By Jesse Newman and Jacob Bunge
Brandon Sinclair spent $26,000 on herbicides for his corn and
soybean fields last year, roughly half what he says he used to pay
at his local co-operative.
The savings came from a source many U.S. farmers have been slow
to tap: the internet.
Farmers have long made pilgrimages to farm stores and
co-operatives to purchase seeds, fertilizer and weed and pest
killers. Now, with a commodity glut pressuring crop prices and
pushing farm incomes to an eight-year low, farmers are scouring the
web for better deals on the products they use to grow their
crops.
The shift could upend a decades-old system built around
small-town suppliers that also offer farming advice and sell
services such as spraying for weeds. Mr. Sinclair says the math is
simple: Using savings found online, the 31-year old Illinois farmer
was able to spring for a helicopter to wrangle his herd of cattle.
Now he is urging his neighbors to shop online, too.
"I've always been kind of a tech guru and a tight-ass," Mr.
Sinclair said.
The internet has been slow to spread across rural America, but
increasingly farmers are within reach of online pricing and
sellers. A decade ago only a third of people in rural areas had
access to broadband internet, versus nearly half in cities,
according to the Pew Research Center. As of November broadband had
reached 63% of rural residents and 73% of people in cities.
Farmer proponents of online shopping say they have discovered
local prices for crop supplies can vary widely across the country.
Weedkillers can cost up to four times as much in one part of the
country as in another, according to Farmers Business Network Inc.,
a San Francisco-area startup backed by Google Ventures.
FBN, which provides farming advice and sells supplies, last year
launched a service allowing farmers to monitor what their peers
nationwide pay for hundreds of chemicals. Farmers use the data to
negotiate for lower prices from local retailers or buy products
directly from FBN.
Online sellers, including some wholesale distributors and
national farm retailers, often offer generic versions of popular
pesticides that are cheaper than the branded counterparts
frequently sold by co-ops. FBN says it also can offer products at a
discount because it lacks expenses associated with brick-and-mortar
facilities and is able to get better deals from manufacturers
because of its national scale.
"It's infuriating knowing how deeply we've been gouged," said
Nebraskan farmer Clay Govier, who said he saved more than $12,000
on herbicides for his 3,000-acre corn and soybean farm by checking
prices on FBN's network.
Farm retailers say the season and the availability of supplies
can fuel discrepancies in prices of chemicals, just as prices for
some consumer goods vary depending on where they are sold. They
also argue that online portals can't replace the relationships
local co-ops foster with their customers, and the logistics of
shipping large volumes of hazardous chemicals can be a hurdle for
upstarts.
"It's naive to think that buying a TV or an Xbox online at
Christmas is no different from buying the seed and chemicals that
your livelihood depends on," said Lance Ruppert, head of agronomy
marketing at Growmark Inc., a major co-operative.
Traditional co-ops and retailers are struggling along with their
customers, and some see online sales and services as a way to
defend their turf. Growmark is considering an online sales portal,
as are fertilizer producer Agrium Inc., which is also the largest
North American agricultural retailer by sales, and CHS Inc., the
largest U.S. agricultural co-op.
Last year, Agrium's profit dropped 40% because of lower
fertilizer prices, while CHS's earnings fell 46%. Growmark's profit
declined 5% for its fiscal year ended Aug. 31.
Products ordered from online sellers are typically delivered
right to a farmer's door via truck. FBN has nine warehouses in
eight states to supply customers, and uses trucking companies such
as FedEx Freight, a subsidiary of FedEx Corp., which can deliver
chemicals in quantities up to 44,000 pounds.
FBN, which launched in 2014, doesn't disclose its sales, though
co-founder Charles Baron said they have risen sharply in the past
12 months. He said the company isn't yet profitable as it invests
in its technology.
Earlier attempts to bring e-commerce to the farm failed.
Rooster.com, a site selling farm supplies that was created in 2000
by Cargill Inc., DuPont Co. and the co-op now known as CHS, quickly
closed down.
David Black, CHS's chief information officer, said Rooster
struggled because farmers were used to planning out fertilizer,
seed and chemical purchases with local experts. Many potential
customers weren't willing to forego their advice for cheaper
prices, he said.
Now demographic shifts are helping to change that. Farmers have
long tracked crop prices on their home computers and were early
adopters of GPS technology; now increasingly tech-savvy young
people are taking over family farms.
"Everything can be done at home," said Chad Smith, a 30-year-old
former seed salesman in Elk Mound, Wis., who now sells insurance.
"You don't need to go into the co-op and eat peanuts and talk to
the salesman anymore."
Write to Jesse Newman at jesse.newman@wsj.com and Jacob Bunge at
jacob.bunge@wsj.com
(END) Dow Jones Newswires
February 16, 2017 07:14 ET (12:14 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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