Last month's announcement that Rooster.com, a U.S. agriculture e-business network, had agreed in principle to merge its business operations with Pradium Inc., an online business-to-business agricultural commodities marketplace, is being viewed as a healthy consolidation of two closely related online ventures.
After all, the two web sites are backed by many of the same investors — some of the leading names in the U.S. grain industry, including Cargill, Inc., Cenex Harvest States Cooperatives, Archer Daniels Midland Co., Louis Dreyfus Corp., and seed companies DuPont and Pioneer Hi-Bred.
"This merger lays a strong foundation for building a complete Internet-based industry operating system connecting all of agriculture," said John Johnston, chairman of the board of Rooster.com and chief executive officer of Cenex Harvest States.
Rooster.com is an online network that maximizes the "click and mortar" marketplace for the agricultural community. Producers can use Rooster.com services to market their crops and buy their seed, fertilizer, crop protection products, equipment and other supplies via the Internet.
Pradium is developing an online marketplace and information resource for agricultural commodity merchandisers and traders. The marketplace will offer buyers and sellers of cash grains, oilseeds and agricultural byproducts multiple market-making mechanisms that include dynamic trade and private negotiations.
The combined company will be headed by Rhem Wooten, current president and c.e.o. of Pradium. The two web sites are expected to remain separate for now, although some staff is likely to be laid off. Rooster, based in Bloomington, Minnesota, has a staff of about 80 while Pradium, based in Annapolis, Maryland, has a staff of 15.
Wooten said the new entity would present a revised business plan to its board by the end of March.
Warren E. Clark, an e-business agri-marketing consultant, said the Rooster-Pradium merger makes sense in the eyes of the investors and end-users. "Elevator operators and farmers realize that we're living in a ‘field-to-fork' type of business environment today, just as much as the grain merchandisers and agribusiness owners of Pradium and Rooster do," said Clark, who owns a marketing consulting firm, CCI, Inc., in Chicago.
Clark, who works with several major ag-dot-com and "click and mortar" agribusiness companies, predicts even more consolidation on the Internet.
There are probably 35,000 to 40,000 agricultural web sites worldwide today. "Whatever the number is," Clark said, "there are too many and competition will weed out those who should survive because they are providing an economic benefit to their users."
The first spate of consolidations among ag-dot-coms actually began last year, he said, before the April 2000 market crash, with the merger of eHarvest.com and Farms.com. This trend "continues through today at an accelerated pace," Clark noted, "as TheAgZone.com restructures and reinvents itself as Verdisys, HorsePower.com falls by the wayside as too undercapitalized, and a number of others which are now considered well-funded will be merging with those who had too high a ‘burn rate' on the capital provided by their investors."
The value of "smart money investors" will surface in the next few months, Clark predicts. "The most money raised ‘pre-crash' may not have turned out to be the most strategic or ‘smart money,'" he said. "Companies that do not have sustainable business models and a well-funded kitty will merge with those who do."
Clark said he expects more of the same among ag-dot-coms in the coming years —"innovation and consolidation with a focus on providing service to the end-users and a return on investment to the owners. It's not rocket science, just good business."