Think fast: what’s a $200 billion element of a $1 trillion domestic industrial sector still 90% dependent on paper checks? If you said “agriculture,” you win a pretend bushel of corn.
Speaking of Bushel, it’s also a Fargo, North Dakota-based software firm that’s set to advance the digital transformation of an agriculture (“ag”) sector still being slowed down by paper payments.
Bowled over by the irony that many American farmers are sending money through Venmo today — while awaiting paper check payments for their grain — Bushel CEO Jake Joraanstad told PYMNTS’ Karen Webster that this most essential of sectors is digitizing in earnest.
“We have rail and highways,” he said. “We have big storage facilities around the country that make us one of the best in the world at delivering agriculture products. The problem is on the digital side. We’ve been behind on adoption.”
Noting that it hasn’t changed in a century, Joraanstad said, “We’re still doing a lot of it on paper. The opportunity is how do we get, not just the farmer — the farmer’s pretty incredible at technology — but how do we get the rest of the supply chain to adopt these tools, go away from paper, move onto data-focused tool sets and remove things like paper contracts and paper checks in the mail?”
Bushel first took aim at the system of paper scale tickets used by ag producers that track how much they’ve produced and how much remains on their contract before payment.
“When they deliver their grain to the facility in the fall, they drop the grain off and get a paper receipt called a scale ticket, and they had to keep track of all those to know how many deliveries they made and how much they still have left,” he said. “We started off by removing that. We basically built the mobile app, like the bank built to not have to go to the ATM.” Now it’s automatic.
After digitizing scale tickets, Bushel moved to contracts, to the point where farmers and buyers “can even sign a contract in that tool. We started [with getting] rid of those basic paper processes where the farmer can be up to date on their business through this portal tool without having to think about printing paper or going to find a paper [in a] stack.”
Such are the obstacles to clear in laying digital infrastructure for an age-old industry that is a foundational national priority, and yet still does finance with paper, ink and stamps.
“It’s almost a $1 trillion industry in the U.S. broadly,” Joraanstad said. “It’s incredible that we’re still 90% checks. In Australia, for example, at least 90% of the payments to farmers, maybe 99%, are electronic and settled in like 15 seconds. We’ve got some work to do here.”
Obvious Problem. Obvious Solution.
Not to flog a cashed check, but the paper reliance is catching up to the ag sector after a pandemic, and now possibly a recession, pushes its paper-pushers to their limits.
Joraanstad said the labor shortage is one issue. “When somebody retires or leaves the company, to fill the role of settling and writing the check, printing the check, putting it in the mail, that person is not always there anymore.
“The second part of it is for the farmer. They’re still getting this thing in the mail. Last I checked, all farms that I’ve ever seen aren’t next to a bank, they’re out in the country growing large acres. So, they have to drive sometimes an hour just to deposit a check. It’s really an obvious problem, and there’s an obvious solution.”
A labor shortage around check writers is a pandemic-era problem if ever there was one, underscoring the need for this strategically vital sector to undergo digital transformation.
He noted that most grain buyers “have some form of an ERP. They’re managing how much the farmer’s going to need to get paid, but when they go to do that, they send invoices in paper, in the mail, they send a settlement on a paper check.”
The Bushel platform now integrates with those business systems so it’s “easy for the farmer and [buyer] to engage in the same place.”
With 60,000 farms now using the Bushel platform for one or more clerical tasks, Joraanstad said, “It’s just a matter of adding that one more layer, one more step to be able to get paid [digitally] instead of through the paper check. We think it’s going to be in that natural path.”
Another issue is the system of liens placed on grain loads, which is a more complex transaction.
“There’s a lien on a lot of farm accounts on the grain that’s delivered, so traditionally that’s been a second signature on a paper check,” he said. “We intend to solve that as well, to be able to get to that 90% plus electronic. There’s a couple of phases, but to get to 50%, it’s an adoption problem.”
Enrolling takes about three minutes, Joraanstad said, and once on the network, farmers can transact with anyone else on Bushel.
As for the lien situation, he added, “We think we can solve it, but it’s going to be a little bit of a lift to get there. And until you solve the lien problem, these organizations can’t repurpose those people that have to write checks because they’ve still got 50% of the checks to write. It may alleviate some time, but it doesn’t alleviate the whole position opportunity. That’s the work that we’ve got to do next.”
Bushel uses one-day ACH, but transfers are instant on the network.
A New Day for Farm Payments
Noting that “we could have built it just for our own customer network, and we did,” Joraanstad told PYMNTS that its Bushel Wallet Link application programming interface (API) and platform tool was made commercially available, effectively as an ecosystem enabling payments in an easy integration he compared to “putting a button on your site or putting a workflow into your system to collect payments.”
At present, up to six bank accounts can be linked to Bushel Wallet via the Plaid network, with funds moving as usual through that interface. User also get a Bushel debit card — in the mail.
“If you’ve got other types of accounts you want to work in, if they’re part of the Plaid network, you can do it,” he told Webster. “The problem with credit cards and PayPal and things like that is the fees are too high for this industry. Imagine a product that only has a 3% margin or 6% margin.”
Paying out 2% of that as a transaction fee “doesn’t really work.”
Bushel is well positioned to provide a range of financial products to the ag sector, including credit cards and digital lending instruments tailored for the unique needs of this business.
“Most farmers have something like a half million [dollar] to a $1 million line of credit a year, some are way bigger than that. They finance their equipment. They finance their land. There’s opportunities to move the transactions in all those on our platform,” he said, adding, “We can de-risk loans, we have historicals that the farmer can share with our tools. There’s certainly a lot more opportunity. You’ll probably see a Bushel credit card coming someday.”
What’s a bit thrilling about ag payments are the typical amounts. Joraanstad told Webster checks tend to fall between $20,000 and $40,000 each.
“A lot of farms run on cash-based accounting, so they’ll even defer the payment to the next year,” he said. “Our customer, the grain company, the one in the middle, they act like the bank a lot of times, so we want to help them do a better job of that service than what they’ve been doing in the past.”
With corn now averaging $7 a bushel, farmers are experiencing inflation differently. With extra margin in their pockets, farmers and grain buyers “have some time to make some changes, make some bets, and the driving factor here is not how much money they have, but it’s the lack of labor,” he said. “They have the same problem on the farm. Our tools like Farm Logs and other tools that we’ve developed will make it easier for the farm to automate some of their work.
“It turns out the grocery store only has food because we grew it. So, we’ve got to figure it out.”