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Issue 30 |
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Prairie Grains is the official publication of the Minnesota Association of Wheat Growers, North Dakota Grain Growers Association, South Dakota Wheat, Inc. and the Minnesota Barley Growers Association. |
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Dot Com: The future of agriculture? By Tracy Sayler
The Internet is a mega-trend in business—especially business to business e-commerce—and that trend is already reshaping the way the agricultural industry conducts
business. Forrester Research Inc., an independent technology research firm, ranks food and agriculture eleventh out of 13 business sectors in the rate of Internet adoption, just ahead of construction and
industrial equipment. As you might expect, computing and electronics ranks first. Ag's ranking may be connected with how the industry has traditionally conducted business. "No other multi-billion dollar business
today holds as high a regard as does agriculture for personal relationships and closing deals with little more than a handshake. They like to know and trust who they are doing business with," says Bruce Gjovig,
director of the University of North Dakota's Center for Innovation. Gjovig joined ag leaders in the region earlier this spring in Grand Forks to discuss agriculture's future in the "dot com world," sponsored by
the National Agri-Marketing Association. Participating in the meeting were representatives of the new producer alliance FarmConnect and the Minnesota Wheat Council, which have a presence on the web, respectively at
There is an estimated 7,200 ag-related websites now in operation, says Gjovig. Still, only 13% of agribusiness firms are using the Internet, and 87% of those were using it exclusively for e-mail, according to a 1998
survey by the California Futures Institute. "That is a very narrow and not very deep use of the Internet," says Gjovig. "But it is changing." Goldman and Sachs Co., New York, estimates that agriculture
business-to-business sales on the Internet will reach $123.6 billion in 2004, or 12% of all ag sales made in the country. If that figure holds, it would mark a stunning increase from 1999, with an estimated $34
billion or 4% of total ag sales. Goldman and Sachs further forecasts that by 2004, ag sales will represent 8.25% of the entire Internet economy. "Ag is coming late to the party, but coming on strong," says Gjovig.
Farmers are notoriously both strong adopters of new technology, as well as skeptical and slow to adopt new technology. "It is this dichotomy that suggests why ag has been slow to adapt to e-commerce, but when it
does, it will be strong and fast," he says. "Ag folks are reluctant to change in the beginning. They like to gather information and think about it. But once they accept, they adapt very quickly and become very
loyal." About 30% of the 2.1 billion farmers in the U.S. have Internet access, according to 1999 USDA estimates. Of U.S. farms with sales of more than $250,000 or more, 77% have access to a computer and 52% have
Internet access. And it appears that farmers in the Midwest are the most "wired." According to a survey by E-Markets in Ames, Iowa, 70% of full-time crop producers in the Midwest have Internet access, and half report
using the Internet at least once per week. Farmers are five times more likely than small business to use the web, says Gjovig, for several reasons: • Farmers have a history of catalog and telephone shopping. There may be negative consequences from ag's growing presence on the web, says
Gjovig. A Washington State rural sociologist points out that the more middlemen the system cuts out, the less income will move into rural communities. Further, there are bound to be ag business failures on
the web, with many companies gearing up to compete on the web for a limited customer base. Keys to ag dot com success Grabanski, president of a Fargo-based grain market advisory service, is expanding his business to include other services, with an online emphasis. He is working
to establish a farm input buying network on his primary business web site, In addition to
online alliances, Grabanski believes key elements are needed for ag businesses to be successful on the web: • Concentrate on web projects where someone else hasn't already invested in development. "I used to think differently about competition and
marketing before the Internet," he says. "Other local market advisory services aren't so much the competition any more. It's everybody else in the nation providing market advisory services." Web opens door to tight-margin industry "I think this problem is not unique to our business, I think
everyone in agribusiness is dealing with it," says Matt Glessner, with AgSupplier.com was created last December
to give customers an additional service option: To buy products for less service, but less money. Thus far, it seems to be a good move. About 30% of AgSupplier.com customers are new to AGSCO. And customers are using the
web site for some, but not all purchases. "So they're buying some inputs off the web, and some through traditional sales areas where the service and help they want is provided." Glessner says the web site has been
valuable in helping to determine customer needs and buying habits. "One thing we've noticed is a lot of hits (web visits) at night," he says. "We're getting a true sense of who our customer base is and what
they want." Although the Internet creates the ability to shop from anywhere, Glessner believes buying locally can still matter, even on the web. "I do not think we would have been as successful if we
hadn't been tied to AGSCO, a locally known business," he says. |
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