Firms That Bossed Agriculture for a Century Face New Threat: Farmers | Hacker News Reader

Firms That Bossed Agriculture for a Century Face New Threat: Farmers

wsj.com

I worked for a company that has been in the tech side of this space since 2004 until acquisition last year. You'll notice that the discussion in this article (which seems to be submarine PR for Cargill) talks about Cargill and ADM's relationship with the farmers. There are a lot of smaller elevators and coops out there that are working to help farmers capitalize on the increased flow of information while maintaining their ability to stay open against corporate competition from the ABC giants (ADM, Bunge, Cargill).

The big thing in the overall space is that the software side of ag lags behind profitability in the industry. The company I worked for was 6 people (fte 3 devs), and we were running on a .NET WebForms platform originally written in 2005 that we didn't have the time or resources to bring nearly 250kloc to something more modern. (That includes web, backend processes, api, our mobile app platform was another 40kloc)

Hopefully, modern web/big data/etc tech allows small farmers to move past occasional profitability to thriving growth, not just allows big companies to capture more profits.

I'm the founder of a company called Harvest Profit. We build a suite of profitability and risk management tools, trying to help farmers better manage their operations.

Farming is a unique business where the average farm generates $1+ million of revenue and is self-managed.

I agree with this article. More farmers are taking on the duties of merchandising their commodities and we help them with that. It's a fun challenge.

As an aside, selling intangible goods like software to farmers (who love equipment) is not for the faint of heart!

Hey, cool product you have. I've grown up at the farm and been dreaming of starting an agriculture related company at some day. Most of the biggest issues humanity is facing nowadays are related to agriculture (climate change, starvation etc.)

In my country (Finland) farms are folding faster than ever due to driest summer of the century. Still the food prize isn't going up - neither the profits of the companies selling their products.

I've actually seen your product, as the Myriad, the company that acquired my previous employer is based in the same city as you. I think your product looks great, and I hope you do well. I'm all for products that help local farmers make good profits!

Thanks Russ! Hopefully we will get the opportunity to collaborate!

> ABC giants (ADM, Bunge, Cargill)

ABC(C)D. Dreyfus is in between Bunge and ADM in terms of revenue and quite influential in Africa and some parts of Latam (Cargill is the outsized one, twice as large as any of the other and culturally quite different). Continental (now ContiGroup) is about a fifth as large as e.g. Dreyfus so doesn't quite count.

I would recommend the ageing, but still relevant Merchants of Grains [1] for a better understanding of the dynamics of this industry. More modern books - such as Marc Rich's biography - are too sanitised. As you hint, it can't really be "disrupted" by technology - the advantages these companies have are more geopolitical than informational. My position reporting platform in the late 2000s dated from 1994 and had never been updated; despite 5-6 layers of control, some faulty trades (e.g. FX hedge the wrong way) were not caught for months. Some heads of trading desks could negotiate with ministers profitably, but had trouble understanding simple derivatives.

[1] https://www.amazon.com/Merchants-Grain-Profits-Companies-Cen...

There's a huge margin out there for both farmers and suppliers if they can bypass the middleman. Did you know that grain shipped overseas contains up to 5% foreign matter? That farmers are docked if they bring in grain with over 0.5% foreign matter?

I held out the idea that the blockchain would be useful as a tool to let suppliers in Europe or China deal with large farms or groups of farms but it hasn't happened so far.

Thats what bonds are for. Far easier to manage. Trusted third parties are always more efficient if you have the trust.

And if you don't who are you trusting to input the data into the blockchain? I mean, really.

This is such a weird criticism of the "supply chain blockchain" concept.

I assume that the blockchain record just acts as evidence that a given person entered something incorrectly. The blockchain just acts as a database that is under no one company's control.

I know nothing about these projects but that seems obvious. Where am I wrong? How do I have to "trust someone to enter the data"?

I suppose an easier way to rephrase this criticism is that blockchain is usually seen as the solution to the 'trust problem' (handwaving what specifically isn't trusted, or why, or why you can't find a third party to trust).

In this case, the issue with (to the best of my knowledge) supply chain is that the wrong product is delivered, a substitute product is delivered or a product is not delivered. Broadly, that the customer doesn't trust the supplier. How does a blockchain solve this problem? If you can't trust your supplier to deliver the right product, or to pick trusted suppliers, how can you trust them to enter the correct data into a distributed ledger? Any ledger? Data entered into the blockchain can just as easily be falsified or wrong. It just can't be changed. Why can't this data just be stored in a database? What value does a blockchain provide here?

The blockchain doesn't solve a problem in this case, unless I'm missing something. It's just a database but harder.

And eg. some financial companies already have obligations to store data for X time periods and back it up to tape off-site. That regulation already stops you from just deleting/modifying your records, as far as I can see a blockchain doesn't provide any advantage over mandatory offsite backups.

What services do the middlemen provide? Are those services truly unneeded or will the farmer have to develop those skills and/or outsource to a different company? It seems like there is an opportunity here when viewed through traditional product distribution eyes but can a farmer ship direct to customer, organize bonds and insurance, navigate the futures markets?

In this case the middlemen do serve a purpose. The infrastructure that provides farmers access to a global market is typically provided by companies like Cargill and ADM. The part this article points out which is important is the value of on farm storage. By storing a large amount of grain and using modern hedging strategies afforded by most crops being commodities farmers can make money in an area otherwise controlled by Adm and Cargill (storage and marketing). Distribution of the product globally will be hard for any large farm to handle at scale.

Perhaps a co-operative owned by the farmers themselves would be the best approach

> That farmers are docked if they bring in grain with over 0.5% foreign matter?

That really depends on the contract. A much more costly problem is Moisture. Its rather costly to dry grain.

The ABCs do make some profit from moisture... They buy moist at a discount, and blend it with anything dryer than spec and sell it at spec. This practice probably generates roughly a 0.5% boost to revenue depending on the weather. This would be incredibly hard for farmers to capture because it requires buying from places with a wet harvest and places with a very dry harvest.

Actually, a lot of elevators make most of their profit on moisture management. Being able to nail a 15% M on a 125 car train can bring in a lot of money. There are farmers who do dry their grain before they bring it in, but gas dryers are expensive.

> I held out the idea that the blockchain would be useful as a tool to let suppliers in Europe or China deal with large farms or groups of farms but it hasn't happened so far.

This is an area of active work at IBM using the open source Hyperledger Fabric project.

https://www.ibm.com/developerworks/cloud/library/cl-coffee-w...

https://blogs.wsj.com/cio/2018/06/25/walmart-led-blockchain-...

Edit: Here is an example project to conceptually show how it works. https://github.com/IBM/blockchainbean/

Or maybe a database.

At least blockchain is cool, which means that code weenies will actually take the time to figure out how it works. The same is not true of databases; code weenies find databases dreary and boring.

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