Iowa Public Television

 

B to B hits agriculture

posted on May 12, 2000


ONE OF THE HOTTEST SECTORS OF THE SO-CALLED NEW ECONOMY HAS BEEN ECOMMERCE. BILLIONS HAVE BEEN INVESTED TO EFFECTIVELY OPEN STORES ON THE INTERNET.

COURTESY OF SEARS AND ROEBUCK, RURAL AMERICANS HAVE HISTORICALLY SHOPPED LONG DISTANCE. CONCEPTUALLY BUYING ON THE WEB IS NO BIG LEAP. IN FACT ACCORDING TO FORRESTER RESEARCH, A MAJOR INTERNET CONSULTING FIRM, ONE OF EVERY FOUR CORN FARMERS THINKS AN

ON-LINE PURCHASE IS LIKELY THIS YEAR. THE FIRM PROJECTS BY 2004 SOME 55 BILLION DOLLARS WORTH OF AGRICULTURALLY RELATED SALES WILL OCCUR ON THE WEB. THE CONSULTANTS ALSO WARN MOST OF TODAY'S "DOT.COM E-TAILERS" WILL BE OUT OF BUSINESS BY 2001.

MUCH OF THAT WINNOWING WILL BE DETERMINED BY THE ABILITY OF INTERNET FIRMS TO SERVICE CLIENTS, RATHER THAN JUST MAKE SALES. THE ANSWER FOR THOSE WHO WANT THE BUSINESS OF AGRICULTURE IS CULTIVATING A HIGHER TOUCH RELATIONSHIP. DAVID MILLER EXPLAINS.

 

DAN WILSON OF PRAIRIE CITY, IOWA IS PLANTING HIS CORN FOR THE 2000 CROP YEAR. NOTHING WOULD APPEAR TO BE ANY DIFFERENT THAN ANY OTHER GRAIN FARMER PUTTING SEEDS IN TO THE GROUND, BUT THE DIFFERENCE IS HOW THE INPUTS ARRIVED AT HIS FARM. WILSON PURCHASED ALL OF THE INPUTS FOR HIS 1,000 ACRES OF CORN AND BEANS, A LITTLE MORE THAN $30-THOUSAND WORTH, OVER THE INTERNET.

Wilson: "...I was kind of unhappy with the management of my local cooperative and the local cooperative seems to be the "only game in town". And, I don't think that's very responsive to the membership. And, so therefore, there are other places to do business."

 

WILSON IS PART OF A SLOWLY GROWING GROUP OF PRODUCERS WHO ARE USING THE INTERNET TO CONDUCT SOME OR ALL OF THEIR BUSINESS.

IN THE PAST, PRODUCERS CREATED AND MAINTAINED CLOSE RELATIONSHIPS WITH THEIR LOCAL FARM SUPPLIERS. IN MANY CASES, THIS IS WHERE ALL THE INPUTS AND SEED WERE PURCHASED, BUT NOW FARMERS ARE SEARCHING FOR WAYS TO CUT COSTS AND FIND THE BEST DEAL. FOR WILSON, THAT DEAL CAME FROM THE POWERFARM-DOT-COM WEB SITE.

Wilson: "I don't really like to deal with salesmen, when I need to talk to somebody, I want to talk to them now, and when I'm done, I like to be done. Uh…so, therefore, when I deal with something like this, I get quick response, and I get what I want, and then I'm done."

WILSON'S ORDER WAS PROCESSED 90 MILES AWAY, IN CEDAR FALLS, IOWA, AT AG SERVICES OF AMERICA, THE HOME OFFICE FOR POWERFARM-DOT-COM.

THE COMPANY HAS A 15-YEAR HISTORY OF PROVIDING "ONE-STOP" SHOPPING FOR GRAIN FARMERS, COVERING EVERY ASPECT OF THE OPERATION FROM PURCHASING SEED TO ASSISTANCE IN MARKETING THE HARVEST.AG SERVICES HAS MADE ITS LIVING BY CONNECTING FARMERS AND SUPPLIERS.

UNTIL RECENTLY, MOST DOT-COM WEB SITES BASED THEIR REVENUES ON BUSINESS-TO-CONSUMER ECOMMERCE. THIS IS THE PRACTICE OF SIMPLY SELLING A PRODUCT OVER THE INTERNET WITH LITTLE OR NO FOLLOW-UP AFTER THE SALE. BUT COMPANIES, WHO HAVE TRADITIONALLY DONE BUSINESS THROUGH PHONE OR FAX, HAVE TURNED TO THE INTERNET AS A WAY TO INCREASE THEIR MARKET SHARE, OR BETTER SERVE THEIR CURRENT CUSTOMERS, WHILE CONTINUING TO OFFER THEIR TRADITIONAL "SERVICE AFTER THE SALE." THIS SORT OF CYBER-INNOVATION IS REFERRED TO AS BUSINESS-TO-BUSINESS, OR B-TO-B, ECOMMERCE.POWERFARM-DOT-COM FITS THE B-TO-B MODEL.

THE SITE WAS LAUNCHED NOVEMBER OF 1999, WITH FULL ECOMMERCE SERVICES BEGINNING IN JANUARY OF THIS YEAR. POWERFARM'S END GOAL IS TO TAKE THE MAIN IDEA BEHIND THE $225 MILLION PUBLICLY HELD AG SERVICES OF AMERCIA AND PUT IT ON THE WEB.

GAYLEN MILLER IS PRESIDENT AND CEO OF AG SERVICES OF AMERICA

MILLER: "...we've been doing this for 15 years, it's similar to the way the internet business works, and we've simply taken that model, and we're transposing it onto the internet, to bring more value to the consumer, the farmer. And once, we've established that base foundation which is our core business, then we plan to build on that with other products an services that we want to add on Powerfarm."

PRODUCERS NEVER NEED TO MAKE PHYSICAL CONTACT WITH ANYONE FROM EITHER POWERFARM OR AG SERVICES. CREDIT CAN BE APPROVED AND INPUTS OR SEED CAN BE PURCHASED 24-HOURS A DAY, SEVEN DAYS A WEEK ALL FOR A MINIMUM ORDER OF $5000. CURRENTLY, POWERFARM HAS 3400 REGISTERED USERS AROUND THE WORLD, BUT THE COMPANY IS LIMITED TO TRANSACTING BUSINESS IN THE CONTINENTAL U.S..

BUT, IF YOU WANT TO TALK TO SOMEONE THE COMPANY STILL MAKES ITS CORE SERVICES, LIKE CERTIFIED CROP CONSULTANTS, AVAILABLE TO FARMERS OVER THE PHONE.

Miller: "So as the internet business grows, we want to make these people available to the farmers who are buying on the internet. There's times that they may want to do more than place an order electronically, they acutually want to visit with someone. And we are going to make our agronomists available to these farmers who are buying on the internet."

COMPANY OFFICIALS CONSIDER THE PAST FEW MONTHS TO BE ONLY THE BEGINNING. IN THE WORKS ARE PLANS TO OFFER OTHER SERVICES LIKE PLANTING CONTRACTS, AN ON-LINE PARTS CATALOGUE, YIELD DATA DERIVED FROM INDEPENDENT SOURCES, AND A SELECTION OF ANIMAL HEALTH PRODUCTS.

THE BULK OF THE CURRENT AGRICULTURALLY BASED WEB SITES, LIKE XS AG.COM, FIT THE BUSINESS- TO-CONSUMER MODEL. EVEN SO, MAJOR AGRICULTURAL PLAYERS HAVE STARTED THEIR OWN

B-TO-B SITES. THESE INCLUDE THE PARTIALLY ACTIVATED ROOSTER-DOT-COM, THE JOINT VENTURE BETWEEN CENEX-HARVEST-STATES- COOPERATIVES, CARGILL AND DUPONT, AND THE J.R. SIMPLOT SITE PLANETAG-DOT-COM.

SOME EXPERTS BELIEVE THE MOVEMENT TO PURCHASING SERVICES ON THE WEB REPRESENTS A CHANGE AS LARGE AS THE SHIFT FROM HORSES TO TRACTORS.ONE OF THOSE EXPERTS IS BRUCE BABCOCK, THE DIRECTOR OF THE CENTER FOR AGRICULTURE AND RURAL DEVELOPMENT AT IOWA STATE UNIVERSITY IN AMES, IOWA.

Babcock: "...I think the potential is there, to greatly lower the cost of bringing the final product to the consumers table. And that's why, I'm not optimistic, I don't take a stand on it, but I look at it, and I say," there's gonna be huge changes in the way that the business of agriculture's conducted and it's gonna be conducted on the internet."

BABCOCK PREDICTS SOME LOCAL ELEVATORS AND COOPERATIVES WILL SHIFT THEIR BUSINESS EMPHASIS. THEY WILL BEGIN TO OFFER VARIOUS COMBINATIONS OF INPUTS AND SEEDS OR PROVIDE SERVICES, LIKE CUSTOM APPLICATION OR ADVICE ABOUT PLANTING, AND MAKE IT ALL AVAILABLE ON THE INTERNET.

Babcock: "...it's a revolutionary tool in some sense but it's just a tool. The one thing that I think it has the possibility of doing is, it, because it greatly lowers the cost of transmission of information, that coordination of agricultural supplies is gonna be much easier done over the internet."

Miller: "... If you look at the distribution system within agriculture, it's very fragmented ... Our goal will be to get the producer, the farmer closer to both, the supplier, and closer to the end user of those products, that bein' the processor... and the internet allows us to do that ... we feel that we can bring a lot of value to the farmer. And that's really what this is all about."

NEXT YEAR, WILSON PLANS TO TAKE ADVANTAGE OF WHAT SITES LIKE POWERFARM.COM HAVE TO OFFER.

WILSON: "Sure. I look to buy lots of different things over the internet. Where we can buy fer with cash for a good price."

FOR MARKET TO MARKET, I'M DAVID MILLER.


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