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What FBN’s New Chemical Inputs Sourcing Service Means for Farmers

February 25, 2016

Farmers Business Network (FBN), a farmer-to-farmer agronomic network and data aggregation service, has launched a new business line; the startup is helping its members source chemical inputs at competitive prices.

The FBN Procurement platform will provide significantly lower input prices for FBN members, according to the company, which has raised funding from some of the biggest names in venture capital — Google Ventures, Kleiner Perkins Caufield & Byers, and DBL Investors included.

Through the platform, members will be able to purchase directly from input manufacturers. FBN will help farmers identify where they may be overpaying for their chemical inputs while also negotiating prices with dealers to meet a member’s specific needs. The platform touts a 15 percent to 40 percent saving on popular chemicals and offers a best price guarantee.

“Effectively, FBN is like the agent for the farmer and can represent their business, expose their business, and put it out to a much wider array of competition from vendors around the country,” Charles Baron, co-founder and vice president at FBN tells AgFunderNews.

Baron breaks the service down into two components. First, members can submit the price they pay for their complete list of inputs enabling FBN to crowdsource this information and get an idea of how much everyone is paying. FBN will tell the farmer whether they are getting a good deal, a fair deal, or a poor deal on each product. If a farmer wants to find a better deal, FBN will find an alternative, which could include a non-branded version. FBN may also recommend that the farmer reconstitute the input using non-branded ingredients. To monetize the platform, FBN charges a transaction fee.

Inputs are shipped to the farmer using a common carrier. Members decide when they want to take delivery and can also arrange to pick up their order at an FBN-licensed facility to cut shipping costs.

“This certainly leads to more transparent pricing and fairer pricing for our members,” says Baron. He attributes the original idea for FBN Procurement to the members, who have asked for help with input procurement. Many farmers have trouble knowing whether the prices they pay are competitive while others find the procurement process to be a pain, he explains.

FBN is open to working with any supplier. Baron says suppliers that are looking to grow their market reach have been some of the first to tap into FBN Procurement.

Other than potentially helping farmers improve input margins, Baron believes it creates an additional opportunity for members interested in earning additional income through custom chemical applications.

Although this new platform could be described as a major deviation from FBN’s data aggregation and decision support services, it’s not an entirely new concept for the ag chemicals market at large.

“It’ll be interesting to see because there are already groups that are basically buying in bulk or wholesale, and shipping straight to farmers. There are multiple different groups doing that today,” Justin Bruch, an agronomist and farmer, tells AgFunderNews.

When it comes to reconstituting non-branded chemicals for a cheaper solution, Bruch sees some issues surrounding liability. The chemicals may not work as planned — non-branded chemicals and compounds may produce a different outcome to their branded counterparts — present issues with mixing into a solution, or may cause crop damage. Who bears the liability should something go wrong?

On the tricky subject of liability, Baron notes that FBN Procurement only sells in states where it is licensed as a dealer. FBN will also verify whether the purchasing member is licensed to buy the chemicals and notes that purchasers are responsible for complying with the chemicals’ labeling and instructions.

Bruch also has some doubts as to whether big names like Syngenta, DuPont, and Monsanto would be on board with FBN Procurement. “I can’t see the advantage of Monsanto selling through FBN at a wholesale price because it doesn’t necessarily drive new business; it just changes where the transactions happen.”

A farmer from the Southeast of the US agrees with FBN that the current process is antiquated and in need for disrupting, however.

“The whole model of how inputs are currently sold is a little bit dated with the dealer network,” he tells AgFunderNews.

In most other industries, the consumer contacts the distributor directly to obtain a price quote. In agriculture, most farmers order chemical inputs through a dealer who can ratchet the price either up or down. It’s also difficult for some farmers to access published prices, leaving them at the sole discretion of distributors.

Still, farmers typically have close ties to their local dealers. “They will need to be substantially cheaper to get people to switch,” argues the farmer. “This is a relationship-based business.”

In some cases, farmers have been sourcing through the same dealers for generations. Breaking that tie could compromise the relationship, which the farmer may still need to rely upon for other purposes like sourcing seeds, equipment, and repairs.

Bruch shares these relationship-based concerns. “Farmers would be the strongest group of any in America to say ‘I will buy locally to support local business and the local farming community’.” He also echoes the sentiment that chemical prices will need to be substantially better to convince farmers to forgo buying through local chains.

Baron sees these relationship concerns as less of an issue. “Ultimately, what matters is that farmers can be profitable in tough markets like today’s, and we don’t believe they should bear all the pain when crop prices are low,” he says. “Our members are independent businesses, and they can use the price transparency information however they wish.”

Relationship issues aside, dealers offer additional support services to their clients including agronomic support. If a crop fails after application, the dealer will send an agronomist to evaluate the field and will often provide a re-application if the chemical failed. FBN does not currently offer this service, according to Baron.

“It’s potentially a great service with a lot of disruptive ideas and something that the industry needs, but there will have to be a little tap dance among users first,” says the Southeastern farmer. “If FBN and the current dealers evolve and make it all work, it could be big.”

What do you think? Get in touch at [email protected]

Image credit: Jeff Vanuga, USDA Natural Resources Conservation Service

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