The State of Agricultural Net Markets

Yet another industry to go B2B is the agricultural marketplace. On some fronts the agricultural exchanges have plenty in common with the rest of the B2B world.


[From iSource Business, February 2001] Consumers are getting more and more picky about what they put in their mouths, notes Blair Louden, director, Grain-Canada for ConAgra Malt, Americas. Not that this is any reflection on his product or his industry, he says. "The brewing industry as a whole has always been very quality conscious."

Yet, the signs are clear. How a product is made and where the ingredients are grown is beginning to matter more and more when shoppers put together their grocery lists. "Proving the biological integrity of the raw materials we buy is about to become a very important marketing concern. We have to get our arms around this issue," says Louden.

Which means his suppliers are going to have to get their arms around the issue as well.

Louden's suppliers are barley farmers a group with more than a passing awareness of the latest agricultural trend of identity preservation. Convincing these suppliers to submit their farming modes and methods to third party scrutiny (a necessary marketing step when making such purity claims) after following certain environmental standards is not the problem. The problem is doing it efficiently and cost effectively.

Enter the agricultural marketplace another industry to go B2B.

Louden was no stranger to the B2B marketplace, having already participated in a Net grain marketplace called AgraLink. When AgraLink formed AgriPlace, Louden realized the site's new capabilities would allow him to help his suppliers verify the purity of their produce with minimal investment in time or money.

"It was clear that AgriPlace would be an appropriate conduit for setting up a pedigree or audit trail. We would be able to audit the farmers' growing methods and maintain a biological history of what we were buying," he says.

Basically, a potential supplier would access AgriPlace to see what protocol ConAgra demanded a process that, to the uninitiated, can seem surprisingly complex considering the requests for soil fertility, wheat identification and other agronomic measurements. In this system, the farmer does not contact ConAgra directly for the contract. Instead, he or she signs up for the contract at AgriPlace electronically, a process that helps ConAgra and the farmer control administrative costs during the contracting process.

By the time the crop is ready to be delivered to the malting house, SGS, an independent testing organization affiliated with AgriPlace, obtains a sample of the crop. From that sample, it is able to provide such information as the day the crop was planted, the day it was harvested, what the weather was like during this time and the day the crop was hauled to the grain elevator. All of this activity is coordinated, reported and tracked on the Production & Procurement Contracts area of the Web site.

Completing it Offline

But while the agriculture industry has followed the rest of the world onto the Internet, it has veered away from the traditional "buyer meets seller online and consummates a sale" business model. A lot of these exchanges focus more on the value-added functionalities and supply chain enablers, such as those provided by AgriPlace, than straight procurement activities.

While such services are clearly boons for the supplier end of the procurement relationship, the purchasing side recognizes their value as well. "In today's environment, trading is performed via a cumbersome manual process where there is limited visibility of trading partners and prices," says Mary Kay Haben, group vice president, Kraft Foods and president, Kraft Cheese and Mexico & Puerto Rico. "The services offered by Dairy.com [a new dairy exchange in which Kraft has participated as well as invested] will streamline the process by improving the coordination between buyers and sellers, allowing them to reduce inventory and logistics costs."

And lest you should think this is a reflection of a traditional industry being dragged kicking and screaming into the 21st century, more than a few analysts believe this focus on value-added services will become the winning model across most industries when all is said and done.

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