Innovation

Build a Marketplace for These Primary Producers

Opportunities 2015: Deregulation of the selling process have left these producers seeking a new middleman. How to cash in.

Written by Michael McCullough

Illustration: Dale Edwin Murray

At the age of 28, Brennan Turner has seen more golden opportunities than most of us will over our entire careers. Awarded an athletic scholarship to Yale University, he studied economics and worked summers on Wall Street. Drafted by the Chicago Blackhawks in 2005, he spent five seasons playing professional hockey in the minor leagues and Europe.

It was while dealing with the pro athlete’s ample downtime during one dreary winter in Dundee, Scotland, that Turner spotted his best opportunity yet, shaping up in his Canadian Prairie homeland. The Conservative government was working to dismantle the Canadian Wheat Board’s monopoly over wheat and barley sales. He looked into what had already happened in Australia, which deregulated its single wheat desk in 2008.

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“Deregulation is forcing the producers to be more proactive when they’re making their grain sales,” Turner says. He saw the opportunity to create a user-based platform where buyers and sellers could seek each other out and negotiate—something the existing auction systems didn’t allow them to do. In spring 2014 he launched FarmLead, an online grain marketplace.

The Saskatoon-based startup now hosts 400 buyers and 1,700 farms covering 11.5 million acres. “We’re signing up about 20 farmers a week,” Turner says. “Last week we did 29.” In the eight months FarmLead has been operating, more than $8 million worth of crops has changed hands on the site.

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Turner understands the farmers’ challenging transition. His extended family farms 40,000 acres in Saskatchewan. “The question was always, €˜How do I find a better price?'” he recalls. That has long been the burning issue for growers of pulses and oilseeds, and now it’s the case for wheat and barley producers too. Farmers have been slow to adopt online and mobile tools, but now “the rate of adoption is exponential,” he says.

When the free trading of western wheat began in August 2012, big domestic grain handlers like Richardson International and Paterson Grain were considered the main beneficiaries, along with multinational agribusinesses such as Glencore (which owns Viterra, formerly the Saskatchewan Wheat Pool), Cargill and Archer Daniels Midland. But as FarmLead demonstrates, the effects go further.

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The number of traders licensed by the Canadian Grain Commission, for example, has increased to 87 from 73 over the past 18 months. “It’s made for much more fluid trade, which has benefited not only the processors and the traders. It’s also benefited the farmers,” says Al Constantini of C.B. Constantini Ltd., an independent grain trader based in Vancouver.

He acknowledges that this is a point of contention—there are Wheat Board loyalists out there who will highlight cases of farmers suffering in the wake of deregulation. But this is the way the oilseed and pulse business has been run all along, and it partly explains why canola has overtaken wheat as the Prairies’ biggest cash crop.

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A freer trade in agricultural products also engenders innovation and the development of new markets: Turner points to the way Regina-based AGT Food and Ingredients (formerly Alliance Grain Traders) has carved out new and expanding niches for Canadian-grown lentils.

The final act of the deregulation drama is set to play out between now and 2017, the deadline Ottawa has set for the Canadian Wheat Board (or its assets) to be privatized. Constantini argues that will benefit the industry too. “It’s good for all of agriculture, top to bottom.”

This article is from the Opportunities 2015 Special Report in the February 2015 issue of Canadian Business. Subscribe now!

Originally appeared on PROFITguide.com