A new online business is matching grain farmers with buyers of their crops. While based in Little Rock, Ark., grainster.com is not bound by borders and provides easier international transactions.
The online business, for better or worse, comes hard on the heels of the financial demise of Brinkley, Ark.-based Turner Grain. Currently in bankruptcy and facing lawsuits, Turner and its affiliates have left farmers unpaid for hundreds of thousands of dollars of delivered grain.
In early December, Delta Farm Press spoke with grainster.com head Layne Fortenberry. Among his comments:
What is the difference between Turner Grain and what you’re doing?
“Just by chance we went live two days after Turner Grain hit the news.
“First of all, we’re not buying any grain. The best way I know to describe this is a dating service for grain. We’re simply introducing the farmer to, say, Cargill or ADM or Bungee or even to international buyers -- whoever is looking for grain. In a perfect world, the grain will go straight from the farmer to the end user, whether domestic or international.
“We’re membership-based -- there’s a $500 annual membership fee -- and we aren’t trying to get into anyone’s pockets. We’re not physically taking any grain, at all. We’re just a matchmaking service taking the farmer to the world.”
Any assurance that the members are dealing with legitimate buyers on your site? Do you provide safeguards of some sort?
“We suggest you get to know your buyer well before doing any business. Make sure they’re bonded and licensed.
“While the service in online, you don’t really make a deal online. It’s all about personal assets, as well. If someone wants your grain, they’ll get in touch and then you’ll negotiate over the phone. While it does make use of newer technology you won’t lose that personal aspect when doing business.”
On the site’s interface…
“The site requires a simple profile be filled out. Obviously, the most important information is your name, phone number, e-mail and the type of grain, grade, moisture levels you’re looking to sell.”
What spurred you to do this?
“I first had this idea almost exactly eight years ago.
“At first, the thought was to charge percentages on deals, maybe a per-bushel fee. But I never really felt comfortable with that because it got to complicated.
“That’s the key with our current model: it has transparency.
“Going through normal channels, there’s a logistic chain from the farmer to the end-user where at least five people are going to touch the grain. All those guys are going to pull a nickel, maybe a dime, off each bushel. That gets to be costly.
“Well using this service means a big cost savings because you’re cutting out all the middle men. The farmer makes more money and the end-user can buy the grain for less.
“Once we got into this, an even bigger deal, especially for the international buyers, was grain quality. My background is in rice so I’ll use that commodity as an example. International millers came to Arkansas a year or two ago. Basically, they wanted to go directly to the farmers. The price was important – everyone wants to save money and get a better deal. But their focus on quality turned out to be even more pressing.”
IP increasingly important
On the increasing importance of IP…
“I’ve got a buddy in Costa Rica who was bringing in a lot of rice. He was part of a group that decided to send a sample of the rice off to the lab for testing. There were 11 varieties in that one sample.
“Well, around the world folks want different rice varieties. The South Americans have different palates than Asians. And it’s a big deal – everyone wants different cooking qualities, different textures.
“So, quality is very important. The end-users know what they want and don’t want to pay for something outside those parameters.
“That’s why the site is so beneficial for farmers. There won’t be any comingling of varieties and they’ll get to grow what the end-user wants and ship it out. Identity preserving (IP) your grain is where things are headed.”
Short-term and long-term sales…
“The site allows searches for short and long-term sales. Farmers list their grain before they even plant. So, it’s basically forward contracting with the buyer. Or, the buyer can go on the site and list their needs and the farmer can find a good hook up. It works both ways.
We’re not changing the way everyone trades grain. We’re just taking it to another platform and making it more transparent and more global.”
Sectors accessing the site?
“It’s kind of wild and there’s a lot of interest already.
“Again, with rice as an example, millers can use the site to buy from the farmer, process the rice and then turn around and sell the processed product back on grainster.
“Even crop insurance guys may be interested in this. What’s the cash price on grains around the country? Ag finance guys want to know the same. I had a guy tell me recently that lending institutions are increasingly requiring marketing plans before they’ll make loans. Well, what about using grainster as part of a marketing plan? We’re looking into that.
“What about bakeries? Grainster would seem to be a place where bakers can go to find what they need.”
What about expanding outside grain?
“That’s possible. I’ve been approached about expanding it to fertilizer and agro-chemicals. That way farmers can go find deals and not have to pay the middlemen.
“I’m not saying no to any of that. But currently we’re concentrating on grains and making this work as smoothly as possible. Once that’s done, we’ll consider other commodities.”
Reactions to grainster?
“Most folks have been very positive about it. There has been a bit of criticism from certain folks but I think even they’ll find their way into this system. A lot of people don’t like change so there’s sometimes a bit of pushback. But that’s not necessarily a bad thing -- it lets you know you’re hitting a nerve.
“I think it’s telling that Butch Calhoun, the Arkansas Secretary of Agriculture, really likes the idea of grainster. The international buyers are very excited about it.
“Right now, we’re going into a second phase of the site. We’ve been live since August but the site has almost been in a demo mode -- sort of a soft opening -- that we’ll build on. We’re now putting in a private messaging system and negotiate buttons. That should be done by mid-January.”