E-BUSINESS TAKES TOP PRODUCT HONORS.

Editor's Note: Electronic business (e-business) may not fit neatly into a traditional agricultural product category, but then there's nothing traditional about anything on the Internet. Yet its merits in fostering the exchange of agricultural inputs, outputs and information justify its selection as Agri Marketing's product of the year. Like tractors, artificial insemination, biotechnology and other advancements, e-business and e-commerce will revolutionize agriculture.

In fact, nearly all of the interviews and related work done for this special segment were completed through e-mail and Web-site research to illustrate how integral this technology has become in conducting agricultural business on a daily basis. While this section provides a snapshot of e-business today, it barely scratches the surface of its potential.

The W.K. Kellogg Foundation in Battle Creek, Mich., recognized the widespread potential of the Internet in an issue paper released in July. Sections of The Impact of E-Commerce on Agriculture, Issues for 21st Century Food Systems," authored by Dr. Richard Foster, vice president, programming, for the Kellogg Foundation, appear in this special magazine segment.

      Internet access and e-commerce promise to revolutionize the landscape of
   business, including agribusiness. Already e-commerce is clearly beginning
   to have a major impact on farming and food distribution. From new portals
   aimed at farmers buying inputs and selling raw materials to Web-based niche
   market food product sales and home delivery grocery services, the Internet
   is increasingly central to the entire food systems chain.

      In the March 2000 issue of Agri Marketing, Forrester Research, an
   Internet research firm, predicted business-to-business (B2B) e-commerce
   would hit $1 trillion by 2003. Network Solutions, the domain name
   registration service associated with the National Science Foundation,
   estimated that the number of Web site domains has risen from 177,000 in
   1995 to 6 million today. Agri Marketing also noted the Internet Corporation
   for Assigned Names and Numbers (ICANN) is considering whether to add new
   generic top-level domains to the domain name system and reported that some
   companies have even begun to take orders for them.

      Farmers, input suppliers, commodity buyers and food consumers have
   wasted no time in exploring the options e-commerce may offer the food
   chain. Up to two-thirds of producers are estimated to have Internet access
   and are using it to gather information. Millions of new Web sites available
   to producers and consumers continue to come online, and the volume of
   business done through the Internet is forecast to explode. The challenge is
   in getting a handle on the rapid changes occurring in the marketplace.

Sparks Companies, Inc., Washington, D.C., is monitoring those changes and their potential implications for agriculture and the food industry. Vice president Beth Bechdol characterizes agriculture as an industry of "rapid consolidation, policy upheaval and a wave of sweeping new technologies." As such, she says e-commerce is well positioned to weave into that fabric.

With consolidation occurring in all components of agriculture, Bechdol explains that globalization and competitive pressures are forcing change and making unit cost reduction a goal across the system. In addition, issues such as NAFTA, biotechnology, China's accession to the World Trade Organization and domestic farm policy are affecting agricultural commerce.

"E-commerce can improve the flow of information, provide more effective allocation of resources to core value-added activities, and lead to leaner operations, cost savings and transactional efficiencies," says Bechdol. "Shortening the value chain and integration with business partners can lead to substantive operational and financial improvements."

Already, Bechdol says, more than 1,000 agricultural and food "e-companies" exist. More than 100 are significant ag and food e-commerce companies that have sites up and running, under construction or still to come. Bechdol divides sites into one of four categories: those that offer ag news and information, those that house data, those that conduct agricultural e-commerce and sites that offer a combination of those services.

"Most major agribusinesses are now involved, although companies are still shaking out," she says. "The technology is constantly improving, and business and consumer response (to e-commerce) is positive. But consolidation (within e-commerce) is inevitable."

Bechdol anticipates that as consolidation and other changes occur, new business models will emerge and the food system will see some restructuring. In addition, Bechdol says, new issues will develop that could challenge the e-commerce landscape.

"The technology is still in very early stages," she sums. "There is an enormous shake-out coming soon, and more money likely will be lost than earned in the near-term. Benefits will go to the early adopters."

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