Electronic Marketing of Agricultural Commodities

An Evolutionary Trend Gao ID: RCED-84-97 March 8, 1984

In response to a congressional request, GAO reported on the efforts of the Department of Agriculture (USDA) to develop electronic marketing for agricultural commodities, the benefits and problems of electronic marketing, and the status of electronic marketing in agriculture.

USDA is monitoring the use of electronic systems in marketing livestock, providing educational activities to persons interested in learning about electronic marketing systems, and funding pilot projects to demonstrate the feasibility of computerized electronic marketing. Overall, the projects demonstrated that agricultural commodities can be traded electronically and that electronic marketing is a feasible alternative to current marketing systems. However, the studies showed that, to be successful and economically viable, trading volume must be sufficient to cover the fixed and operating costs of an electronic market as well as to attract and keep traders in the system. The projects showed that electronic marketing improved market information, increased marketing efficiency, increased competition, and increased access to the market for both buyers and sellers. In addition, transportation costs are lower because an electronic market eliminates the need for central assembly of products prior to sale. Some of the problems associated with electronic marketing include concerns that: products cannot be adequately described, personal interchange will be lost, buyers and sellers will not perform according to the terms stipulated in the trade, and that electronic marketing is not cost-effective. In addition, some potential users are unwilling to participate or see no advantage in participating.

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