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Articles from 2000 In June


Corn+Soybean Digest

Who Wants To Spend A Million There?

Experts answer questions about e-commerce

E-commerce is safe. That's the final answer to one of the most-asked farmer questions about buying inputs on computers.

E-commerce experts are confident of their answer - no lifelines are needed - despite recent reports of credit card theft in non-ag areas of cyberspace. The risk is minimal, they say.

"Millions of people are buying products on the Internet every day," says Larry Kline, chief operating officer at ForTheFarm.com. "Most are using their credit cards, and it's very secure."

"There's enough security in the system that I have no qualms about ordering over the Internet," agrees Diane Becker, Internet instructor and consultant from Norfolk, NE.

"I have no hesitations buying things online," adds Steve Drazkowski, a University of Minnesota extension educator.

Most e-commerce sites have security devices that encrypt credit card numbers so they can't be stolen en route from your computer to the seller's server. Look for a padlock or other insignia that indicates the site is secure.

Security devices make e-commerce transactions safer than handing your credit card to a waitress at a restaurant, Drazkowski believes.

A bigger concern, he says, is the safety of credit card databases stored by dot-com companies. If those lists aren't secure, a hacker could break in and steal them.

You wouldn't lose a lot of money - most credit cards have a $50 limit on liability for unauthorized purchases. But if given the option, don't give any company permission to keep your number on file, says Drazkowski.

Here are answers to other questions farmers often ask about e-commerce:

Can I save money buying online?

For many farmers, that's the million-dollar question. The correct answer: Maybe. But lower prices aren't e-commerce's main drawing card, according to Kline.

"Buying online is convenient and efficient," he says. "You can look at a lot of products in a short amount of time. In some cases, you can save money, too."

Who will provide the service that has traditionally accompanied input purchases?

In some cases, it will come from the same dealers and salespeople you've worked with for years. In others, though, those suppliers will be bypassed, and no local help will be available. It depends on the type of dot-com company you buy from and other factors.

In the long run, says Drazkowski, e-commerce will reduce the amount of service available to farmers.

"Some of the dot-com companies say they want to maintain the relationship between the local salesmen and their customers," he says. "The extent that they're able to do that is still questionable."

What about warranties?

Most products are backed by the manufacturer, not by the dealer, Kline points out. If no local dealer was involved in the sale, many dot-com companies will help you contact the manufacturer, he adds.

"We'll provide the customer service to help them with that. We'll get them in touch with - or get on the phone and call - the manufacturer."

With so many e-commerce sites selling the same products, how do I decide which ones to patronize?

Several factors may influence your decision, according to Kline. These include: downloading ease, neutrality and customer service.

"First, make sure the site is secure," says Becker. "For now, especially with big money items, I'd go with the ones that are affiliated with established companies, such as a magazine or national implement business," she adds.

Also, it's probably a good idea to phone a friend. Get advice from others who've bought online before making your first purchase.

Corn+Soybean Digest

Rapid Change Marks E-Commerce

New products and services continue to evolve

If you want to grasp the rapid evolution of e-commerce, there's no better place to start than e-commerce.com. When Rusty Harder and Dave Krog founded it in 1996, their mission was simple: Bring people together on the Internet to create opportunity and increase efficiency.

They accomplished that mission immediately when they introduced a contracting service in 1997.

"At that time, elevators and other grain buyers were struggling to establish contracts for high-oil corn and soybeans with specific traits," Harder says. "It was tough for them because there was a lot of competition and they had to move very quickly. So we set up an online 'meeting place' where farmers and contractors could get together. The first three days we offered the service, we contracted more acres than our customers had put together in the previous 12 months."

In 1998 the company added seed ordering capabilities and inventory management services to those same customers, quickly followed by "input bundling," where a producer ordering Liberty Link seed, for example, would receive the herbicide with it.

In 1999 the company offered a system where elevators could bid directly to producers for their grain, and the year 2000 brought more services. In March they introduced Decision Rule contracts that allow elevators to offer risk management tools to their customers, and in May they began offering a cash grain exchange.

"The grain exchange will allow buyers and sellers to incorporate quality attributes into price discovery," Krog says. "The key is to connect the producers with the ultimate end users. That's what e-commerce does so efficiently."

At Farmbid.com, CEO Ted Farnsworth says another type of change is on the way - and fast. In just a few months, he watched international traffic at his site explode. Ten percent of the transactions at the company now occur between American farmers and international buyers.

"We are getting flooded with e-mail from overseas and they are looking for just about everything," Farnsworth says. "The global market is going to be huge. And for American farmers it will create a liquid market they never had before."

To facilitate that growth, though, Farnsworth says the transportation industry will have to quickly solve some logistical problems.

"The bottleneck right now is the ability to immediately ship anything to anyone anywhere, and it's not easy," he says. "It's much simpler to ship a case of vaccine than to ship a few tons of fertilizer, for example."

Mark Porter, sales manager at NetSeeds.com, sees change of another sort having an impact on E-commerce. Extremely rapid growth, coupled with financial issues, he says, could bring down some Internet companies.

"Annual growth rates for us have hit 400-500%," Porter says. "I wonder how many companies can handle that. Also, some of these companies are going to run out of money, especially the ones that don't have a lot of product to sell. That's why we're so excited. We are self-financed, we're profitable and we reinvest everything."

Handling growth is nothing new for Joe Dales, senior vice president of marketing for Farms.com. Already, Farms.com has over 100 employees and expects to double within the next year. The explosive growth, he says, is due to the beauty of price discovery in an open forum and the fact that the Internet creates marketing opportunities.

"What we'll see next are more opportunities to add value throughout the whole food system," Dales says. "If someone wants a specialty product it can be tracked through data bases. Biotech innovations can be tracked as well. The ability to add value with Internet commerce is immense."

Corn+Soybean Digest

Tidal Wave Or Ripple?

E-commerce's impact isn't known yet

Will this new business model cause sweeping change or just a ripple? To be sure, the jury is not out on the changes e-commerce will bring to farm country. In fact, the jury hasn't even heard the evidence yet.

Still, the debate is on and emotions are running high. Some onlookers claim e-commerce will decimate local dealers and distributors and accelerate the countryside's economic downward spiral. Others say e-commerce is clearly an inspirational booster shot for a flagging industry that desperately needs change.

Who's right?

"I think there is one area that everyone can agree on," says Steve Sonka, director of the National Soybean Research Laboratory at the University of Illinois. "E-commerce will cause considerable change.

"There will be more competition. Local outlets will have to decide what business they are really in. And the entire system, from transportation to storage to services, will be altered.

"With that said, however," Sonka continues, "it's clear that when you look at the technology as a whole, it has created jobs across the economy. I think what's causing such consternation is that when a local business closes, it's visible and painful. At the same time, when a local business adapts to new technology and is really going good, no one notices. In sum, proponents of both sides of the debate are right."

Mike Boehlje, professor at Purdue University's Center for Agricultural Business, also sees a middle ground. The most profound change, he says, is that e-commerce alters the definition of a market boundary. Deals can now be struck without regard to geographic location. However, he says, other functions have to be performed. For example, anyone can sell a new piece of equipment, but there's still transportation, set-up and service that someone has to do.

"And who is in the best position to do that?" he asks. "The local dealer. Keep an open mind. Everything doesn't happen in the virtual world."

Two things are certainties, though, Boehlje says. There will be a higher level of price competition that reduces dealer margins; and savvy dealers and retailers will adapt.

"Maybe a local dealer doesn't take the attitude that business will be hurt," he says. "Maybe he realizes that his competitive advantage lies in fulfillment, delivery, set-up, application and service. Maybe he decides that rather than compete head-on with an e-commerce site, he'll link with the site and provide service. It's a way to add to his portfolio - a way of offering more services to his customers."

Even so, some areas of the ag economy are more exposed than others. Mark Porter, sales manager at NetSeeds.com, says, "There is a revolutionary change going on and it will grow. In the seed business alone, $750 million is tied up in support of the traditional infrastructure. By restructuring the seed business and eliminating a lot of unnecessary overhead, we are reducing costs and sharing it (dollars saved) with the farmer."

Ted Farnsworth, founder and CEO of Farmbid.com, agrees: "The distribution channel is what is at greatest risk. Goldman Sachs (the investment giant) says e-commerce will be a $1 trillion marketplace in the U.S. by 2004. The firm also says that 12% of agricultural business will be online. That will be disruptive. With that timeframe, it looks like $120 billion will come out of the supply chain."

As the founder of eHarvest.com, which has since merged with Farms.com, Joe Dales helped build the technology's ground floor. And he is certain that this technology offers a strategic opportunity rather than a strategic threat.

"I don't deny that there will be major change, but this is not going to hurt local economies," says Dales. "On the consumer side, farmers are just like me. They hate buying and selling products without knowing accurate costs and returns. But with the Internet, they have the information they need no matter where they are. They can clearly define the cost of goods and services and how they get paid.

"And on the supply side, the dealers and retailers have as big an opportunity as anyone. With the Internet we can build a sustainable business model that will help farmers build sustainable farms. That's my vision."

At Rooster.com, grain marketing manager Joe Stone says that's precisely what he and his colleagues are building - an "agricultural mall" that includes all parties. He says mainline agribusiness companies, cooperatives, dealers and farmers all will interact on site and increase overall efficiencies.

"I believe the Internet is going to become the business tool we use most," he says. "Open access, information and expanding choices will help everyone become more efficient in this global marketplace. And I don't see an upheaval in the existing infrastructure. Any party that adds value in the chain will have a place."

Marc Crawford, chief information officer of XS Ag.com, says it's already happening on that site.

"We have thousands of small town dealers who list products on our site, and they've been here over a year," he says. "They now have access to markets they could never reach before. Customers are here, so the dealers are here. They can use us to their advantage." F

Corn+Soybean Digest

Tricks Of The Trade

Here are ways to get the most payback for your online time

'Today's World Wide Web is the world wide wait," says technology forecaster and futurist Daniel Burrus. "And it's not just for connections; it's also that there's too much information."

But several time savers can help you make the most of your online time.

Your computer

The processor and random access memory (RAM), particularly, affect the speed and ease with which you can cruise the 'net. Iowa State University (ISU) extension recommends a minimum of either a 166 MHz (megahertz) Pentium processor or a Macintosh PowerPC. When it comes to RAM, 16 MB (megabytes) will do, but 24 MB makes for speedier surfing.

"The life expectancy of a computer is about two years," says Andrew Whyte, a University of Minnesota software support specialist. "So I always say, 'Buy two years ahead of what you think you need and you might get four years out of it.' It's usually a very marginal additional cost."

Look for affordable packages like a 400 MHz processor, 64MB of SDRAM, 3D graphics card and 4.3 GB (gigabyte) hard drive. Total cost: about $800.

He also advises: "If you have some cash left over, spend it on the monitor. That's what you'll be looking at all the time."

Your modem

With high-speed access becoming more available, the modem you need may depend on how you choose to connect.

"The biggest time saver that I've found is high-speed access," says Whyte. "Unfortunately, rural areas are often very limited in their choices. It's pretty much what the regular telephone lines are capable of doing."

The good news is that technologies like cable modems, digital subscriber lines (DSL) and satellite access offer high-speed options that many predict will blanket the U.S. within the next year or two.

Cable and DSL connections are currently offered in limited areas. A satellite link can be achieved at any location with a clear view of the southern sky. Cable modems connect at speeds from 300 Kbps (kilobits per second) to 1 Mbps (megabit per second). DSL speeds reach about 1.5 Mbps while satellite service speeds run about 400 Kbps.

Compared to a 33.6-K modem, these options are a minimum of 10 times faster. It's like going from a two-row planter up to a 24-row planter.

All these services allow you to simultaneously use the phone and Internet, and they all require special modems. For satellite access, a satellite dish and a regular modem are also necessary.

With any high-speed access, you'll want to make sure that your computer will keep up.

As is often the case with new technology, these high-speed-access options can sometimes be cost-prohibitive, says Whyte. When shopping, be sure to take into account installation fees, modem rental or purchase and monthly charges. Also note that these charges usually do not include Internet service, so your monthly access fee will still apply.

Your Internet service provider (ISP)

The number of ISPs has mushroomed over the past few years, outfitting users with various access options. ISU extension recommends that you ask some questions before signing up:

* Does the provider have a local dial-up number?

* What are the rates for unlimited and/or hourly use? Is there a set-up fee?

* What services are included: full Internet access, e-mail or space for your own Web page?

* Is any Internet software or browser provided?

Knowing the answers to the following two questions can save you a lot of time.

* What's the ratio of user accounts to provider modems?

If the user-modem ratio is more than 10 to one, there will likely be times when you can't get online.

* What modem speeds are supported?

An ISP that only supports speeds to 33.6 K will slow a 56-K modem down to 33.6.

To find an ISP, check with your local phone company, library, computer store or extension agent. If you have access to an online computer, thelist.Internet.com has service and cost information for ISPs by area code, state or country - including free service options.

Your search engines

Once you're online, how do you track down what you're hunting?

"Know what you're looking for," advises Connie Hancock, University of Nebraska extension educator. "It really makes a difference. When you do a search, you should narrow it as much as possible before you get started."

Search engines (like AltaVista, Excite, Google, Lycos and Yahoo) look for pages using a crawler. A crawler is a program that contacts Web servers and scans them for your search topic.

Hancock suggests using search engines that are specific to your topic. For example, AgriSurf and AgFind search only agriculture sites for your subject matter.

"Search engines access just a tiny percentage of what is actually available out there," Whyte says. "In any particular subject they might find 20 or 25% of the Web sites that are available. So it's a matter of getting a little bit creative with those questions."

Another option is a metasearch engine. Since no two search engines return exactly the same results, these engines query several search engines at once. Dogpile, ProFusion and MetaCrawler are some favorite metasearch engines.

Search operators, such as plus or minus signs, are almost as important to your search as the key words. Simply entering two words will return a completely different set of results than putting quote marks around them. Following are some examples of how operators can affect search results.

Search For: Returns Documents Containing: corn borer the word corn and/or the word borer "corn borer" both words together +corn borer corn, the word borer may be there +corn +borer both words, not always together +corn -borer corn, pages with borer are lower

Putting quotes around words allows you to search for a specific phrase. When using a plus or minus sign, put a space before but not after it. If you use lowercase text, both upper- and lowercase results are returned.

Wading through search results is often a time-consuming task full of its own challenges.

"Learn to interpret what the little summary paragraph is about," says Whyte. "It saves a lot of time if you can learn to pick out which sites look good and not even bother going into the ones that don't."

Hancock concurs. "Part of the trick is to identify what information is good, reliable information and what's not quite so worthy of spending time on."

When you do find a useful, reliable site that you may want to visit again, add it to your favorites or bookmarks. Then keep the addresses organized in folders. Or, Whyte cautions, it could take as long to find the bookmark as it did to find the site.

Corn+Soybean Digest

Managing Data

Data warehouses help farmers make decisions

For any technologically adept farmer, data management and storage has become a prime concern. And the data that gets generated not only is mountainous - often it resides in computers off the farm.

Take today's high-tech farmer, who routinely tracks maintenance tasks, inventory, equipment costs, yield monitor information, chemical and fertilizer applications, hybrid selections, seeding rates, tillage passes and grain storage information. Throw financial records into the mix and that's quite a load of data to handle.

But relevant data also is being compiled by his crop consultant, custom applicator, fertilizer and chemical dealer, banker, accountant and local and regional elevators. At best, compiling all this data and using it for decision-making is daunting. But realistically, it's just about impossible.

That's what makes data warehouses an important tool. They serve as a pooling point for all that pertinent data, and they store it in a manner that allows farmers to apply it to their operations.

"The average person simply can't integrate all those different systems," says Scott Dyer, director of the farm-to-table program at VantagePoint (vantagepoint.com), a state-of-the-art data warehousing company. "There are a series of disparate systems out there that don't communicate with each other. We want to integrate the information system into a single account where the farmer can view all relevant information. So we pool all that data, house it at a single source, and offer a secure, backed-up system."

With VantagePoint's service, for example, a farmer can go online, select one of his fields, and overlay a series of "information maps" that could include precipitation, soil type, yield, fertility, hybrid selection and chemical application.

"We want to link all the different layers so that information can be used for decision-making," Dyer says. "If you can't link it and analyze it, it's not inf ormation - it's just data.

"The farmer also can selectively display his information to any number of clients, and that's another way to add value to data."

Another data warehouse, mPower3 (mpower3.com), features the farmer's production data but integrates it with several other information bases. The company's Web site includes pest models that factor in weather, crop location and farming practices to predict insect outbreaks throughout the growing season. Crop growth models include corn, wheat and soybeans; a real-time hail alert system derived from weather tracking; and high-resolution aerial imaging.

"When we began five years ago, no one was looking at information as an asset," says Scott Charbo, president of mPower3. "But consider a single spray application. To the farmer, it's a cost measure and an efficacy measure. And if each application is stored historically and analyzed over time it becomes a decision-making tool.

"But it's also a consultant's tool. And it can be used as a verification tool as well, if that information is important to a processor or grain merchant. We want the farmer to be able to take all the information and move it across the spectrum. The farmer can make better production decisions. And he also can make that information available to other parties for his benefit if he so chooses."

Corn+Soybean Digest

What's Next For The 'Net

Futurists look at the high-speed e-commerce machine

It seems everything from communications to farming drives at breakneck speed. Can you begin to imagine what to expect from the Internet within five to 10 years? Actually, some people can. "For farmers, it will be a wonderful future," says Bill Horan, partner in Horan Brothers Agricultural Enterprises at Rockwell City, IA.

Starved for time, consumers (including farmers) are already drawn to the Internet because of lower transaction costs, Horan believes. "Consumers of the future are going to be more loyal to the experience than to the brand," says the central Iowa farmer.

Here's how four Internet gurus see the next few years unfolding for the Internet and its e-commerce capabilities.

B2B Opportunities

The biggest boon for farmers in the future will be in business-to-business (B2B) commerce, not retail, predicts Lowell Catlett, ag economist at New Mexico State University.

"Efficiencies with the Internet will be small, but worth it," says Catlett, who specializes in marketing and futuristic issues. "The real gain will be on the input side."

Outsourcing, or hiring specialists for professional assistance to maneuver through the Internet maze, will be the wave of the future, too.

For example, Catlett claims crop consultants "will be tied to the Internet." They'll become bigger players in purchasing crop inputs for farmers and they'll likely rely heavily on the B2B route.

As you rely more on consultants to make wise decisions about Internet crop input purchases, Catlett says it also becomes more important to build trusting relationships with them. "Relationships become far more important the more complex the world gets."

Catlett also believes that, as more farmers get involved in identity-preserved crops and contracts, they'll become more coupled to the Internet. "They're not going to necessarily sell on the Internet, but they're going to schedule their crops with buyers."

Still, in order to make sales work, buyers must provide a value better than the local elevator. "Moving products long distances doesn't pay. Standard market channels are still efficient and hard to beat," he says.

Fast And Furious Changes

Futurist Ryan Mathews from FirstMatter, a futuring consulting firm, thinks of e-commerce as a global cyber marketplace. And that, of course, means international commerce with potential for political trading snags. "In the next 10 years, e-commerce will be big enough globally that governments will scramble to loosen up the barriers, not tighten them. Money will be in creating bigger markets, not restricting them."

On the home front, though, it's difficult for Mathews to imagine why anyone would buy inputs from a local smaller dealer when they could get them cheaper using the Internet. "However, the smaller dealer could be participating in that exchange and could be brokering deals.

"Some of the services they (local farmer-dealers) provide currently will have diminished value in the future. But that doesn't mean they'll go away as people start doing business on the Internet. It just means it changes. The question will be whether they can add value," he says. "Radio, for example, didn't get eliminated just because of television."

Mathews likens the present Internet environment to an old Wild West town with "outlaws, pioneers, mavericks, hired guns and shady ladies.

"Right now, investment markets are rewarding the guy riding into town with guns blazing. They want to get their IPOs (initial public offerings) and get out. Clearly, there's going to be a shakeout," Mathews says. "We're going to see a huge consolidation of dot-com companies. Dodge City didn't stay wild after the sodbusters arrived."

Mathews expects that, as the Internet continues to unfold and e-commerce becomes more commonplace, farmers will see colossal progress in access. "People want functionality and they want it to be portable and easy," he says.

"I anticipate farmers will be accessing the Internet from their tractors or combines, and maybe by simply using their wristwatches.

"Flat-screen, voice-activated technology is here now, too, but the cost of the technology has to come down first," Mathews says. "Once that happens, technology will be pushed into farmers' hands."

Fewer But Better Sites

Technology will continue to develop and be faster, especially in rural areas, says Gordon Billingsley, content director for AgriClick.com. "In 10 years we'll be amazed at how completely integrated, completely fast and completely mobile the Internet will be. Nothing will hold it back," he says.

Billingsley believes that the Internet, over time, is not changing what farmers are doing. It's just providing a more efficient way to get things done.

"As Web sites become easier to navigate, those sites will actually be playing the consultants' role," he says. "Sites are constantly becoming more useful and intuitive. And that will only get better as technology gets better. We'll also be able to better personalize and customize its use."

That may become easier, too, with fewer dot-coms to navigate. Billingsley predicts that the field will narrow with only about four to five big, farmer-friendly dot-com players left. Those players, though, will provide a comprehensive amount of information that's easy and efficient to use.

"Farmers are already ahead of the general population in computer knowledge. Once e-commerce catches on, they'll be able to make immediate decisions to make more money," he says.

Cut-Rate Coordination

If you're still wondering how this Internet technology will affect you, take a look at the produce industry, says Bruce Babcock, director of Iowa State University's Center for Agriculture and Rural Development.

"On-demand or just-in-time production is where we'll see value created by the Internet," Babcock explains. "The Internet creates new supply chains at lower costs."

For example, Babcock says that some big vegetable and fruit companies - worldwide - are locating particular products to get ripe at a particular time for delivery. Fresh fruits and vegetables from Arizona, California, Mexico, Chile and New Zealand are now feeding an integrated, year-round supply for consumers.

"There's a high-cost of coordinating and scheduling all that, which now is done cheaply by matching buyers to sellers via the Internet," Babcock explains.

But that won't happen unless customers have good experiences. "Farmers will go to sites in the future only if they know they can trust delivery and service. Those are the sites that will survive," Babcock says.

Corn+Soybean Digest

Buy, Sell And Search

Farmers are adopting the Internet at a spectacular rate. In fact, in the last two years the number of farmers with access to the Internet has more than doubled. Some experts expect agriculture to become the fifth largest electronic-commerce market.

That's exciting and probably a little scary. To keep pace, you may have to change the way you gather information, do business and make decisions.

Sound like daunting tasks? They are.

That's why we hope this special Internet issue of Soybean Digest will show you some better, more expedient ways to navigate the Web, and help answer some of your e-commerce questions.

E-commerce sites are an exploding part of the Internet. Projections by NUA, an Internet consulting and development company, indicate that in 2002 over $910 billion will be spent in e-commerce in the U.S. alone.

But trying to nail down the number of farmers actually making purchases via the Internet is like aiming at a moving target. Still, there are some clues. For example, last fall Soybean Digest, along with eight of its sister publications at Intertec Publishing, surveyed readers about Internet usage. In general, 51% of higher-income farmers (over $500,000 in annual gross revenue) use the Internet. As income declined, so did Internet usage. In the $250,000-500,000 range, 39% use the Internet; in the $100,000-250,000 range, 25% use it.

As you might expect, younger farmers use the 'net more often. Sixty-three percent of our readers under the age of 35 use it; 46% in the 35-54 age bracket; and 21% of our 55 or older readers.

More recently on the e-commerce front, Soybean Digest cooperated with Farms.com and gave 3,958 crop and livestock producers from around the country the opportunity to respond to a survey about their buying habits. Those producers - responding via an interactive Internet questionnaire - are registered on the Farms.com site. The charts below show what they had to say.

Corn+Soybean Digest

Just Sign On

Making an online transaction is simple

When you sign on to do business at XSAg.com, the first step is registration. The company validates your e-mail address and bank account, and certifies that you have the required licenses to do business (both buyers and sellers of ag chemicals must be licensed by their states).

Let's say a farmer finds the product he's looking for, places a bid, and his price is accepted. Once the agreement is struck, the Bank of America removes the required funds from the buyer's bank account and places the money in an escrow account.

Next, XSAg arranges for freight using an automated system that quotes rates, and the trucking firm is sent to the seller to pick up the product. Upon delivery, the buyer has 48 hours to inspect the shipment and accept it. Once the product is accepted, the money is electronically transferred from the escrow account to the seller, minus 2% - XSAg's profit.

"In a simple auction, the buyer pays the freight, but it's at cost and it's quoted online," explains Marc Crawford, company chief information officer. "In a name-your-price auction, freight is included in that price, so the seller must meet the price and pay freight."

Security is a primary concern. "Encryption of information begins when you register, and all information remains secure," Crawford says. "Our servers are maintained by Digex, which is located in Maryland and houses more Fortune 500 sites than any other company. When data is in transit, XSAg uses a system called Secured Sockets Layer (SSL) that provides encryption between the customer's computer and our servers within Digex's facility."

Unlike XSAg.com, which is simply a sales facilitator, NetSeeds, Inc. (netseeds.com) is a new-age seed company that sells its own seed directly to farmers throughout the Midwest.

"What we did was cut out all the frills and eliminate the traditional sales infrastructure," says Mark Porter, the company's sales manager. "In effect, we restructured the seed company so we could reduce costs and offer outstanding value. We wanted to communicate directly with the farmer without the middlemen. It's more precise."

Completing a seed purchase takes only a few minutes. Once you're registered and decide on a purchase, you have the option to pay by check, credit card or Deere's Farmplan. Next, you choose a delivery date and time, provide directions to your farm - and within three seconds receive order confirmation and an invoice. Then NetSeeds arranges for delivery.

"At any time, the farmer can go online and check on the status of his order," Porter says. "And we use VeriSign technology and encryption to ensure privacy. Our profit comes from selling on margin, but we don't have to support a multistate sales staff or a lot of concrete and steel warehouses. That's how we deliver value."

A grower who wants to market his crops through CyberCrop.com must register as a user and be authenticated by the company as a legitimate producer. Then he'll receive a trading password. The next stop is reviewing bids from various buyers, choosing a bid he wants and clicking to accept it. Then he'll immediately receive a legally binding contract.

"If a grower wants to bid a different price or negotiate a different delivery date, he can make a counter offer," says CEO Scott Deeter. "Also, the grower can view each buyer's premium discount schedule. We provide tools through Dunn and Bradstreet concerning creditworthiness of buyers. Our profit comes from a transaction fee paid by the buyer - the service is free for sellers."

Concerning site security, many sites go beyond basic encryption techniques and VeriSign technology. At Farmbid.com, CEO Ted Farnsworth hired AnswerThink Technologies to design a proprietary security system to complement the security system at Digex, its server. And at Farms.com, Joe Dales, company senior vice president of marketing, says security is foremost in his approach to e-commerce.

"The issue of privacy and security concerns hardware and software," Dales says. "That takes money, and we spend it. In addition to traditional security techniques, we hired an expert from Federal Express to help protect data and privacy. There are a lot of redundancies." Interestingly, many e-commerce companies decline to be very specific about security systems - it appears the less that people know about their systems the better they like it.

Corn+Soybean Digest

Farmer Feedback

Growers tell why they do - and don't - buy over the 'NET

Internet purchases will save Plainview, TX, cotton grower Jerry Brightbill up to $50,000 in chemical costs this year, he estimates.

"I save as much as 50% by buying chemicals over the Internet," he says. "Sometimes it may be as little as 6-7%, but if I can save $1,600 with a phone call, why not?"

Buying crop chemicals off the Internet is just one way Brightbill is using new technology to farm his 4,200 acres of irrigated cotton more efficiently. "With no-till and Roundup Ready cotton we're doing a lot more with a lot less than we did even a few years ago," he says. "We control our pivots from the office and we've got GPS on our tractors and sprayers. Our goal is to micro-manage to save costs."

Brightbill wasn't sure that would be the case when he ordered his first chemicals online. "I thought 'there goes my money' when I wrote the check," he says. "But now I think the system is laid out pretty good. I don't hesitate to order off the Internet."

The prices he finds there, however, give some of Brightbill's local dealers pause. "If they can match the price, I'll still buy locally. But sometimes they just scratch their heads. They can't figure out where these prices are coming from."

Online sales have exposed chemical company pricing policies, according to Brightbill. "One day a dealer will tell me a price is below his cost, and the next day he's calling back to tell me he can match it. It's making the chemical companies look like the bad guys."

Fertilizer is the next input Brightbill intends to buy online. "I'm already pricing liquid for this summer. If the price is right, I wouldn't hesitate to buy a transport load," he says.

The Texas farmer is less enthusiastic about buying equipment and parts online, however. The same electronic technology that helps him buy chemicals from distant companies also makes him more reliant on local service for equipment. The electronics that run his equipment require specialized skills that he doesn't have. "I don't need a chemical dealer to tell me what chemicals I should use. I've got a crop consultant to do that," he says. "But I can't live without service from my local machinery dealer."

Online sales favor larger growers, according to Brightbill. "The larger the farm operation, the more applicable it is to buy in pallets," he says. "To really make it work, you have to buy in quantity. Of course, farmers could buy a pallet and split it with others."

Prefers To Buy Locally

One reason Pat Duncanson didn't buy over the Internet this year: He wants to keep his dollars local.

The other? It wouldn't have been any cheaper than buying traditionally, says the Mapleton, MN, grower.

"This year there was no financial incentive to buy our crop protection products on the Web. But maybe we shopped harder. Maybe another producer isn't getting the same deals," he says. Duncanson priced farm inputs locally and on the Internet this spring and couldn't find one product that saved him more than 1%.

"With most of the products, if I was willing to go to two local suppliers, I could buy locally cheaper," he adds.

In his area, Duncanson says, there used to be seven or eight ag suppliers. Now there are only three.

"If we lose any more there will be no competition. And we will be more dependent on Internet sites to provide that competition - for crop protection or seed," he says.

But it's not like he doesn't see a value in this new way of buying and selling.

"In the Dakotas, for example, there may be only one supplier. I think the Internet there can provide a powerful tool to keep things competitive."

He's not ruling out the use of e-commerce in his own operation. Nevertheless, he'd like to see e-commerce companies work hard to give local businesses or dealers some value within their buying systems.

He cites Mary Kay, the cosmetics company, as an example. Customers apparently can order Mary Kay products online, but a local representative gets credit for the order. That person then provides any follow-up or service, if needed.

"I think that model could very well apply to ag," says Duncanson. "I challenge e-commerce companies to figure out how to make partnerships with local suppliers."

Shopping When Convenient

Buying soybean seed at 11 o'clock on a Sunday night was convenient, say Jeff and Brian Borgmeier. And nary a seed salesman was in sight.

Well, actually, their salesman was onsite. DirectAg.com, a relatively new player in the e-commerce world, was the Web site from which the St. Peter, MN, brothers bought their soybean seed this year.

Although the purchase was convenient, that wasn't the main factor in making their first buy over the Internet. Finding that the site sold Stine seed - with the soybean cyst nematode-resistant varieties they wanted - was.

"We were looking for Stine soybeans and didn't know of a dealer nearby," says Jeff. "We'd been on the DirectAg.com site a couple of times and saw that it had Stine. I pulled up some information and we decided to go that route."

One plus from buying their beans that way: not having to deal with salespeople who may be pushy or take up a lot of time, adds Brian.

"It was nice to have a neutral way of buying," he says.

The Borgmeiers, who raise corn and soybeans, didn't expect to get a bargain.

"I think we probably got the same price (compared to traditional buying), but we had a convenience factor. And the seed showed up on our doorstep. It's just another way of buying," says Jeff.

Because it was their first order, the brothers registered, found the varieties they wanted and typed out their order. Then Jeff called DirectAg.com to make sure they'd placed the order correctly.

"I wasn't 100% sure that everything was set. The first time you do anything, you want to talk with people to make sure they've got it," he says.

The order went in just fine and the beans were all planted by May 2.

One thing they'd like to see added to the site they did business with: more varietal information. "Hopefully, they'll soon be able to get some yield data on varieties," suggests Brian. "With a lot of seed companies, it's hard to get good yield data."

The Borgmeiers also use the Internet for news, weather and to get university information. And using it to buy more farm inputs is definitely a possibility.

"We're somewhat isolated and it's a nice way to get expertise that maybe we couldn't get by playing phone tag with people. It takes a lot of the chasing out. And it's another way of price-comparison shopping," Jeff says.

They don't consider Internet purchases as taking away from local businesses, since St. Peter doesn't have many ag suppliers. "We don't feel the need to buy everything locally," adds Jeff.

Likes Personal Service

The logistics of handling large quantities of chemicals is one of the reasons Nehawka, NE, farmer Wade Nutzman has steered away from online purchases.

"Not everyone is equipped with the facilities and storage space to buy product in large quantities. UPS doesn't deliver mini-bulks," he says. "We've tried it in the past when we could get a better price from a dealer farther away. With the freight, time and handling issues, I'm not sure we came out ahead by the time we were done."

As a board member on his local co-op, Nutzman also sees the other side of the chemical purchase coin. "Most farmers still don't mind paying for service. It's nice to have a local person to work with," he says. "Eventually our co-op may develop a two-tier price program - one that includes service and one that doesn't."

While he isn't ready to buy chemicals online, Nutzman uses the Internet regularly to keep up on new products and their labeled uses. And like a lot of other farmers, he does check Web sites for "price discovery."

Corn+Soybean Digest

E-Commerce Takes Hold

Stage is set for revolution in ag buying

As an educator at the University of Illinois - an institution that was a prime player in the construction of the Internet - Steve Sonka was surfing before the term was in vogue. He was amazed then. And he is amazed now.

"I can remember just five years ago trying to tell people about the Internet," Sonka says. "They looked at me like I was drunk. For the technology to be taken for granted in such a short time ... well, it's just shocking."

As an information and communications tool, the Internet has no equal. From e-mail to library access to chat rooms, the Internet is a seamless international conduit that supplies near-instantaneous answers to questions. But it also is changing the face of business in America - and happening at a rate far faster than Sonka's five-year time line for routine acceptance.

Consider, for example, what happened at Farmbid.com, an e-commerce site based in Ft. Lauderdale, FL, that offers online auctions, farm equipment, seed and animal health and crop protection products. Company founder and CEO Ted Farnsworth says, "In March of 1999 I was looking for ag products on the Internet and there just wasn't much available. I thought there might be a niche there, and I commissioned Arthur Andersen to do the research. It was positive, so I hired some tech guys and launched the site four months later in July.

"In September, Goldman Sachs listed us as one of the top 75 companies to watch, and we took off. Today, we do about $300,000 to $400,000 worth of business each month and there are some interesting trends. Beginning in February, I noticed a lot of activity from overseas buyers, and now about 10% of our traffic is international. It's absolutely great that a farmer in Iowa can sell his tractor to a buyer in Costa Rica through our site. I had no idea Internet commerce would explode like this. It just happened."

What happened was a timely technological connection that brought buyers and sellers together - electronically - without regard for geographic location. It doesn't matter whether the buyer is in Texas or Iowa, whether the seller is in Florida or Canada, or whether the e-commerce company that facilitates the process is located in Kansas City or Hong Kong. The only thing that matters is that buyers and sellers connect. And the Internet is what made that connection possible. Once the process was possible, all it took was for a few entrepreneurial souls to recognize the possibilities and put the pieces together.

And those pieces have created nothing less than a new business model.

In the "old" business model - what often is referred to as a brick and mortar system - products reached consumers through a serpentine manufacturer-distributor-retailer pipeline. Communication between and among the participants was limited, and purchases were ultimately consummated in the buyer's local market.

Commerce on the Internet, however, explodes those notions. Marc Crawford, chief information officer of XS, Inc. (XSAg.com), explains: "First of all, our company provides a neutral trading floor because we don't own any of the products that are sold through our Web site. We simply facilitate transactions between buyers and sellers.

"Using our site, a buyer, for example, can check the price of glyphosate on any given day. And that price might be offered by any dealer or distributor - or even a manufacturer - from anywhere in the country. A farmer also can plug in his shopping list and receive bids for his business from anyone offering those products. In effect we've expanded the farmer's purchasing options from his local area to a nationwide audience.

"Market efficiency is what we are all about. We broaden market access for all parties, which significantly reduces the cost of inputs."

The same rationale applies to a farmer when it's time to sell his crops. Currently, farmers are virtually "price takers" - tied to a handful of buyers in a local market area. Scott Deeter, president and CEO of CyberCrop .com, aims to change that system.

"The current grain marketing system is cumbersome, at best," Deeter says, "and the real pain point is communications. To get a cash bid from two or three local buyers is time-consuming. You've got to get on the telephone repeatedly, and sometimes the person you need isn't available.

"We've created an electronic grain exchange that eliminates the telephone, eliminates the paper and gives the seller access to many more buyers. What takes a day on the phone will take 15 seconds on our site. And, when there are numerous buyers, then that farmer can get a better net price.

"Open access will level the field. What we are doing is bringing independence and neutrality to grain trading."

Certainly, what makes e-commerce so compelling is the concept of open access. In a perfect market, all players have equal access to information that affects the price of goods and services. But, of course, the traditional process of buying and selling agricultural products has been far from perfect. The Internet - by its very nature - reduces secrecy and opens the door to competitive pricing.

"What the Internet does is provide more vibrancy to the marketplace by increasing the quality and quantity of information," says Dave Krog, vice president of product development at e-commerce.com. "Our vision has always been that everyone in the value chain should be able to see what's going on. That's how opportunities come about. If Nabisco wants to buy a particular quality trait, growers need to have that information. If a livestock producer wants to buy a particular feed ingredient, suppliers need to know about the opportunity. The Internet expands the range of buying and selling, and eliminates secrecy and the artificial pricing that goes with it. The theme is to bring buyers and sellers together for profit in an open forum."

Still, it's a little unnerving that e-commerce could create such a startling change in such a short time. Some people are comfortable with it; others are not.

"I think we've had a much more rapid change in this area than most of us are comfortable with," says Mike Boehlje, professor at the Center for Agricultural Business at Purdue University. "Technological change is not new, but the speed with which this technology arrived and the influence it has had on traditional business models is new.

"Still, there are competitive forces out there. If one e-commerce company can be online in 10 months, another player with deep pockets can get there faster. It's all about quicker, faster, better. Brand value - being the dominant first mover out there - is what the race in e-commerce is all about."