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