New business model | Canadian companies allow farmers to conduct sales without brokers
Cutting out the middleman is an ancient business strategy, but two of the most innovative ways of doing that have recently come from tiny startups run by young Canadians.
After a year of running their respective non-traditional marketing systems, the operators of Agriprocity and FarmLead say the farmer-to-user model is expected to become a bigger part of the farmer’s marketing toolbox.
“There’s tons of potential,” Nicole Rogers, the principal of Dubai-based Agriprocity, said in an interview at the CropConnect conference Feb. 19.
“I’ve been so encouraged this year.”
Brennan Turner, who operates the online crop listing service FarmLead.com, was similarly optimistic while at CropConnect.
“It’s going great,” he said.
FarmLead allows farmers and users of grain to post bids and offers and get directly connected with each other to make sales rather than relying on brokers or grain companies and marketers.
Agriprocity tries to directly connect grain users and processors in the Middle East with prairie farmers to establish long-term relationships that offer both farmers and users a profit.
The company organizes farmers in certain areas and connects them with overseas buyers.
The buyers agree to take possession of the crops in Canada, while farmers agree to try to produce what buyers want.
Rogers said the buyers she deals with are mostly concerned about security of supply, which means they are willing to deal with a range of qualities once the crop is grown.
They will still buy from the major multinational agriculture trading companies, but they prefer that a small portion of their supplies be more predictable than the sale-by-sale situation with the multinational companies.
Similarly, farmers are tying only a small part of their production to these direct sales relationships, which provides cash flow stability and reduces the amount of their crop that they have to market.
Rogers said her system likely won’t give end users low prices or farmers peak prices, but it offers profitability and stability.
“This is not a cheaper model,” said Rogers, who is Canada’s former agriculture representative in Dubai.
“Ultimately, it is security of supply.”
Rogers said her buyers in the United Arab Emirates like knowing exactly who they are buying their crops from and how the farmers are growing the crops.
She thinks her farmer-to-user system will likely be more successful for overseas grain users than buying land in other countries and hiring farmers to grow for them.
She said they seem to want to know what’s coming to them and that they have partners they can work with.
“There’s a real desire to know where that grain or oilseed is coming from and that they’re going to be able to get it in the future,” said Rogers.
Turner said his clients also like knowing more about who they are doing business with.
“We have found that price transparency is significant,” said Turner, who has just launched SeedLead, which is similar to FarmLead but focuses on pedigreed seed.
“We allow and empower each user to be their (own) individual broker.”
Both of these marketing systems are not typical in the large commodity trading world, but Rogers said her approach has been des-cribed as old-school, with a cost of production plus margin price-setting structure.
However, it will be new for many farmers and users and perhaps a little unsettling for the big grain trade.
“I’m a disruptor,” said Rogers.
“This is totally disruptive of the way we’re doing business now.”