The Problem: Crops are an unpredictable business. Grain farmers typically commit the bulk of their expected yield to a local buyer; if they harvest more than predicted, they need to arrange a second sale. If all the farmers in the area are trying to unload a surplus of the same crop at the same time to the same buyers, prices are driven down. Negotiating these secondary sales on the phone “takes a ridiculous amount of time and energy,” says FarmLead cofounder and CEO Brennan Turner. Farmers often employ brokers, who take a cut.
The Epiphany: When Turner returned to his family’s 40,000-acre farm in Saskatchewan after stints playing pro hockey and working on Wall Street, he was frustrated that he couldn’t “shop around” spare tons of canola as easily as shares of ExxonMobil. He started sending target prices to a list of buyers, who submitted offers, effectively creating a mini auction site for the family farm. He got much better prices than the local posted bids.
The Execution: Turner launched FarmLead, sort of a Priceline for grain trading, in 2014. Farmers list inventory and buyers submit bids. If they strike a deal, details are set up through its mobile app. FarmLead charges buyers and sellers a fee of roughly 50 cents per metric ton, 50% to 75% cheaper than traditional broker fees.
The Result: The sale of over 1.4 million tons of grain has been negotiated via FarmLead. More than 4,000 farmers are using it, getting average prices of 5% to 6% above the locally posted, offline bid. This May, the Ottawa-based company is opening a Chicago office, looking to double users by year’s end.