PERSPECTIVE — If you’ve been following this site for a while you might remember a certain editorial we published on Farmers Business Network (FBN) back in February, right on the heels of the San Francisco, CA-based ag tech startups’ announcement it would be launching a new online crop inputs procurement marketplace for the 2016 growing season.
The article got a lot of run online while growers worked on locking in seed orders for the upcoming year, and you can imagine that the piece came up in conversation yet again this week as I chatted with FBN co-founder and VP of Product Charles Baron about the companies’ latest announcement, having just secured another $20 million in funding, led by Acre Venture Partners (which is primarily backed/funded by Campbell’s Soup; a Google-backed VC invested $15 million in FBN back in May 2015).
According to the press release, the $20 million in funding will go towards helping FBN expand Procurement beyond the 21 states (mostly Midwest and California) it is available in today, and Baron shared with CropLife.com that it will also allow the company to expand its product offerings (mostly hard chemistries at this point) to include things like biologicals, seed treatments, foliar fertilizers and more adjuvants.
“Modern farmers are wanting to do things in a new way, we’re somewhat new in the market and a new concept, but we’re also here to stay, that’s what the round of funding means,” Baron says. “We’re here to stay and we mean what we say, and we’re going to make our farmers more profitable.”
Baron and FBN feel the first season of Procurement was a solid debut, compelled by the company reportedly tripling the amount of farmers on the network and upping the acreage upon which they collect data to over 9 million in the past two years.
“We started with comparing seed varieties, and that got our members extremely excited about all of the analytics, and they said ‘Hey, can you help us with pricing’,” Baron recalls. “So, we said let’s study it.”
By having its growers upload invoices directly to FBN from dealings throughout the retail chain, FBN gathered enough data to publish the Ag Chemical Price Transparency Report, which came out just last month.
“We found enormous disparities in the prices people were paying for products,” he remembers. “Be it retailers or co-ops or independent dealers, whomever, it’s not a statement against one or the other, it’s just a statement that farmers in different regions are paying significantly different prices for the same thing.”
Baron and FBN claim its members were paying as much as a 300% difference for the same products, in some cases the products were generic, and in some branded, and in local areas (often from different outlets under the same retail brand) its customers were paying a 40% difference in price at dealerships within an hour’s drive of each other.
“We were shocked – completely shocked, so we decided there was an enormous need for our members to have more transparent prices; they couldn’t tell what a fair price was,” Baron explains. “Number two, we wanted to get rid of the zone pricing, regional pricing, the rebate programs that were very confusing to our members, so they could actually do an apples-to-apples comparison.”
It should be noted that growers that sign on with FBN are not required to purchase inputs through Procurement, but they have the option to use FBN’s pricing to try to negotiate large-volume discounts with their local suppliers, as well.
Yes, the dreaded price-sheet that our own Paul Schrimpf wrote about back in February.
“And we’ve had hundreds of customers do just that, they’ve shared with us incredible stories of how much they’ve saved, and how important that is to them,” Baron says.
When confronted with the fact that what FBN is doing with Procurement (they’re not the only ones, BTW, Granular is also doing some work on price transparency in the market) competes directly with the local retailer – agriculture’s trusted advisor for hundreds of years – Baron points to a University of Illinois study released in July that found crop input prices have been on a steady rise since 2006.
“Farm income is under enormous pressure today, you have what is probably going to be a bumper crop on 90-plus million acres of corn, already depressed prices and a bearish outlook on the market now. The American farmer has got to save money in this market, they cannot keep going the same way.”
Now, here is where I will step in and offer a brief bit of editorial (that’s what we so-called-journalists do, after all).
Since that February piece came out and ruffled some feathers, I’ve spoken with numerous sources throughout the industry on just what FBN Procurement means to the market. In all honesty, most don’t seem to be that worried about it, reasoning that there will always be growers that get big enough to want to go it alone on certain aspects of the operation to save some money, and conversely there will always be guys that need that local touch/expertise from the trusted advisor, and are willing to pay for it.
Can both play nicely with each other and co-exist in a contracted market? That remains to be seen.
“Farmers are extremely comfortable buying online, and many have the ability and know-how to buy and mix and apply their own chemicals, and there are also going to be farmers that want to use their local supplier or rely on advice from the local retail agronomist, and we’re open to working with those parties, too. A lot of our farmers work with independent agronomists, we are more than happy to help with connections there, too.
“It’s just a modern model for modern farmers who want to do business in new ways, and are very focused on using new techniques.”
But what about the customer service aspect? As I’ve heard many in the retail chain ask over and over, who does an FBN grower contact for guidance when things go wrong with a Procurement purchased product? What about help interpreting labels, or local regulations, or if the applicator gets something wrong? Who’s going to answer that late-night phone call at FBN when something, anything, inevitably goes wrong? These are legitimate concerns considering the complexity of today’s cropping systems.
“We’ve completed hundreds of on-farm deliveries, and had probably only one or maybe two product issues or product failures, and in those cases we completely re-compensated the grower,” Baron counters. “The growers are very happy with the product, and we can deliver most products within one day or three at most, and we also offer cash-and-carry at our distribution warehouses.”
So, buoyed by its currently deep pockets and in the midst of expansion yet again (according to Baron the company is hiring “all over the country – everywhere – Ohio, Illinois, Texas, you name it”) it’s probably fair to say FBN is here to stay – at least until someone is successful in buying them up.
Look, I understand this is a very sensitive subject in the market right now. Everybody is hurting revenue-wise, from the farmer all the way up the chain.
In many of the circles we run in nostrils flare and blood pressures spike at the very mention of those three little letters: F-B-N. And let’s be Jack Nicholson in A Few Good Men Crystal Clear here: we’re most certainly not here to advocate that growers facing a few years of tough margins abandon the relationships they’ve worked so hard to foster over the years with the local retailer to save a few bucks an acre.
But regardless of what FBN does or says it’s going to do, the folks we proudly yet humbly serve here at CropLife – the U.S. ag retailer – needs to stay on top of what they are doing and react to it, otherwise they may find themselves at the coffee table this winter, staring down an FBN price sheet, thinking to themselves “What in the hell is this?”