Agribusiness on the Internet

Gary Raichart – Feb 15, 2002

For a major grain processing company, the primary use of the internet resides in communication. While many other areas exist in which the internet is used, none are as extensive nor have any become as important to the industry as through the areas of communication. While the internet has not had as drastic an impact on agribusiness as other industries, the effects have not been minimal. The ways in which grain companies interact internally and with suppliers and customers have and are changing as result of the internet, in addition to some changes in how operations within the companies are executed.

Static and Dynamic Information

Any grain industry website has a combination between static and dynamic information. The static information, such as company history, general information concerning products, descriptions of past research and its effects, and other basic company information that does not change more than occasionally, if it changes at all, are able to be posted once and left alone. This area of the website has little to no maintenance associated with it, yet it often provides useful information to those who need such knowledge. However, the dynamic portion of the site, the information that changes daily, hourly, or even every minute takes a great deal more maintenance, yet it is also the information most desired by customers and suppliers.

(Courtesy of Cargill’s website)

Weather, Reports, and News

The main areas of dynamic information put on websites by grain companies fall into the categories of prices, weather, reports, and news. Reports consist primarily of business releases concerning breakthroughs in research made by the company, annual and quarterly business reports, and other such reports concerning business operations. News consists of any recent information that could affect farmers or customers. This information could be something such as a description of a new government law and how it might change the operations of farmers, to how the weather will affect the commodities market, to how events in foreign nations might affect grain exports and thus prices. Information concerning the weather can include anything from current satellite images to forecasts for the next ten days. All of this above information is actionable information to farmers. Information concerning the weather allows them to plan their schedules around expected rain days so that they don’t lose time by fixing equipment on a day when they can be in the fields. Also, the reports and news are important in that they aid farmers in making informed choices concerning what types of crops they should plant, what chemicals and fertilizer they should use, and other such information that can help them produce more that is worth more, and thereby increasing their profits.

Prices

The other area of much importance provided by grain companies to farmers and other suppliers, such as grain elevators, are prices for crops that the company is willing to pay. These prices move up and down much like the prices for stocks on the stock market. In fact, the prices will even vary within the same company at the various plants that the company owns. Therefore, when providing prices, the grain company must provide the prices for each of their different plants. This information can be provided in two different ways, either through showing all of the prices of the entire company, or just showing the prices of a local plant, with prices of other plants close to that one so that someone who is located in between the plants can choose between the two. This information allows farmers to decide when to sell their product and also where they would like to sell their product, in addition to providing information to grain elevators so they can choose to whom they would like to sell their grain. Thus, the provision of actionable information is a profound use of the internet for grain companies.

Salable Information?

The question arises, though, as to whether this information should be provided free of charge to the entire world. As with the provision of anything useful, it costs to supply it. So, should grain companies who have put a lot of money into organizing and furnishing all of this information provide it as a service to the entire world? It all depends on business choices. One company is currently providing all of this information for free with open access, but is planning on limiting access soon. It is going to require a login name and password in order to be able to access certain information on the site, yet it has decided not to charge for it. In fact, they will provide any customer who wishes access to the information. The main motivation for limiting access is to prevent its competitors from easily bidding against their prices, preventing them from being undersold.

(Courtesy of DTN’s website)

DTN

Approaching this question from a different angle is a company whose business is the provision of information such as that described above. DTN (Data Transmission Network, www.dtn.com) was founded with the express purpose of providing “its customers with targeted (proprietary and third party) time-sensitive information through a variety of distribution methods including Internet, satellite, leased lines and other technologies.” Early in the life of the company, it provided information to its customers through monochrome receivers, dispersing basically commodities information. Today, however, it now transmits information using what it calls ACE (Advanced Communications EngineSM), which uses multiple processors for capturing satellite imagery, in addition to being equipped with a modem for internet access, and it now provides all sorts of information related to e-commerce. While it initially had a monopoly on providing commodity information in semi-real time, the proliferation of the internet required them to expand the information they provided in order to maintain the usefulness of their product so they might continue to sell information. Thus, provision of information related to agriculture is a key component of agribusiness on the internet, whether as a salable product or as a service to its customers.

Extranet

Another use of the internet by agribusinesses is the provision of customer specific information through the establishment of an extranet. An extranet allows for interaction between the business and either customers or suppliers on what appears to be a personal level. The customer or supplier is supplied with some sort of login capability, using comprising of a login name and a password. Logging on gives the customer or supplier access to a portion of the company server; in other words, they get access as a client to a portion of the business’ network dealing with information concerning them.

My Yahoo!

An example of a commonly known extranet is “My Yahoo!” (www.my.yahoo.com). My Yahoo! stores information concerning users both on their own servers and on cookies stored on the users’ computers. This information allows them to cater their services to the user so as to improve their product. It allows organization of links on the My Yahoo! homepage so that the users can access the sites they use the most, increasing efficiency. My Yahoo! also offers to provide information concerning stocks, weather in one’s area, email, and advertisements matched to stored information on what types of sites each user visits most, in order to increase users’ clicking on ads, which is how yahoo! makes money. In summation, the purpose of the extranet is to provide services, information, advertisements, or other items to specific customers who find such data the most useful.

The Rule of 80/20

The theory is the same behind extranets for agricultural businesses: they desire to provide information specific to customers that they will find useful in their own business transactions. One agribusiness company is planning on establishing an extranet governed by a contact management system. This system involves intense profiling of customers and merchants. For example, if one supplier only hauls in a few truckloads of soybeans to a certain plant every year, they would not receive the same information or level of service as a supplier who hauls in hundreds of truckloads of five different crops at various times throughout the year. The system also involves a business principle known as the time rule. The time rule is the belief, held to be applicable in most businesses, that 80% of the time spent by a company is with 20% of the customers. This rule extends to the rule that 80% of crop volume is provided by 20% of the suppliers. Therefore, the business will want to deal with the main twenty percent of suppliers on a much more personal level than the eighty percent, which means that they will want to provide a great deal more information to the 20% through the extranet, while not alienating the other 80%. However, they cannot supply the same personal level of service to the 80% as the 20% because it is not cost efficient.

Security

Some of the information provided through this extranet could be the same as the information discussed above near the top of the page. However, the available extranet allows the business to provide a great deal more customer/supplier specific information due to the inability of anyone else to access this information. The security of the information has been a topic of great concern. Due to the fact that it is generally considered impossible for any security system to be created that cannot be broken into, many people fear exchange of financial information over the internet. However, as the public becomes more informed, it is realizing that the security systems have become good enough to keep out all but the most expert of hackers. In fact, most of the information exchanged on the internet today is safer than the former channels through which it used to be distributed. To try to reinsure extranet users, companies inform them concerning how secure the system is, and by informing them that they do not trade the personal information about users to other companies, which betters the business relationship, increasing trust.

Customer Specific Information

The establishment of an extranet allows for the provision of many useful services to both suppliers and customers. Agribusiness companies can sort out demographically those to whom they wish to distribute information, and then distribute information accordingly. For example, the company can send out the actionable information that was discussed above to clients over email so that they will be sure to get the information important to them and not have to sort through other information that is not applicable. This information service can also be distributed down past direct clients of the agribusiness company. It also allows a landlord with a tenet who farms many lands to access his information separately from the tenet information, providing each only that which they need and want to know. Oftentimes, large grain processing firms interact more with grain elevators than actual farmers, but through the extranet and email, the agribusiness company can send down information so that those who might need it can get it, even though they aren’t a direct client of the company distributing the information.

E-Account and E-Customer

However, perhaps the greatest reason for having the extranet is the ability of clients to access personal information in relation to their dealings with the company. Clients, in some companies, are able to access personal accounting databases online so they can quickly and easily view their dealings with the grain processing company. Terms for internet database accounts such as this are given such names as E-Account or E-Customer. It can allow customers to see such information as when they placed the purchase order, how their shipment is being moved (e.g. by railway), how they can track the shipment, when the cargo is to be expected, and the current status of their account with the company. It can also offer information on grain procurement for certain products. Thus, an extranet can provide extremely useful information to clients of an agribusiness.

Commodities and Futures Trading

The internet is also used somewhat in trading, though not as much as many initially thought. By and large commodity trading over the internet has failed. The theory for this by one corporate executive is that, in commodity trading, there are three things equally if not more important than the price. These three things are service, location, and relationships. Commodity trading is very dynamic and sensitive business, and trading effectively requires a good deal of savvy. Currently, there are less than one million farmers in the United States, and only a very small proportion of those farmers are directly dealt with by a grain processing company. The majority of the dealings of a grain processing company are with grain elevators, who procure the grain from farmers, then sell it to the grain processors, and sometimes there are many more intermediaries than that. Thus, commodity trading over the internet never really took off. However, that does not mean that the internet is useless in this area. On the contrary, many deals are made over email correspondence; it is just that the actual deals are made either in person or over the phone. Additionally, futures trading over the internet, while not yet the rule of thumb, has gained some popularity of late due to the fact that futures trading is nothing more than information exchange, which is perfect for the internet. The only problem here is that, if one does not know with whom they are trading over the internet, they have to trust that they will not default on their promised product provision. While this fear is true of any futures trading, it is more fearful over the internet due to the increased chance that the deal is between people who do not know each other, have no relationship, and therefore no trust. Thus, the internet has made a moderate impact on trading of goods, but as yet has not been that influential.

Intranet

The other main way in which agribusinesses use the internet is through internal operations. Much of this work is done on what is termed an intranet. An intranet is a network that operates over the internet, but behind a firewall. It is used by employees of the company, and it allows them to access the servers of their company from remote locations. This remote access is extremely useful, especially when a company has plants all around the nation. It allows employees to access email from home, from plants, and even on vacation so that they can always be in touch. Additionally, it allows IT employees to run jobstreams from remote locations, which allows employees to be able to work at home if need be, but more importantly, it allows IT employees to provide 24/7 support from wherever they may be. There are programs that allow access to computers remotely so that the computer specialists located at one site can access the computers of people at another site, and fix them without anyone having to travel or providing computer support people at all locations. There are now also systems that allow for monitoring of actual plant production. Thus, an engineer can take a look at a screen hundreds of miles away from the actual plant, and can see the status of how the plant is operating revealed through such things as pressure sensors, temperature gauges, and the like. Thus, when there’s a problem at a plant, an engineer does not always have to be sent out to the plant, and travel costs are decreased and efficiency is increased. Therefore, the internet is a valuable tool within the actual grain processing business.

Summary

The internet has become a very useful tool to agribusiness. The main use of the internet concerning contact with customers and suppliers is the provision of actionable information. This information can either be available to all, or it can be specific proprietary information available through an extranet. Meanwhile, companies internally use the internet; often it is used through something called an intranet, which runs programs remotely which are important to the efficient production of product and customer interaction. While the internet is not as vital to the agribusiness as some other businesses, it has definitely increased the overall efficiency of companies and allowed for much better information distribution, which allows for a better industry all around.

(Courtesy of Central Soya’s website)

References:

www.admworld.com – Website of Archer, Daniels, & Midland company, a major grain processing company. Accessed Feb. 15, 2002

www.cargill.com – Website of Cargill, a major grain processing company. Accessed Feb. 10, 2002.

www.cenralsoya.com – Website of Central Soya, a major grain processing company, focused more on soybeans. Accessed Feb. 10, 2002.

www.dtn.com – Website of Data Transmission Network, a main provider of agricultural business information as a product. Accessed Feb. 10, 2002.

Personal Correspondance.