Click. Click. Sold!

Op­tions to mar­ket grain on­line are gain­ing a fol­low­ing, but re­sponse isn’t a land­slide – yet.

Successful Farming - - CONTENTS - By Mark Moore

When Dar­rel Buschkoet­ter’s lo­cal el­e­va­tor was of­fer­ing $3.70 to $3.80 per bushel for his #2 corn, he looked to an on­line grain-mar­ket­ing por­tal for a bet­ter deal.

“A few more cents per bushel is al­ways good, es­pe­cially at cur­rent prices,” he says.

Able to find an el­e­va­tor will­ing to pay $4 a bushel, which in­cluded com­ing to his farm in Web­ster County, Ne­braska, to pick up the grain, Buschkoet­ter jumped in with both feet.

“I re­searched the ser­vice and felt com­fort­able with the price pro­tec­tions it of­fered,” he says. “It opened up my mar­ket­ing op­tions. I will def­i­nitely do it again if I’m of­fered a bet­ter price.”

New Arena

Pro­duc­ers have long been able to check prices via the in­ter­net and, even be­fore that, make calls to el­e­va­tors far and near. To­day, on­line por­tals are of­fer­ing pro­duc­ers the abil­ity to con­duct grain trans­ac­tions any­where they have in­ter­net ac­cess.

“His­tor­i­cally, pro­duc­ers thought the lo­cal el­e­va­tor would have the best price,” says Bren­nan Turner, CEO of Far­mLead. “For 20% to 40% of the sales, there may be el­e­va­tors or buy­ers who are will­ing to give pro­duc­ers a bet­ter price.”

The rea­sons vary. A glut of grain at the lo­cal el­e­va­tor may de­press prices, or an im­me­di­ate need at a pro­cess­ing plant can leave an area tight on grain sup­plies.

“Pro­duc­ers and grain buy­ers come to our site and ne­go­ti­ate terms and price,” Turner says. “We want to max­i­mize the op­por­tu­ni­ties to get the best pos­si­ble price.”

Stum­bling at the Gate

On­line grain mar­ket­ing is noth­ing new. Dur­ing the dot-com boom of the early 2000s, there were sev­eral por­tals in­tro­duced to agri­cul­ture that promised speed, ef­fi­ciency, and the best pos­si­ble price.

“The ideas of the early on­line grain-mar­ket­ing por­tals were good, but they sim­ply were not well re­ceived on the pro­ducer level,” says Karl Set­zer, risk man­age­ment team leader for MaxYield Co­op­er­a­tive in West Bend, Iowa, which op­er­ates its own on­line grain-mar­ket­ing por­tal. “The tools were there, and it gave us a glimpse of what we could do when it comes to on­line mar­ket­ing, but it was about 10 to 15 years ahead of its time.”

Sites like Ama­zon and eBay were in their in­fancy, and the gen­eral pub­lic was just be­gin­ning to grasp the idea of do­ing busi­ness on­line. Be­cause of the chang­ing mind-set and com­fort level con­sumers have with on­line trans­ac­tions to­day, some of that has trans­ferred to those want­ing to make grain-buy­ing de­ci­sions us­ing on­line por­tals.

“The lin­ear re­la­tion­ship be­tween buy­ers and sell­ers of grain has ex­isted for a long time,” Turner says. “With on­line, you are open­ing up your au­di­ence and your op­tions. Buy­ers now have some­where they can go to se­cure sup­plies more ef­fi­ciently. This is all done faster than ever be­fore. There’s no need to sit on the phone all day track­ing down bids.”

From the pro­ducer’s per­spec­tive, on­line por­tals of­fer a straight­for­ward way to mar­ket grain. Far­mLead notes tremen­dous growth in its cus­tomer base year over year, with more grain com­pa­nies ac­tively part­ner­ing with the com­pany to reach ad­di­tional sources for their grain needs. That means a wider au­di­ence for pro­duc­ers – and po­ten­tially more com­pe­ti­tion – al­low­ing ad­di­tional sell­ing op­tions.

On the buy­ers’ side, it en­ables a larger buy­ing ra­dius and the abil­ity to en­ter new mar­kets. “I have been us­ing Far­mLead for three years. In that time, I’ve had the op­por­tu­nity to make con­nec­tions and to pur­chase com­modi­ties from pro­duc­ers in North Dakota, Mon­tana, Al­berta, and Saskatchewan,” says Ryan Slozka, se­nior trader for AgMo­tion Trad­ing Canada

and do­ing busi­ness as U.S. Com­modi­ties, LLC.

“I am able to con­nect to hun­dreds of pro­duc­ers in a frac­tion of a sec­ond,” Slozka says. “I can sort through com­modi­ties and lo­ca­tions and eval­u­ate pric­ing and qual­ity with rel­a­tive ease. It’s a live plat­form that runs 24 hours a day, 365 days a year.”

Turner says hav­ing few hur­dles in the on­line grain-buy­ing ex­pe­ri­ence is in­cred­i­bly im­por­tant. “Our trans­ac­tion fees are set at 1¢ per bushel, and both the buyer and seller pay. It does not mat­ter what com­mod­ity it is. The price is the same. It’s one se­cure en­vi­ron­ment. When the terms are agreed upon be­tween the buyer and seller, the grain is moved.”

Still Hes­i­tant

While growth has been ro­bust in the on­line grain-mar­ket­ing arena, there are pro­duc­ers who still haven’t jumped on the band­wagon.

“Se­cu­rity is a big ques­tion mark,” Set­zer says. “Pro­duc­ers read the head­lines, and there have been in­stances of el­e­va­tors leav­ing them high and dry. They must be com­fort­able with the ser­vice. It can be a long process to gain that trust.”

Turner says it vets all grain buy­ers thor­oughly. “We check if a buyer is bonded and in­sured. It’s a rig­or­ous process, but it’s es­sen­tial to en­sure our sell­ers trust who they are do­ing busi­ness with. We have not had any pay­ment is­sues to date, and 100% of what is owed to the farm­ers has been paid.”

The sys­tem MaxYield uses has been avail­able for sev­eral years. Ini­tially, Set­zer says they saw an ex­plo­sion of pro­duc­ers us­ing it. “Our clients were quick to ac­cept the idea of sell­ing grain on­line. We were on the ground floor and were able to work with them to im­prove the sys­tem as it grew.”

Re­cently, he has no­ticed that while pro­duc­ers may be us­ing their sys­tem to re­view prices, a few are mov­ing back to more tra­di­tional ways. “Some cus­tomers still want that per­sonal touch,” says Set­zer. “They still check bids on­line but work with our lo­cal con­tacts to com­plete the sale.”

While on­line buy­ing of prod­ucts through other por­tals has in­creased, Set­zer says he’s see­ing a slight lev­el­ing off of on­line grain buy­ing. “I think pro­duc­ers are start­ing to be a bit more guarded when it comes to shar­ing in­for­ma­tion. We are care­ful to en­sure their pri­vacy is pro­tected.”

Who's Em­brac­ing the Tech?

Set­zer says his early as­sump­tions of who would be us­ing the on­line grain-sell­ing por­tal the most were wrong. “I as­sumed the com­puter-savvy, tech-leader pro­duc­ers from larger farms who spent time be­hind the desk mar­ket­ing grain would be our key cus­tomer base,” he says. “Turns out, the clients with the off-farm jobs from mid­size to smaller farms were the ones who em­braced on­line grain sell­ing. Those pro­duc­ers were us­ing the ser­vices when our nor­mal of­fices were closed.”

The bot­tom line: Pro­duc­ers still want that one-on-one ser­vice.

“That was one rea­son the early on­line ser­vices failed to reach cus­tomers. They for­got about the pro­duc­ers and how they work,” Set­zer says. “On­line por­tals are in­cred­i­bly pow­er­ful and can of­fer a wide range of op­tions, but we also must adopt our ser­vices for the ben­e­fit of pro­duc­ers and un­der­stand what they want.”

“On­line por­tals are in­cred­i­bly pow­er­ful, but we also must adopt our ser­vices for the ben­e­fit of pro­duc­ers and un­der­stand what they want.” – Karl Set­zer

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