Decision support software developer FarmLogs has launched what it describes as a first-of-its-kind grain marketing service called AutoHedge for corn and soybean growers.
Based on hedging strategies developed by analyzing over 20 years of corn and soybean prices, the mobile app helps farmers market their grain while eliminating guesswork, brokerage accounts with margin calls, and the stress that comes with marketing a crop.
FarmLogs, which has raised $37 million in venture funding to date, has dubbed its new platform a “set it and forget it” approach to grain marketing. AutoHedge enables growers to enroll a percentage of their crop to be marketed from February 28 through July 31, when prices are historically at their best. The AutoHedge app works by automatically pricing enrolled bushels on each trading day during the pricing window, so growers can stay focused on farming while knowing they’re making money, according to the company.
FarmLogs, which started life in 2012 as an enterprise resource planning (ERP) tool — in layman terms, that’s a record-keeping tool — to help farmers move away from spreadsheets, pen, and paper, is the latest agtech startup to add an online marketplace to its business model after starting out in another direction.
Farmers Business Network started life as an ag data sharing platform and now retails inputs and grain online, offers crop insurance and health insurance. And Indigo Agriculture created a grain marketplace after starting life as a microbial seed products company.
Another startup offering farmers access to the future markets in agriculture — but this time in dairy — is KuhDo from Germany.
Marketing Headaches
As company co-founder and CEO Jesse Vollmar notes, farmers are not day traders yet the way that grain growers are required to deal with the commodity futures market is the same as a professional trader. Learning the ins-and-outs of the futures markets is a tall task on top of the daily demands that most row crop farmers’ operations already put on their plates. This forces many producers to resort to selling cash grain and forgoing the advantages and flexibility that selling through the futures exchange provides, including offloading price risk and timing sales to get better performance.
“Farmers are already running vastly complex businesses, so learning a new profession like trading is possible but it’s not something most of them have an interest or passion in doing,” Vollmar told AgFunderNews. “And if they do, it’s still a lot of work to have to keep up with and to manage routinely. The opportunity to use software to connect what we know about your farm operation and what you are producing to a system that can automatically execute marketing for you and that ensures that you are properly diversifying your market strategy is exciting. On top of that, automation in the app can ensure that you don’t get behind in marketing because you’ve been busy planting 2,000 acres of corn.”
Ensuring a simplified user experience was important for FarmLogs, which launched the app as a standalone product or an addition to existing users’ dashboard. Setting up a crop for marketing involves farmers entering information about the crop type, total acres, and the elevator they’d like to work with. The farmer tells the app the percentage of the crop that he or she would like to enroll and the initial step is complete. A FarmLogs rep contacts the farmer to confirm the details and to complete the program onboarding process. The program then automatically sells equal portions of the user’s bushels every day at the daily market close during a seasonally optimal window of time to earn the best price.
An optional “Boost” feature allows growers to take advantage of market rallies by pricing additional bushels whenever they like with the push of a button in their app. Unlike traditional grain contracts, AutoHedge also removes the work of tracking profitability by automatically updating a user’s marketing position within their FarmLogs account.
Users are charged a per-bushel fee that is on par with market prices: 5 cents per bushel for corn and 7 cents for soybeans. Farmers pay nothing upfront and the total fee is deducted from the farmer’s final payout.
So far, the app seems to be yielding farmers better prices, according to Vollmar, outperforming the average corn harvest price by at least $0.25 for the past five years, according to FarmLogs.
Including Farmers in the Tech Development Conversation
The concept behind AutoHedge was born out of its discussions with commodity crop farmers about their biggest challenges as well as FarmLogs’ State of Grain report, which surveyed over 1,000 growers about their strategies, confidence level and approach to grain marketing
“This is no secret. Everyone asks farmers what their biggest challenges are and marketing is almost always one of the top responses if not the top response,” Vollmar notes. “We have the opportunity to dig through how growers market their grain in a study we run that ends up producing our State of Grain marketing report, and that’s how we developed the idea for the product.”
While many tech efforts are aimed at helping farmers improve the agronomic efficiency of their farms, fewer tools are designed specifically to increase farmers’ profits while helping them to focus more time on the farm. For many operators, handling things like marketing are a pesky necessity that comes with the business of being a farmer. Although AI, analytics, and IoT are exciting buzzwords that will have an impact in agriculture, Vollmar notes that production is the one area where farmers already feel pretty confident.
“A lot of growers aren’t begging for agronomic tools because they feel confident in their ability to grow crops. That’s the aspect of the job they love the most and have the most expertise and familiarity with,” he explains. “That gets to the problem that growers don’t enjoy dealing with: marketing. It hasn’t really been adapted to the farmers’ perspective, so marketing is really piggybacking off of these complex financial derivatives offered on the exchange that are the same products offered to hedge funds and speculators.”
To see the app in action, check out this one-minute demo.
