Web Wary

by Emily Wilson
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For anyone involved in grain storage and handling around the world, the Internet is definitely becoming a topic with increasing awareness. Although the application of this technology has yet to catch on in the industry, it is slowly, but surely, on its way. In what form, manner or package has industry professionals guessing and waiting.

Using the Internet to facilitate grain transactions is still in the future, but throughout the industry there is widespread use of the Internet as an information-gathering tool. Larry Prager, international sales manager for MFS/York/Stormor, Grand Island, Nebraska, U.S., said the grain industry is just beginning to discover how it can use the Internet.

That discovery process, however, is slow and uncertain. Many people are waiting for the Internet to prove itself as a benefit, Mr. Prager said, and are waiting to see how it can work for them.

Osman Senturk, a marketing specialist for Eksim, a commodity trading company in Istanbul, Turkey, said the Internet is not yet considered a necessity in Turkey. "It is mainly used for e-mail purposes, sending each other proposals, technical drawings and quotations, and almost all try to reach the news via the web," he said. "So far, we have not seen many major Internet applications integrated directly to the business process."

In Turkey, and throughout the industry, people are watching to see who is going to use the Internet and what they will do with it.

Chuck House, communications manager for the Grain Elevator and Processing Society, Minneapolis, Minnesota, U.S, said GEAPS members also are concerned about how to use the Internet in their business. "People want to know if they have to use the new emerging systems, if they will replace the old methods, and if it will all fade away," Mr. House said. "There's a lot of interest among members and some doubt about what it all means."

GEAPS has added the Internet to its list of possible topics to be presented at its 2001 technical conference and trade show in Phoenix, Arizona, U.S.

CURRENT USES. Raúl Frúgoli, an engineer at the Port of San Lorenzo, Santa Fe, Argentina, believes the industry is at the beginning of a new era. "I think we do not realize the tremendous potential of Internet," he said.

The Asociación de Cooperativas Argentinas has 170 cooperatives already inter-connected by Intranet, which is similar to an Internet site, but only accessible by password to a certain group, such as a company. Other facilities, such as the A.C.A. terminal elevator at which he works, still use the telephone and fax. Mr. Frúgoli said the Internet is primarily being used in Argentina to communicate via e-mail and to browse for equipment.

Terrance Pardoe, chief executive of Coastal Grain Ltd., near the village of Belford in the northeast United Kingdom, said the Internet is certainly a topic of interest for people in the U.K., especially those involved in grain trading. "It is not quite to the situation where grain is being traded on the Internet yet, though," he said. "People are waiting for it to take off to see how it can help them."

Contrary to Mr. Frúgoli in Argentina, Mr. Pardoe has not noticed a trend of people searching and shopping for grain storage and handling equipment on the Internet. "When I'm looking for equipment, I want to speak to manufacturers," he said. "You can't put all the details on the net and ask relevant questions."

Mr. Senturk's company, Eksim, is taking small steps to prepare for the future. Eksim recently equipped its sales team with wireless computers, which allows them to perform business applications via the Internet, such as order filing and tracking, stock monitoring and accounting.

FORCING THE TIDE? A number of Internet sites for the agricultural industry have been launched within the past year, especially within the United States. Mr. Frúgoli, who said he knew of several sites being developed in Argentina, said, "My main concern is about the hacker's power and how to make confidential or even secret transactions without any interference."

Many agricultural-based web sites are also being developed in the United Kingdom, Mr. Pardoe said, although he said he is unsure whether these sites will be successful. Until buyers want to purchase online, farmers, shippers, cooperatives and feed companies won't go online either, he said.

E-mail is not yet considered a legal contract in the U.K., which is hindering the transition to grain trading on the Internet, he added. "Buyers don't want to spend time buying grain online because there is no formal agreement about Internet transactions," Mr. Pardoe said.

There are no ag-dot-com ventures yet in Turkey, but Mr. Senturk said he believes the industry will welcome their arrival and the possibilities of faster information and increased competition and transaction speeds.

"Currently, Turkish farmers are not using technology very well," he said. "Grain elevators and millers seem like they will be the pioneers in the industry. We are eagerly waiting to see what would happen if these kind of sites are launched locally."

Ron Finck, executive vice-president of grain at West Central Cooperative, Ralston, Iowa, U.S., said web sites like Cybercrop.com, e-markets.com and others in the U.S. are the pioneers in integrating the grain industry and the Internet. "A few business models are attempting to replace the traditional grain handling industry all together," he said. "Whereas this does cause us some concern, we feel that there will still be a need for efficient handling and transportation of grain in the future. Grain is not currently being delivered by U.P.S."

Ordering grain is not like ordering a book through the Internet and having an overnight delivery company like United Parcel Service deliver it to your door, Mr. Finck added.

"Transportation is such a key part to buying and selling grain and it seems ag-dot-com companies have failed to understand that," he said. These new web sites "are not going to drastically change the flow of grain just because they are posting everybody's grain and bids," he added. "Prices and grain movement won't change substantially because the margin structure is already so narrow, there is little room for improvement. It's more feasible that electronic information be utilized."

Mr. Finck also sees a problem with anonymous bidding and buying on the ag-dot-com sites. "Producers are not willing to give up knowing who they are doing business with," he said. "Producers enjoy establishing a working relationship and a trust — and they want to make sure they will get paid."

MAKING IT WORK. West Central Cooperative is a good example of a grain company that is integrating the Internet into its daily business. This integration is a step by step process, Mr. Finck said.

"The first step is like posting a bulletin board, providing information," he said. "The second step is becoming more interactive."

The company separates its duties into buying and selling transactions and the services that go along with those transactions, such as payments, record keeping, billing and paperwork.

Through the company's web site, www.west-central.com, West Central does all its billing over the Internet, tracks the arrival and departure of train loads, and even makes payments and settlements. "The Internet isn't replacing the current system," Mr. Finck said. "You still sell over the phone and talk to another person. It's not getting easier to sell and transfer grain — transactions are becoming less uniform. We still feel there is value in discussing those things with the customer."

The Internet's value to West Central and other grain companies lies within facilitating its services via the Internet, Mr. Finck said, making its own offices more efficient and making business more convenient for producers. For example, producers can run marketing simulations for contracts on the web site.

"I can see the day when West Central actually encourages producers to take payment and paperwork online," he said.

West Central on May 1 began posting three versions of contracts that producers can monitor online to observe changes in prices. "That is step one," Mr. Finck said. The web company E-markets.com helped develop the software for West Central's three new contracts.

"Step two would be letting producers view their entire account online," he said. "We are working toward that now."

Although Mr. Finck said he knows of only a handful of grain handling companies within the U.S. that are at step two, he thinks that there is a desire for it from both sides and that producers may soon be able to make offers online.

Mr. Prager of MFS/York/Stormor said he likes to think of the Internet not as technology, but as a conduit for information. That mindset may be the key to integrating the Internet into the everyday business of the grain storage and handling industry.