Tips and Links
U.S. Web Site Pioneers Online Tools for Farmers
By Bob Burgdorfer
CHICAGO (Reuters) - The toughest decisions farmers have to make generally involve marketing their crops, and a Web start-up that is making that job easier appears to be taking root in the Corn Belt.
The start-up, E-Markets, Inc., is a pioneer web site aimed at U.S. farmers that began in 1996. Slowly and steadily, the site has gained a solid following both among farmers and grain elevators with new web-based tools for marketing grain.
More than 2,000 elevators in the Midwest now use the site to post bids for grain that local farmers can weigh.
But the Ames, Iowa-based company, founded and managed by agribusiness executives who learned their trade at industry giants like Pioneer Hi-Bred and Purina Mills, has gone well beyond the usual bulletin boards, chat rooms and ads on many farm sites. It now offers automated marketing plans for grain.
"One of the most uncomfortable things for an elevator manager was when a farmer came in and said, 'When should I sell my corn?'" David Abbott, E-Markets president and chief executive officer, said in an interview.
"We are giving the farmer and the elevator manager an opportunity to sit down and talk about a marketing strategy," Abbott said of the E-Markets approach.
The approach comes from two programs, one available now and the other to be launched later this year.
In March, E-Markets began offering a program called the Decision Rules for ContractsSM (DRCSM) pricing tool. With DRC, a farmer commits to sell a specific amount of grain to an elevator. The grain is then automatically sold in daily increments over a period of time at each day's market prices, eliminating distractions.
That way, the elevator has possession of the grain and can ship it to exporters, food processors or other users at any time. The farmer, meanwhile, benefits from a trend rather than being tied to a one-day high or low, since the price paid is calculated as an average over the sale period.
"I think DRC is one of the most innovative grain marketing tools to be offered since agricultural options began trading in 1984," said Diana Klemme, vice president at Atlanta-based Grain Service Corp.
Password-protected pages on E-Markets' web site handle all the automated sales and record-keeping, putting producer and elevator on the same page after they jointly decide how much grain and what period of sale to use.
The incremental selling allows farmers to capture price spikes in the market that they might otherwise miss, E-Markets officials said.
"Many (farmers) start with a sound plan," said E-Markets vice presdient Soctt Cavey. "However, they can get caught up in the volatility of the grain markets and fear they will miss or have missed the best pricing opportunity, causing them not to execute the plan."
The Aurora, Nebraska Cooperative Elevator Co. is one of 250 U.S. grain elevators now using the web-based system.
DRC offers a marketing option that would be very difficult for us to provide customers otherwise," said Todd Gerdes, the cooperative's specialty grains manager. "What would be complicated to do on our own, DRC makes very simple with the computer and Internet."
Later this year, Abbott said, E-Markets expects to launch an online exchange for specialty grains like high-oil corn or specific milling wheats. The system will match up buyers and sellers of grains that have attributes for specific purposes.
"A Nabisco for example has certain criteria that they are looking for in wheat that makes a better cracker," he said, adding that the farmer will benefit from the premium prices.
E-Markets draws revenues from small per-bushel tolls on such transactions as well as user fees from large processors and elevators employing its online tools.
Half of the firm's 60 employees are programmers, Abbott said. While its operations are still running at a loss, he said he expects a turn profitable in the near future.
Some $500 million of grain and other farm products were contracted throught the site in 1999, he said.
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