by
Sarahelen Thompson
Professor
Department of Agricultural and Consumer Economics
University of Illinois
And
Eugene Kunda
Senior Economist
Chicago Board of Trade
Abstract
E-commerce will have a profound effect on agricultural markets. Due
to lower transactions costs, more firms throughout the agricultural value
chain will be able to engage in business-to-business e-commerce. Products
and services will be increasingly unbundled throughout the marketing channel.
Firms will be able to specialize in narrow niches and will face competition
from other similarly specialized firms. Many more products and services
will be traded as "commodities," and price discovery throughout the value
chain will become more transparent and observable. Differentiated or value-added
agricultural products, such as high oil corn, or "Roundup Ready" soybeans
could be traded on organized, perhaps virtual, exchanges. To increase the
probability of success of new contracts, exchanges should use information
technologies, demutualize, design contracts to meet industry needs, encourage
inter- and intra-market spreading, and develop new means to certify product
quality. Producers will benefit from e-commerce if they can gain competitive
access to the virtual value chain.