Don't Miss a Beet

How Technology Has Transformed Today’s Agriculture Commodities Market

January 06, 2022 Kermit Nash, Jonathan Havens Season 1 Episode 12
Don't Miss a Beet
How Technology Has Transformed Today’s Agriculture Commodities Market
Show Notes Transcript

In this episode, host Kermit Nash, co-chair of Saul Ewing Arnstein & Lehr’s Food, Beverage and Agribusiness (FBA) Practice, and colleague Casey Grabenstein, a partner in the firm’s Litigation Practice, speak with Mark Haraburda, CEO of Barchart, a leading provider of commodities and exchange data. They discuss how the digital age has not only impacted boards of trade going from the open-outcry days of traders shouting and giving hand signals on the trading floor to a two-way electronic trading environment, but also how today’s technology has leveled the playing field for all sizes of farmers, cooperatives and agriculture companies to easily and quickly access real-time data and seamlessly conduct business. For example, the traditional way of farmers selling grain has evolved from face-to-face interactions at the co-op or grain elevator to transactions being conducted over mobile apps that connect farmers to merchandisers instantly. 

Episode: “How Technology Has Transformed Today’s Agriculture Commodities Market”
Kermit Nash, Casey Grabenstein and Mark Haraburda December 2021

Kermit Nash: Thank you for joining us for our food, beverage and agribusiness podcast series, “Don’t Miss a Beet.” My name is Kermit Nash and I’m the co-chair of the firm's Food, Beverage and Agribusiness Practice based in our Minneapolis office. Today, I'm thrilled to be joined by some distinguished friends and colleagues. First, I want to introduce you to Casey Grabenstein, who is going to act as co-interviewer with me today. Casey, welcome.

Casey Grabenstein: Thanks, Kermit. Happy to be here.

Kermit Nash: Great. Casey is a litigator based in our Chicago office with a national practice. Casey, why don't you take a minute and introduce our guest today?

Casey Grabenstein: Yeah, sure. We're very excited today to have a good friend of the firm with us — Mark Haraburda. Mark is the CEO of Barchart, a leading provider of commodities and exchange data, based here in Chicago. We're looking forward to speaking with Mark. And I know that folks that listen to this podcast are probably familiar with Barchart, but Mark, I think it would be helpful if you can tell us a little bit about yourself and the company to get us rolling.

Mark Haraburda: Great. Thank you, Kermit and Casey for having me. I want to say I love the name of the show, “Don't miss a Beet.” It’s fitting and you know, there's a lot of activity in the agricultural sector, a lot of technology changes impacting the sector, a lot that applies on the legal side as well in this day and age. So it's neat to talk with you folks and engage. You've got a great practice in food and beverage. It's an area we're active in as well on top of agriculture. So I'm looking forward to the discussion. To start, my background started with the Chicago Board of Trade in the 90s, so I have a financial markets background that's been geared more towards the derivatives and futures industry. And as you may know, the Chicago Board of Trade is mostly known for its agricultural commodities, things like corn, soybeans and wheat. I spent about seven to eight years there on the data and product side of the business and really got a good understanding of the instruments that are used for price discovery and commodities, as well as hedging in commodities. And since then, I've been with Barchart for about 15 years.

Kermit Nash: Well, Mark, you look far too young to have been anywhere for 14 years, so that's an impressive background. We look at Barchart regularly when we're actually engaging with companies to kind of see what's going on in the market, but I'd love for you to elaborate a bit on kind of the digital age and how this has evolved, because I think a lot of our listeners, or even just people who are familiar with boards of trade and how they worked historically, would be a bit surprised how much it's evolved and how you play a key role in that development.

Mark Haraburda: It sure has evolved. And, I was fortunate to be there when it started, well it had started before I arrived at the board of trade in the late 90s, but that's really when the digital era for exchanges starting in terms of them migrating and transitioning from an open outcry environment. You've seen the traders in the jackets on the floor of the exchange shouting and giving hand signals to two-way electronic trading environment. And that started in the 2000s and the exchanges at the same time, they also went through a demutualization process where they were really non-for-profit member-owned organizations and they shifted to publicly owned companies and they IPOed. That gave them the ability, or a bigger ability, to become more competitive. And they had to, they had to make technology changes to keep up with the times and evolve. In terms of our firm, we really got our start around the same time. So in the mid-90s, in 1995, we launched as one of the first websites to bring commodity quotes online. And originally it was a subscription service, and around 2000 we migrated that to more of a public financial portal, still really focused on commodities. And, today we cover stocks, we cover currencies, we cover options. But our bread and butter, especially being based right next to the Chicago Board of Trade in downtown Chicago, our bread and butter has always been the commodity market.

Kermit Nash: With all that information kind of coalescing around, not just the variety of commodities that you're keeping track of now in real time, there was a ton of data and that data now has got its own value. Does it not? I mean, it's one thing to look at some of the product offerings you have and see what the price may be or the trading, but there's actually insights there, which are extremely valuable. Right?

Mark Haraburda: Yes and that that's followed the technology shift and evolution from the open-outcry days, there was only a limited amount of data that can be pushed through. Those prices were being recorded by market reporters sitting above the pits and typing in the prices, so not every trade or every quote was necessarily reflected. With electronic trading, the bandwidth requirements increased. You had the capability for more algorithmic trading, more auto quoting, and that's really increased the amount of quotes that you see coming through the exchange. At the same time, everything from cloud computing, which plays a big role in all of this that that's really enabled so much of the technology, for AI providers, for satellite imagery providers, to be able to launch those products and services without cloud computing, that would not be possible because it was just too expensive to build out that infrastructure. So cloud computing to me has been core to any growth when you talk about data and then that's giving you the ability to analyze these massive sets of data with infrastructure that wouldn't have been available to start ups or even larger companies back then.

Kermit Nash: Before we went on live with this program, Casey, you and I were talking about all the problems that your company solves. Is it fair to say that there's just kind of the ABCDs of the world, but doesn't this level the playing field for even the small farmers elevator or the cooperative that may be a little off the beaten path, but yet substantial client base and cooperative members.

Mark Haraburda: Yes. For us, we are a data and technology solutions provider and what that means for us is, Barchart certainly has three arms. One is, which is where you go to get quotes. You look up charts, a lot of information is for free. Two – we have a financial business where we sell data and APIs to financial services companies, software companies, and other B2B relationships. Three is our commodity business and that's where we’re providing that data to any size grain buyer, any size farmer. It has really leveled the playing field. We offer everything from yield forecasts that are calculated throughout the day, production forecasts, access to years and years of historical data, access to cash grain bids from any grain elevator in the U.S. and Canada, and growing in South America by entering a zip code or pulling up our mapping technology and giving you the ability to map those grain bids in a heat map pictured within the state of Iowa. So the accessibility of the data and the tools, it’s really now available to everyone.

Kermit Nash: My dad used to say, “If you understand agriculture, you understand the world.” And as I'm seeing how you're providing services, not just to the grain elevators and the buyers of the grain traders, if you will, you're really getting an imprint on what's happening in the world today. Are you not?

Mark Haraburda: Yeah, there's an entire supply chain and workflow when we talk more specifically about commercial grain and that started with websites in 2000 or so. Grain elevators, like everyone else, they needed a website. Grain buyers needed to get their prices, their bids out to their customers and to the world. And that's really the first service we started providing to grain elevators was websites. And from there, it's evolved into a full suite of digital tools to assist them with buying grain, disseminating their prices, and communicating with farmers. And that's led to efficiencies. We have e-sign for grain contracts. A farmer could sign a contract on his phone. You don't have to deal with the paper. You've got instant, real-time access to that and digital records. And then we could push that transaction to an accounting platform so it doesn't have to be manually entered and subject to error. And it's done virtually, instantly.

Kermit Nash: I'm always thrilled when you get insights from companies that are solving real problems and there's value because that's the type of thing people are willing to pay for. But understanding agribusiness, sometimes there's some reluctance to add additional costs when you're dealing with skinny margins, sometimes with products. But I'm suggesting something, and this is not me putting a golf ball on a tee phrase so you can whack it down the fairway, but take your best shot. So you're solving a lot of problems. What's the next big problem that needs to be solved in agribusiness with data and how that data is used? I imagine you've got a whiteboard somewhere in your office already.

Mark Haraburda: So if you look at the way farmers sell grain, traditionally it's been face-to-face, driving to the co-op or the elevator, making a phone call. And we now have the technology to do that through your phone. And that's really where everyone wants to conduct business and manage relationships. It took a long time to get there. Folks have been trying to change the way farmers sell grain for really 20 years, but the technology wasn't completely there – not only the apps to support it, but also the connectivity to make sure you have a signal and you can actually communicate. So, this has not been a fast change, but we want to provide the capability for more farmers to be able to transact just like you do with banking or investing or Amazon on your phone, you're going to be able to do the same thing. You can do the same thing through the apps that we provide. So what our service does is for the grain elevator, we provide each of them with a custom-branded mobile app that then they make available to their farmers. That app that farmer uses connects to the desktop with a merchandiser where they can transact and communicate instantly. And there's other pieces, I mentioned accounting that's tied in and e-sign that’s tied in. And then, back to the exchange, our same platform is tied into the exchange so the merchandiser could instantly hedge that cash transaction, that physical transaction that they've made with the farmer, reducing risk, reducing paperwork and hopefully leading to better decisions and more profitability for everyone involved.

Kermit Nash: I have to be careful with one of my litigation colleagues on with me, but it seems like you're also mitigating a lot of risk. This business for years has been fraught with risk, from one end to the other end of the supply chain. Want to take a minute and talk about that? Because I think sometimes in life, we don't want to think about risk. We don't want to think about those risks that may end up in a court somewhere, or just even the commodity risk, but you're solving some of those problems. Give us a couple examples.

Mark Haraburda: Yeah. Great question. You look back 15 years ago or so when we started this business, manually entering the bids and the prices that you're posting as an elevator to buy grain for that was subject to a keyboard error or a mistake. Our first solution to that was provide the ability to upload from a spreadsheet so you don't have to manually enter those twice. Or if you're using a different system, we provided synchronization capabilities so we cut out that manual step. And then it went for efficient things – if you want to update your basis across all your locations that you're buying grain at, you could do that with an update in one field rather than having to go through 20 or 30 different locations. And then if you add every delivery point, you might be dealing with 100, 200, 300 different prices. So those sorts of efficient tools are fairly obvious. If you move forward to what we have today with things like auto hedge, like I just mentioned, you could instantly hedge the physical transaction you're making with the farmer with CME group on an exchange as it relates to a futures contract, and then that data, that transaction could be pushed into the accounting system. So again, there's no risk there of entering an error. Then there's other things such as real-time alerts, real-time monitoring, monitoring the offers that farmers may have sitting with the elevator that may not have matched yet with the prices on the exchange. Our tools allow you to monitor those in real time. And if the merchandisers are away from their desk we can alert them with an email, a text message, an app alert that there's a business to be done.

Casey Grabenstein: Mark, it's amazing to hear about what the company's doing, and I'm really interested in your thoughts on what's coming in the future is really insightful. I'm wondering if you could take us back in time a little bit and talk about how the company got started in this area and sort of what things were like then, and tell us a little bit about the company story.

Mark Haraburda: Well, Barchart is, I like to think we're pretty unique. We started in the 90s as a start-up and we wanted to bring data online to the internet and that started with the heavy focus in commodities and that focus continues today. But, we're in other commodity markets, not just ag. We're in metals, we're in energy, we do things in weather, and then, like I mentioned earlier, we have a retail presence when it comes to the stock market, options trading, currencies, and crypto that a retail audience uses. We serve anywhere from two to four million users a month that come to to look at our quotes and our charts. That has really helped us grow our B2B business, because what happened early on is we had companies, exchanges, brokerage firms, banks, grain elevators come to us and say, “hey, you know, we want to put those corn quotes on our websites” and that evolved to, “hey, I need it a real-time feed to feed my accounting systems so I can market positions quicker, or I could run settlement processes. So our website, our retail presence has really driven what the solutions and the demand for the solutions that we brought to the B2B marketplace. And, over time we've maintained, we're a privately owned company, and we've maintained that and we've been able to grow. We don't have outside investors or private equity in our firm, and that's been a model that you don't find very often today. And, it's been very successful for us.

Kermit Nash: Being mindful of the holidays and one of the great all-time Christmas classics, “Trading Places” with orange juice futures either running Duke & Duke out of business or actually making them more profitable, I'm not sure which it is, but Mark, I appreciate so much you taking some time with us today and the insights you've provided. Just to make sure you're taking us out appropriately, how do listeners find you online? If it's just a keyword search, what's the best way to find you.

Mark Haraburda: That's a good question. So, the funny thing is a lot of people call us Barcharts with an “s” and I don't know, it might just roll off the tongue easier that way, but we are Barchart, singular – and that's where you'll find our retail website. If you search “Barchart commodities” or “Barchart solutions,” we've got two other faces to our company that are focused on our B2B solutions, both to the financial space, as well as to the commodity space that you can easily find.

Kermit Nash: Excellent. Mark, thank you so much for your insights. Casey, thanks for joining me today as well. As always, you learn a lot when you tune into “Don't Miss a Beet.” Everyone listening, thank you for your time. Please be sure to join us next time on “Don't Miss a Beet.”

Mark Haraburda: Thank you, guys.