4 big tech companies are making billions in profit while farming, and other businesses barely scratch the surface. What do they do differently?
I watched these days on the internet the investigation of the 4 big tech companies: Apple, Amazon, Facebook, and Google by US congress. These companies were accused of overusing their power over smaller companies at the edge of morality and legality to maximize their profits. I saw the type of methods these companies used to grow so big in quite a short amount of time. I could not believe it. I wanted to share my insights regarding these practices and how they might be used against your farm.
US Congress investigation
I want to confess that I’m a big fan of technology, so I was curious about this investigation. I love tech so much that I even have a bachelor’s degree in automatics. I know that technology can bring value to your farm as it brought to mine. My farm was described as a “high tech farm” even more than ten years ago. During that time, my farm had equipment connected to the internet, and I could control them online as it is popular nowadays.
Watching the congress investigation on the 4 big tech companies, I found some tactics they used to gain even more power. While the IT industry is very different from farming, I found some similarities with my work experience on the farm. I will explain these straight away. And I’m sure you will be able to identify similarities for you too!
4 big tech companies practices
From the US Congress investigation, I found out that the 4 big tech companies use different tactics to collect data about other small competitors. For instance, one of Apple’s tactics to launch new products is to look at how third-party apps perform on the Apple Store platform. This data is confidential and accessible only to the third company (the company that sells the product). However, that was not an impediment for the Apple employees to access this confidential data, analyze it, and launch competitive products while excluding the third-party application from the Apple Store (watch it).
How the 4 big tech companies collect data
I saw that the 4 tech companies were collecting data from their customers and suppliers. Amazon created a system that can do an in-depth analysis of one third-party sellers on the Amazon platform. Amazon knows the number of items a particular company sold on the platform. Those analyses can predict the cost structure (how much money the company spent on advertising and to produce each item), and therefore how much profit the company made from that particular product.
And depending on the size of the niche market for that particular product, Amazon managers decide if that market is interesting enough for them. If it’s attractive, they create similar products and sell them with Amazon’s brand at a lower price. The third-party company can not afford to sell it at that price because it is below its profit margin (watch it).
So Amazon uses data collected about very profitable third companies to create and promote their new products. In this way, Amazon is growing and making billions of dollars in profit while killing small businesses, as shown by the US Congress investigation.
Who are the multinational companies who control the farming / agribusiness sector
In farming, we collaborate with big multinational companies: to supply us with seeds, fertilizers, and pesticides, on one side, and cereals wholesale companies, on the other side.
Would it be possible that they are using similar strategies to keep farmers in survival mode while making huge profits?
In the next chart, you can see the profits of the multinational companies from the agribusiness sector are making. Note: I want to make just a short remark that 1000 on the left scale represents $1billion, and 4000 represents $4billion. Yes, you read it right!
Source: Sophia Murphy, David Burch, Jennifer Clapp: Cereals secrets. The World’s largest grain traders and global agriculture, Oxfam Research Reports, August 2012 (p.23)
Connection with farming
I remembered sales representatives used to ask at the start of every single season: what are my plans for that year and which areas I’m willing to plant with every single crop. That was a common practice, and it is maybe for you also. Moreover, they were taking notes with those data. And those kinds of questions were not just from one company; all salespeople were trained to ask those questions everywhere.
Farmers are generous
Because you are generous, you offer even more data about your farm business by sharing your total quantity forecast in the same way described earlier.
Knowledge from my MBA
From my MBA background, I can tell you that multinational companies have systems to aggregate data and interpret it in a way you can’t believe is possible. Like me, you know that many of the prices of farm inputs are not secret and are easily accessible to everyone who asks for an offer.
Farming game
Let’s suppose the next scenarios:
What if? Some companies know better than you what are the costs for cultivating one hectare/acre of land with corn, for instance.
What if? They know the price of seeds, diesel, pesticides, machinery, labor, etc.
What if? They have outstanding accountants who use sophisticated math modeling tools to predict with high accuracy of your income per hectare/acre.
What if? They have access to historical public data, and by using mathematical tools, they can make an accurate prognosis of the crop yield for the year.
What if? With this data, it is easy to predict in a short time what will be the amount of corn globally.
What if? From here, they can plan what will be the price for corn in that particular year so that farmers are kept in survival mode and a large part of the profit to be taken by them.
If all these are plausible, then it is simple to decide how much profit goes to farmers and how much goes to other agribusiness players. Therefore when they ask you these kinds of questions, please reflect a bit and ask yourself:
Why do they need this data? What for? And what do I benefit from sharing those data?
Farming data is valuable information
Your data is valuable information. Please don’t share it for free. You can see this from the US congress investigation. With more of us who don’t share that information, it will be more difficult for those companies to make accurate prognoses, which means higher profits for the farms. Me at one point, I stopped sharing this crucial information with them. We can change things only when more of us do it!
Who is making a profit in the agribusiness sector?
Farmers, with small exceptions, are like a weak chain in the agribusiness sector in terms of profits. While on one side are suppliers, and on the other hand, customers are making billions in profits.
Do you still think there is a coincidence that big companies are doing huge profits and other farmers/companies are not? Why do you think all actors involved in agribusiness make significant profits while farmers struggle to survive and hope that the next year will be better?
Ask for help
If you want to exit this way of working on your farm, don’t hesitate to contact me. My knowledge, experience, and expertise are valuable to you.
I have a special gift for you. I have written an ebook about “How to prevent your tractor from burning like a torch”. And it is free. You can find it on my website.