Farmers produce grain and livestock, but when harvest is over, where do they sell? Often to the closest location or whatever buyer they can find. FarmLead wants to change that. This startup from Canada, has announced it received $6.5 million in Series A in a funding round led by Monsanto Growth Ventures, with added inveestments from Avrio Ventures and the MaRS Innovation Accelerator Fund.
This funding round, the company's first at the Series A level, not only funds expansion but also the opening of a U.S. headquarters in Chicago. As part of the deal, Kiersten Stead of MGV and Aki Georgacacos of Avrio Ventures join the FarmLead board of directors.
Farm Industry News talked with Brennan Turner, CEO, FarmLead, and a company founder, to learn more about this service and what this company is bringing to the table. "Right now we have about 5 to 6% of our trades coming from the United States," he pointed out. "We had been focusing on Canada for the last two-and-a-half years, and we're adding more tons moved on the platform."
He explained that FarmLead is a totally open platform available to anyone. "We want to help the farm be more confident in grain marketing decisions, and to know they're getting the best possible deal," Turner added.
The grain market is traditionally a "local sale" market where relationships are important, but in a low commodity price environment, grain producers may want access to more buyers where there could be more competitive pricing. "Our platform completely opens up the marketplace to any buyer of that type of grain," he said.
To be a grain buyer, you have to get a credit check and be verified by FarmLead that your checks will be good when you buy grain. For the seller, there are checks and balances regarding the quality of grain you sell too. Bad loads to a buyer are bad news; bad credit from the buyer is bad for FarmLead. "We do credit analysis on every grain buyer, and we check that status every three months," Turner explained. "The buyer can pay the seller through our platform."
On the seller's end, the firm has access to grain testing labs and producers can order tests and easily upload spec sheets for their product to the site for buyers to see. This can be part of the final negotiation of the offer.
During the process both sides are anonymous until a seller agrees to a deal; then the buyer and seller are revealed to each other for final negotiations like trucking or other delivery questions. Most farmers list grain for pickup on the farm; many buyers list prices for grain delivered to the buyer. Turner explained all those details are worked out in the negotiations for that grain.
FarmLead gets paid when the transaction goes through charging $1 per metric ton up to the first 80 tons, then 25-cents per ton after that. Turner explained that on average the cost is about 50-cents per metric ton for customers based on current volume levels.
Users weigh in
In advance of the funding announcement, FarmLead connected Farm Industry News with a buyer and a seller who have used the system.
Kris Westblom is a grain buyer for Hamiota Feedlot near Hamiota, Manitoba. The 12,500-head cattle feedlot does a combination of backgrounding and finishing cattle. He signed up 18 months ago for the platform because he was having a hard time finding sellers of feedgrains over the Internet. "I've found some good deals," he said.
He added, however, that there are challenges with farmers posting high prices in the hopes someone will bite. The feedlot is not looking to pay a premium, but to lock in supply. In addition, the feedlot has to post realistic bids as well. "If I offer 25% under market value, no one is going to take that deal," he said. "The nice thing is that the FarmLead team has been in communication with buyers and sellers that has improved the situation. It's a learning process."
Westblom said that with this system he has cut out the middle-man in some deals. "Now we don't have to have that traditional broker between me and the farmer," he added. "It's young, and early in the process, the lots of grain we have bought have been small, and the number of loads so far has been small, perhaps about 5% of the grain we buy."
For Hannah Konschuh, a grower who is working to sell with the program, FarmLead has allowed the opportunity to sell a couple loads. Her family runs a 5,000-acre dryland grain farm, east of Calgary, Alberta. She and her husband have been farming with her parents for three years - just as the Canadian Wheat Board was dissolving and farmers needed new ways to market and price grain.
"It's a time when people are learning to market their grain," she explained. "We found FarmLead through social media, we weren't necessarily looking but went to a number of trade shows and saw the company."
So far, Westblom has conducted two transactions through the platform and has found that using it is pretty smooth. "They have a function where you can message back and forth between buyer and seller," she explained. "If you have any questions on a deal, like you want specs, you can get them that way."
She explained they had some heated canola which a local buyer didn't want due to quality concerns. Westblom used the platform to locate a buyer that would take the product and offered a fair price - she noted she was honest about the oilseed quality and the buyer took the deal.
Tried before, so what's different
Stick around this business long enough and you can remember past attempts at "new ideas." Creating a grain-trading market place has been tried before, and failed. FarmLead's Turner explained why this time it will be different.
"I think the first thing is timing and the rising use of technology on the farm," he said. "With the advent of mobile tools and the Internet of Things, it has changed the dynamic of how things are being run today. A lot has happened in the last decade-and-a-half."
And second, he noted that FarmLead is not an auction market. This is a negotiation-based platform. "Most grain sales are hyper local and most transactions focus on the farm's local area," Turner said. "We play in the hard-to-buy, and hard-to-sell market, which is about 30% of grain trading. And we're entirely focused on the cash market."
In the announcement about the new Series A funding, Turner also noted that the company has an ability to increase deal flow to farmers "enabling them to negotiate better prices and other key trade terms online. This is the future of grain trading and we are truly poised to transform the way agricultural commodities are traded worldwide."
For more information about FarmLead and its service, visit farmlead.com.