CUSTOM AG SOLUTIONS, INC. — Department of Agriculture SBIR Phase II: 8.119999999999999

Description

In the U.S. small and mid-size operations (1-499 animals) account for 78% of the beef cattleindustry's $31.4B in annual sales. Unlike large producers who commonly develop and utilizecomprehensive marketing plans most small and mid-size producers lack the technicalsophistication and operating scale required to make effective use of available marketinginformation strategies and tools including forward contracts futures and options. In failing toutilize available marketing tools and strategies the small and mid-size producer segmentseffectively transfer over $4.3 billion in annual market value to more sophisticated upstreamindustry participants including auctions cattle buyers feedlots and packers.Under a USDA/SBIR Phase I award Custom Ag Solutions (CAS) developed a prototype cloud- based cattle marketing portal (CMP) designed to dramatically improve smaller producers'marketing capabilities and results. The portal enables producers to 1) track individual cattle lots2) access and analyze relevant and timely market information and 3) evaluate and implementimproved marketing alternatives that consider a combination of production practices marketingstrategies and risk management tools. The Phase I research confirmed that the CMP 1) hastremendous potential to improve market outcomes for small and mid-size cattle producers and2) is viewed by producers as functionally accessible and likely to improve marketing results.Within its proposed Phase II project CAS plans to obtain validate and integrate market datafrom DVAuction the nation's largest online livestock marketing service to enable the CMP tosupport a much wider range of producer sizes types and geographic regions. As availability ofCMP tools and analytical results is expanded CAS will test and analyze CMP outputs acrossproducer segments and then further expand the CMP's capabilities to improve producers'marketing results. Finally during Phase II CAS will use site usage metrics and user feedback tocreate a unique and enhanced user experience through continuous application improvements. ThePhase II effort will follow a detailed work plan centered around an iterative development cycleand designed to accommodate uncertainties in data inputs and dynamic user requirements.The Phase II proposal is responsive to the USDA/SBIR Small and Mid-Size Farms Topic (8.12)due to its focus on cattle producers with 1-499 animals which generate well under $500K inannual revenue. Further the project is aligned with USDA/SBIR Strategic Goal 4 (FacilitateRural Prosperity and Economic Development).Anticipated Results and Commercialization PotentialThe $31.4B beef cattle industry enjoys a stable though mature market which is unlikely tochange substantially over the next 20 years. Over 700000 small and mid-size producers accountfor 78% ($24.5B) of market sales with 146000 producers running 50-499 cows forming theaddressable market for the proposed cattle marketing portal (CMP). Annual revenues for theseproducers range from $35000 to $500000 to total over $18B in 2017. Within this addressablemarket an aggressive marketing and education campaign conducted primarily throughpartnerships with lenders and producer associations is projected to result in a market penetrationof 15% within five years. At 15% penetration the CMP will have over 20000 users managingaround $2.5B in revenues. If the proposed CMP improves marketing results by 10% these users'average annual revenues will increase by $250M ($4350 for a 50-cow operation up to $49800for a 500-cow operation). If annual CMP access fees average 2% of the annual revenueimprovement the proposed innovation will generate $5M in annual revenues.