Farmers generally sell grain based on personal relationships with buyers, says Mike Witkowicz. “You can manage, at best, probably four to five relationships with grain companies.” The problem with that is that there are more than four or five potential buyers out there.
Witkowicz is the vice president of strategy and business development for CXN360, an online company that connects grain sellers with grain buyers. The service works on a membership basis. Members pay a fixed rate, once a year — charges aren’t based on the number of sales made or bushels sold.
Farmer members receive offers from buyers through CXN360. The offers will include all the details: buyer, price, delivery terms, etc. Farmers can connect directly with the buyer to finalize the deal. Many other digital services charge based on finalized deals rather than charging membership fees. These services typically won’t give out all of the buyer information about the deal is finalized. Because CXN360 makes its profits from membership fees rather than deals, it does allow members to bypass its system and deal directly with particular buyers.
CXN360 members can set target selling prices and delivery dates. The system will send alerts about buyers. You can use the system to send grading reports to buyers, and top-tier members can use CXN360 to manage their grain inventory.
Basically, this service connects grain buyers with grain sellers. “We’re the Match.com of grain,” Witkowicz says. For business models like this, the key to success is attracting a lot of users. If there are only a few potential buyers, it’s not worthwhile to be a seller. On CXN360’s buying side, Witkowicz says, “we have about 35 per cent of the Western grain buying locations signed up.” On the selling side, he says CXN360’s members represent 7.4 million acres.
What’s the downside? Witkowicz says he’s heard from farmers who felt they were getting too many offer notifications. (These users changed their settings, so they could look online at their leisure rather than getting frequent texts or calls.)
CXN360’s services include all types of grains, including organic commodities.
Getting the business started
CXN360’s business model is simple. The company sells memberships to farmers and grain buyers to pay for their staff and technology. (Many farmers use the free service, but farmers who pay for upgrades and buyers pick up that slack.) But how did CNX360 fund its startup phase?
After the Canadian Wheat Board was wound down, Lyle Ehrmantraut, who is now CXN360’s CEO, saw an opportunity. He had been working with Cargill and seen the complex logistics involved in sourcing a specific amount of a specific grain from multiple sellers spread across Western Canada.
In 2013, Ehrmantraut came up with a way to simplify these logistics. He wrote a business plan and took it to the Saskatchewan Angel Investment network. A computer engineer from the University of Saskatchewan, David Callele, took an interest and brought expertise to the project. (Callele is now CXN360’s chief technology officer.) From there, the project was mainly funded by friends and family. *The company has other outside investors now.
The technology is functional, “not fancy,” says Mike Witkowicz, CXN360’s VP of strategy and business development. Witkowicz said they were careful to keep graphics limited, so rural users with low internet speeds would be able to use the service.
*The original article was edited to include this note. (LM)