Back in the days of the dot-com boom, it seemed as though online auction models and trading platforms were tried for selling just about everything from hotel rooms to chicken with varying degrees of success. I found an article that I wrote for the December 2000 issue of WATT PoultryUSA that listed five web platforms for trading chicken and other commodity food products; all of the domain names listed in the article are for sale.
The Poultry Exchange will beta launch its online trading platform in May, and the company’s CEO, Janette Barnard, is convinced that spot market buyers and sellers of chicken are now ready to transact business online. Having lived through the heyday of online trading platforms, I was curious why Barnard and The Poultry Exchange’s investors think this time will be different.
WATT: What makes you think there is a demand for this type of online trading platform for spot market sales of chicken?
Barnard: This business was born out of conversations with buyers and sellers that are frustrated with the status quo and looking for a better way to do business in the spot market. Companies are telling us they are looking for ways to bring sophistication to their spot business decisions and processes. We’ve been talking to buyers and sellers for the last 9 months and continue to hear the same frustrations consistently, whether from buyers or sellers. There appears to be the underlying assumption that playing in the spot market is operationally inefficient -- it's time-consuming, regardless of which side of the table you are on. And depending on the market conditions, it can be financially disadvantageous, again for both sides.
There is a strong sense of distrust and frustration with the opaqueness and inefficiencies that make it difficult for buyers and sellers to find one another at the right time and/or to find the market clearing price. It’s not an easy nut to crack though; this is a nuanced industry with complex dynamics. Trust and relationships are currency. Capturing these nuances in order to design a product that is attractive to both sellers and buyers has been our driving force.
WATT: What is the fee for using the exchange and how will it be charged?
Barnard: Buyers will pay a monthly subscription fee to have access to listings in The Poultry Exchange. The buyer monthly subscription fee is $350 per user, or $300 per user for companies with two or more user accounts. To join as a seller/producer and list product in The Poultry Exchange, there is a monthly subscription fee and commission. On a per pound basis, The Poultry Exchange is highly competitive with alternative options.
WATT: Do you anticipate that all of the transactions will have both buyers and sellers in the U.S.?
Barnard: We are focusing on bringing domestic buyers to the table for the beta launch, but as The Poultry Exchange grows and there is more frozen product moved through the system, we expect more export-based transactions.
WATT: Traders and brokers have been used by the industry for years to help producers and buyers connect when unusual needs or surpluses arise. How will the exchange compete with these existing resources?
Barnard: I’ve heard several estimates that only 30-40 percent of the total spot market moves through traders. However, traders and brokers have always been, and will always be, an industry staple. Our goal is to bring efficiency and transparency to the market by providing a streamlined mechanism for sellers to reach more buyers, and buyers to find the right product, all while finding the currently elusive true market clearing price. This will generate real-time data to track spot market movement, giving market participants better information for decision making.
Barnard said that, while the beta launch will be in May 2016, she expects to open the platform to more users about 60 days later. One of the benefits she said that users will ultimately be able to glean from participating on The Poultry Exchange is real-time spot market data to track market movement based on actual trades.