CropLogic Plants IPO Seed
A feature of this upcoming agrarian IPO is that unlike the last several hundred small-cap tech listings, it’s not being spruiked as a ‘cloud’ or ‘software as a service’ based offering or a robotics story.
While the Kiwi-based CropLogic is all about predictive analytics to help growers achieve better yields, there’s no agenda to put agronomists out of work with a fully automated approach.
As for clouds, the most relevant ones are in the sky.
CropLogic’s IP is based on gathering data from sensors in the field (and other sources such as aerial pictures) to devise a crop management plan. “The technology allows agronomists to spend less time in the field while still getting the same level of reliable data,” says managing director Jamie Cairns. “There’s no point in them sitting in a car going from field to field, that’s not what they were trained for.”
The sensors pick up soil moisture and multiple depths and measure soil temperature, which give a steer on the crop’s sugar development. The sensors also include a rain gauge, which usually only Eric Olthwaite of Ripping Yarns fame would get excited about. But in this case, the gauges measure not just normal precipitation, but the moisture from irrigators.
While even small-acre cockies are more likely to wield GPS trackers than gumboots these days, CropLogic is squarely aimed at big producers with 1000 acres or more. CropLogic has also been working closely with the crop processors: giants such as PepsiCo (maker of Doritos), Simplot, ConAgra and McCain Foods.
Product trialling to date has centred on the humble spud --which is one of the highest-value crops and most difficult to manage – in the chip-loving US.
The company estimates 29 million addressable acres in the US and 60m elsewhere. In other words, these tracts of land are in packages of at least 1000 acres (and often much more).
In the state of Washington, CropLogic has captured a 30% share of the 170,000 acres under spud cultivation. The company gained this foothold (and just over $2 million of existing revenue) via the recent acquisition of agronomy business Professional Ag Services.
CropLogic expects to earn a $US35 per acre fee per annum for its deluxe service that includes a flying squad of agronomists to sort out any bacterial soft rot or root-knot nematode problems on the spot. If every large-scale farmer in the US were to adopt the service – which they won’t – CropLogic would be a $1bn a year business.
But penetrate 5% of this market and that’s a handy $50m-a-year business. And with the average potato crop returning $US3657 an acre, $US35 is small beer if the service results in improved yields. Field testing to date suggest an average yield improvement of 6.25%, which would lift revenue by $US200,000 for every 1000 acres cultivated.
The company is also eyeing the cotton, corn wheat and soybean sectors as logical expansions and it also has a foothold in China.
CropLogic is currently doing the rounds for $5-6m at 20c apiece, ahead of a planned listing on August 31 under the proposed ASX code CLI. The offer closes next Friday (August 11).
In a sense, Crop Logic is an exposure to the agri-sector without the full cyclical and weather related risks.
That’s because sun rail or shine, the growers will always need to avail of the service.
For more information including the Croplogic prospectus, CEO interview and to bid into the IPO click here to visit OnMarket BookBuilds.
The New Criterion is authored by Tim Boreham.
Many readers will remember Boreham as author of the Criterion column in The Australian newspaper, for well over a decade. He also has more than three decades' experience of business reporting across three major publications.
Tim Boreham has now joined Independent Investment Research and is proud to present The New Criterion, which will honour the style and purpose of the old column. These were based on covering largely ignored small to mid cap stocks in an accessible and entertaining manner for both retail and professional investors.
Disclaimer: The author nor Independent Investment Research have received a fee or any kind of inducement for this article. The New Criterion is not intended as specific investment advice and readers should contact a licensed financial adviser.