The Best of Business Week Online: Industries
A fast-growing crop of ag Web sites are helping the nation's farmers operate more efficiently
Jerry Brightbill is a West Texas cotton farmer who's moving into the Internet Age. A year ago, Brightbill, who with his father and brother farms 4,200 acres near Cotton Center, Tex., started cruising for deals on farm supplies at a new Web site called XSAg.com. He found he could often nab herbicides such as Monsanto Co.'s Roundup at 20% or more off list price. He ended up spending $40,000 on the site last year and expects to spend much more this year.
Farmers, who tend to be fiercely loyal to local dealers and bankers, have been slow to warm to e-commerce. But that's about to change dramatically. While there are 2.1 million farmers in the U.S., the 380,000 largest ones produce the overwhelming bulk of the crops and buy most farm supplies. And about 60% of those big farmers are now connected to the Net.
For the first time, that's creating a critical mass of potential online buyers for farm goods. Farmers spend about $185 billion annually on everything from bank loans and land to supplies such as herbicides, pesticides, and fertilizer. And XSAg projects online purchases will explode, to some $500 million this spring, up from virtually nothing two years ago.
Not surprisingly, XSAg is far from the only Net company that is eyeing the farm market. Competitors include Farms.com, Directag.com, eMerge Interactive, icecorp.com, e-markets.com, and a host of others. Many of the sites are specializing, doing everything from selling used tractors online to holding online cattle auctions.
Many are getting big new booster shots of cash and management. Last November, Morgan Stanley Dean Witter pumped $20 million into XSAg, which is now out threshing for more money. At the same time, the giants of agriculture are also wading into the fray. On May 1, Minneapolis grain giant Cargill and its partners, DuPont and Cenex Harvest States Cooperatives, will launch Rooster.com, a new entry in ag e-commerce that plans to sign up other major suppliers as partners. Others are backing new sites to help farmers manipulate massive amounts of data to improve crop yields in their fields. Deere & Co., the leading farm-equipment maker, along with partners Growmark Inc. and Farmland Industries Inc., the giant Midwestern farmer-owned cooperatives, are ramping up a new site called VantagePoint Network. And Omaha food giant ConAgra is gearing up a site for farmers called mPower3.com.SHOPPING AROUND. The advent of online buying is creating new price pressures in a farm economy that's already in a deep slump. Many farmers now routinely check prices on the Web before going in to buy supplies from the dealer--and demand a matching price. As online buying and selling by farmers expands, such forces are likely to accelerate. The Net allows farmers for the first time to shop around regionally and nationally.
The new ag sites also put a powerful tool in farmers' hands. Many ag sites are already integrating crop-price forecasting and financial services in with their e-commerce offerings. That means a farmer will be able to go online and commit to plant a certain amount of, say, soybeans, and commit to sell at a certain price. The contract can be used to finance the seed, fertilizer, and other products needed to do the planting, all online.
Going further, both Deere's VantagePoint Network and ConAgra Inc.'s mPower3 hope to help farmers boost the productivity of their fields. Cutting-edge farmers now collect enormous amounts of data from their fields, using global-positioning systems, aerial and satellite photos, and other sensors. VantagePoint and mPower3 are offering Net-based subscription services that they say can help farmers make far more effective use of all these data. The idea is to integrate field data with a whole range of other information, from weather forecasts to environmental rules and pest alerts. Farmers will be able to massage the data and compare their experience with that of other farmers.
One thing seems certain, as the Internet Age beckons in the heartland, things will never be the same down on the farm.By Thane Peterson; Peterson Follows Business from Chicago.