal to achieve.
Generally speaking, I think that in the future when all participants use some kind of an integrated platform, technology providers like us could reach revenues of up to $10-$15 per hectare from all these users. Now, let say that if the average check from all these participants will be even $5/ha in the next 5 – 7 years, and at least only in Russia there will be 30 mln ha digitalized, then revenues could reach $150 million per year for all digital providers.
If our company was to take 30% of that only from Russia, then $50 million is a good goal for us, but I’m also sure that in the future there will be many other possibilities to capitalize on data and digital relations that we currently don’t even see.