Farmers Are Pretty Digital; Their Buyers Are Really Not

In the agricultural space, businesses have to be around long enough to matter.

And that leaves firms pretty comfortable with the way they do — and have always done — business.

“People might assume that it’s the farmer who is not part of the digital shift, but it is in fact their customers, their ecosystem that isn’t,” Jake Joraanstad, CEO at Bushel, tells PYMNTS CEO Karen Webster.

Despite advancements in technology, a surprising 80% of payments to farmers are still made by paper check, indicating a resistance to change within the ecosystem.

“Software has not traditionally made a lot of progress in this industry. And it’s not the farmers. These farmers are really impressive, but when they sell their grain into the supply chain or when they’re buying inputs from these companies that they work with that supply them, those are the parties that are still behind in a lot of ways,” Joraanstad says.

“There are still phone calls, texts, emails. And a lot of them still have fax machines,” he adds.

While in many industries, the old ways of buyers and sellers being matched up through manual processes have given way to more modern, digitally driven dynamics, certain sectors remain set in their ways and more reticent when it comes to streamlining their processes with future-fit innovations.

And even though innovations can bridge gaps along supply chains, the issue of inertia bottlenecking adoption may not be a technical or need-based one, but rather simply a generational and behavioral one.

“The general managers, decision makers, these folks are usually within a few years of their retirement and they don’t want a lot of change because they want to finish out and let somebody else take on the next effort,” Joraanstad says.

It is a story PYMNTS has heard repeatedly around digital adoption, particularly within more traditional and industrial sectors.

Read also: Why B2B Tech Will Drive the Next Innovation Cycle

Farmers Driving Change

Making interactions between farmers and the rest of the agriculture business more digital, streamlined and efficient represents an attractive opportunity.

But as with most commercial sectors, there is a giant iceberg of behavioral inertia to melt. And it starts and ends with payments.

“We move about $170 billion of payments to and from the farmer throughout the year. And that’s all paper checks, almost entirely. There's a little bit of ACH adoption and some credit cards being accepted,” Joraanstad says.

But he explains that the agriculture industry “doesn’t believe that paper checks are a problem.”

“People are not saying, ‘Our biggest problem is paper checks’ — that is not currently in the debate,” Joraanstad says.

He adds, “Credit cards don’t work because of the cost structure.”

Part of the agriculture sector’s resistance to modernization separately stems from a lack of focus by providers on building good software for the industry, which is compounded by the “it’s the way we’ve always done things” mindset of decision makers.

“The focus hasn’t been there by the technology companies,” Joraanstad says. “We know technology can fill some of the sector’s gaps, but there’s not like a whole supply of software on the shelf to go pick from to make a business better. … It’s the least digitized industry.”

Still, Joraanstad believes that farmers can drive change through co-op boards and that payments and data can serve as powerful motivators for the supply chain to embrace digital solutions.

Financing the Farming Ecosystem

While credit cards might not work from a basic economics perspective, other financing solutions are leaned on heavily by farmers and other agriculture operators.

“Almost all purchases in the first half of the year of a farmer are done on an operating line or some sort of financing program,” Joraanstad explains.

He adds that when farmers get paid, they typically “move that money instantly into the next thing. They already have plans for where the cash needs to go, the next tractor to buy.”

Improving the dynamics of the buyer-seller relationship through digital payments and other innovations might be one way to move the needle for digital adoption within agriculture.

That’s because while there are a lot of financing options for farmers, “accessibility and ease of use is a different question,” says Joraanstad, explaining that farmers are usually “paying their lien off by mailing a check, setting up a wire, or whatever [manual process] it is.”

Farmers themselves recognize the need for a change in the payment system, and the ability it brings for them to manage their finances and working capital more effectively. Digital payments provide a more transparent line of sight into how money moves in the financial supply chain, reducing friction and improving overall efficiency.

But will digital take root in time for the sector to harvest its gains? Only time will tell.

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