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December 14, 2000  Agriculture is a growing part of the e-commerce world
There may not be an e-commerce revolution underway, but evolution in agri-business is setting the stage for the growing presence of agriculture on the Internet, according to experts who spoke at the UC Executive Seminar "Agriculture in an E-Commerce World" held Dec. 4 in Sacramento.
Agri-business, however, is not ideally suited to the World Wide Web, said Rolf Mueller, ag economics professor at the University of Kiel in Germany.
"Ideally, in e-commerce, all flow is in bits," Mueller said. "Since agricultural products cannot be digitized, integration with warehousing, transport, inspection and insurance may be necessary if the full advantages of e-commerce are to be realized."
Mueller was the first of a dozen speakers representing academia, agriculture, banking and Internet companies who foresaw a future in e-commerce for the agriculture industry, but hesitated to predict the extent of its significance. Despite a generally positive outlook at the seminar, there was uncertainty about the Internet's ability to boost farm profits and the willingness of farmers to forsake person-to-person contact, invest time learning a new way of doing business, trust Internet security and share pricing information.
As agricultural dot-coms are created and more and more "brick and mortar" companies join them online, pressure builds on the remaining offline companies to join the e-commerce world. However, certain segments of the industry have not been quick to embrace online transactions.
For example, UC Davis agricultural economist Jeffrey Williams said, "The banking industry is a drag on e-commerce."
A member of the audience, Bank of America's Vernon Crowder, said concerns about credibility can arise with online lending.
"In the past, there was some sense of credibility based on infrastructure," he said. "It's easy to put up a webpage. How do we judge credibility in the future?"
Nevertheless, representatives from three "brick and mortar" banks - Cobank, Rabobank and Bank of America - gave presentations on their expansion on the Internet. Each bank has begun to invest in e-commerce and has plans for a larger online role in the future.
The move of many "brick and mortar" businesses to the Internet, carrying with them their trusted brand names, is one way e-commerce is addressing the credibility gap.
Fifteen months ago, the 163-year-old John Deere Company created its Special Technologies Group, setting apart 1,500 of its employees who work on electronics, software and digital communications. President of the Special Technologies Group, Charles Ray Stamp, Jr., reviewed the digital advances being made to complement a company with a long history of serving farmers.
One of those special projects is Vantage Point Network, a paid-subscription web presence that integrates all aspects of farm management.
"Few producers have all the information they need in one database," said Gregory Holzwarth, president of Vantage Point, a website that helps farmers keep track of precision farming information, precision weather forecasts, financial records, crop management and more. "The most important part is the linkage."
Other traditional agri-business firms are also investing in e-commerce, but less enthusiastically.
"In some ways, all this web stuff has been a big hassle," said Robert Norris of Calcot Ltd., a 73-year-old cotton and almond marketing cooperative that represents 1,900 growers in California and Arizona. "If we can provide better and faster service to growers and save them money, I think we can sell it to them that way."
Norris said Calcot has enlisted a group of its "younger staff people" to work in-house on establishing the Calcot web presence.
"I believe that we will change sometime in the future, but when, I'm not sure," he said.
Similar thinking about e-commerce was expressed by executives of the Morning Star Company, a three-decade-old company that produces bulk tomato paste for sale to grocery manufacturers and restaurant chains.
Because of a growing trend toward consolidation, less than 20 of Morning Star's customers purchase one billion pounds of tomato paste, about 60 percent of the company's total output, according to Nancy Freese, a market analyst for Morning Star.
"We have only one full-time salesperson and we represent 40% of the tomato paste market," she said. "There will not be a lot of cost savings associated with going online."
Besides, she said, "We are an old-school industry. Our customers want to talk to us."
Morning Star Company economist Mark Evans said the company does anticipate taking advantage of Internet technology to increase efficiency, citing such advantages as inexpensive contact with customers and quick access to accurate market prices.
Dot-com entrepreneurs and speakers representing "brick and mortar" online startups next took the podium to outline many more e-commerce opportunities they envision for farms and other agri-businesses. Royce Nicolaisen, chief executive officer of AgEx.com, an online business-to-business marketplace for the global food industry, noted that consolidations in grocery manufacturing and retail food sales have shifted the balance of negotiating leverage away from growers. Over the past 20 years, he said, retail prices have grown but wholesale prices have stayed flat, cutting sharply into farmers' profits.
AgEx.com allows growers to buy inputs - such as seed, fertilizer, packaging, even energy and transportation - with aggregated purchasing power that often results in better prices. At the same time, they can gain greater negotiating power by aggregating supplies to the wholesale food industry.
"Collaboration in the agriculture industry will help level the playing field for buyers and suppliers," Nicolaisen said.
As AgEx.com and many other ag-related dot-coms develop their businesses, it remains unclear how the tenuous relationship between the digital age and age-old agriculture will develop. But the speakers at the Executive Seminar tended to agree that agricultural e-commerce will not go away.
"Our inability to predict what e-commerce in agriculture will be like in three to five years should not be taken to mean that e-commerce will not grow vigorously and evolve in agriculture as in other industries," said Mueller, an expert on European e-commerce. "Chances are it will."
The Executive Seminar was co-sponsored by the UC Agricultural Issues Center and the UC Center for Cooperatives.
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