Prairie Ramblings

The Future of Ag E-Commerce

By Tracy Sayler

There’s a web site on the Internet called “The Museum of E-Failure” www.disobey.com/ghostsites.  It lists close to 1,000 web sites from about 600 defunct Web projects that have tanked between 1998 and 2002.  “Our goal is not to laugh at the fallen, but to preserve their last image, before all traces of these sites’ existence are deleted from history’s view,” writes the virtual museum’s “curator,” Steve Baldwin. “It is my hope that these screenshots may serve as a reminder of the glory, folly, and historically unique design sensibilities of the Web’s Great Gilded Age.”

Among the museum’s exhibits is Cybercrop.com, swallowed up by Farms.com last April. This web site offered news of relevance to the grain industry and operated an online grain exchange, where grain buyers and sellers could arrange contracts (not enough, obviously).

Then there is Rooster.com, which became chicken soup last December after the company fell short of revenue targets and it was unable to secure additional funding from new or existing shareholders.  Rooster’s demise might be the most surprising of the recent aggie dot bombs, since it was started by Cargill and seven other agribusinesses including Archer Daniels Midland, Cenex Harvest States and DuPont, all with deep pockets.

The rush to E-commerce in the late 1990s might be compared to the gold rush in the late 1800s.  Many prospectors who rushed West with dollar signs in their eyes didn’t find “gold in them thar hills.” Many cyber space miners didn’t either.  Businesses didn’t want to miss out on the online action, but actual business transactions aren’t happening as much or as fast as many anticipated. Besides, two-thirds of all new businesses fail before they are five years old, according to government statistics.  Why should online businesses be any different?

A U.S. government survey of 32,500 farms of all sizes and types last June indicated that 50 percent of all U.S. farms own or lease a computer, up from 40 percent in 1999. About 40 percent of farms with less than $100,000 in sales used the Internet, and 58 percent of farms with sales over $100,000 used the Internet. However, the survey found that just six percent of U.S. farms use the Internet to purchase agricultural inputs or conduct agricultural marketing activities. That’s a small percentage of a small sector of the population.

Several years ago, Forrester Research Inc., an independent technology research firm, ranked 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 ranked 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. 

Still, there are good reasons to establish an agricultural presence on the Web. Farmers are more likely than many others to use the Web, says Gjovig, for several reasons:

•  Farmers have a history of catalog and telephone shopping.

•  Farmers are fast adopters of technology once they understand it.

•  Farmers are constantly seeking efficiency-boosting measures.

•  Farmers are looking for cost-savings offered on the Web.

•  Farmers like the convenience of 24 hour service, seven days a week.

•  Farms like just-in-time delivery and trimming inventory costs.

There are still a multitude of aggie dot coms. It’s difficult to predict which will survive, and which will be an exhibit in the Museum of E-Failure someday. However, there are three factors that would seem to increase the likelihood for e-commerce success:

Being integrated. Web sites like Agweb.com and @griculture Online www.agriculture.com are integrated with print mediums and/or other partners.  @griculture Online, affiliated with Successful Farming magazine, was the first ag portal on the Web,  launched May 10, 1995.  @g Online and SF publisher Tom Davis says that building alliances, being integrated, and expanding methodically helped Ag Online survive its early startup bumps. @griculture Online is forecasting a profitable year, says Davis, which if realized, would be the second for the e-business.

Being local. Agsupplier.com, started in 1999, is one of the largest ag e-commerce sites on the Web, involving a network of 156 retail outlets in 26 states. Cooperating partners sell ag inputs with less service, but for less money. Farmers enter a zip code and are able to shop online at an ag input supplier in their locale.  Being able to buy locally is part of the appeal, according to Gary Shields, sales manager.

Being specialized. Niche or specialized crops will have a better chance at being sold online than bulk grain, according to Mike Krueger, a partner in Agri-Mark, West Fargo, N.D.

E-commerce will not be THE future of agriculture, but it will certainly continue to be a part of it. E-Commerce will be helped along with the increased adoption of computer and Internet use, as well as new technologies enabling both. 

For example, The U.S. Grains Council, which has established a “Value-Enhanced Grains Solutions” web site www.vegrains.org notes that a new “e-signatures” law will make electronic signatures equal in legal authority to hand-signed documents.  Government warehouses have historically required signatures for auditing purposes, and the new authority allowing digital signatures will make e-commerce of value-enhanced grain easier and faster. It has the potential to help the development of value enhanced grain markets on the Internet, according to the USGC.

This column originally appeared in the Duluth Seaway Port Authority’s Winter 2002 North Star Port magazine, www.duluthport.com.