E-Commerce and Agricultural Markets

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.

JEL Classification: Q12