Bulk fertilizer still prices the way it did a century ago: by phone, by handshake, with few people seeing the whole board. ClearCost, a Saskatchewan startup, says it will change that in January, when it relaunches a digital trading platform for physical fertilizer across North America.
“It trades in the dark. It’s an over the counter commodity. There is not a lot of information available,” CEO Keith Busch says.
SaskWorks Venture Fund led a Series A in the company, with participation from Motiv Ventures, according to a company announcement. The round size was not disclosed.
A market built on phone calls gets a screen
The upcoming version of ClearCost is a rebuild. Busch says the minimally viable product first launched in Canada was limited in geography, logistics connections and payments.
“Our existing product was a great distance from where it needed to be to service the market,” he says.
Feedback from farms, retailers, traders and manufacturers drove the redesign.
The customer is anyone writing a check for bulk
Busch defines the customer by the transaction.
“It’s anybody writing a check for physical delivery of bulk fertilizer, so it is primarily farms,” he says. “They write the majority of the checks in terms of the quantity. We don’t care who’s on the other end of the trade, as long as they can receive a large quantity of fertilizer.”
The product is built for volume: trainloads, barge loads and truckloads moving between ports, river terminals, manufacturing sites and rail transloads, not bagged product.
Others in the chain use it too. Busch says independent retailers and cooperatives want “better access to upstream supply and better ability to aggregate that movement downstream” to groups of farmers “so they can pass on bulk savings.”
He says manufacturers entering the market see a sales channel without a field force.
“What am I gonna do? Hire 300 people and drive them around in trucks?” Busch says they ask. “That’s an expensive proposition with a low conversion rate.”
With signs from multiple stakeholders in the supply chain, Busch says there is demand for an open physical delivery market.
“Give people the ability to move whatever quantities in whatever spaces, and just put the infrastructure in place to make it possible, and de-risk the counterparty activity, because they don’t know each other,” he says.
Prices farmers can strike, not just read
Busch says three problems compound: thin information, concentrated pricing and a long supply chain. The data that exists traces to phone calls, he says.
“It’s qualitative information gathered on a large enough scale to feel quantitative, but it’s not.”
Derivatives do not fill the gap.
“There’s so much basis between a New Orleans ton and an Iowa ton that it’s not really an accurate hedge,” he says.
He argues price is not set by supply and demand alone.
“The supply chain for fertilizer is controlled by a few companies, so it’s priced by a few very large players,” Busch says. “You put those three things together, and you have a very inefficient market.”
ClearCost’s answer is an open market. Busch says the tools for a single trade, including trust settlement, traceable freight and standardized contracting, are free. Market depth, meaning what has moved historically and where, sits behind an annual premium subscription.
The centerpiece is a set of state-level price indices, which Busch says will break down to the county level. They will be delivered duty paid, or DDP, the price a farm pays with all costs in, for spot and forward trades in the major NPK products.
He wants them actionable.
“I actually want those prices to be strikable,” Busch says. “Not just look at it like a New Orleans price and go, well, that’s great, but someone’s quoting me $80 a ton different here.”
Money is held until product moves
Payment is the risk control. Busch says sellers are not paid until delivery.
“They’re not getting paid unless they’re fulfilling the contract and moving the asset,” he says.
He says ClearCost is regulated in Canada as a payment service provider by the Bank of Canada and FINTRAC, and holds funds in trust at Royal Bank of Canada in an account with 100 percent deposit insurance. For the U.S., he says, the company is working with one of the five largest banks under a for-benefit-of structure, which avoids state-by-state licensing.
The company has built a logistics network of ports, barge companies, railroads and truckers, each carrying its own insurance.
Revenue has two sources, he says: the annual subscription and a revenue share with the banks that supply the payment technology.
“You need alignment, not extraction, to develop for this industry,” Busch says. “Our revenue comes from removing inefficiencies and sharing in the gap or the wealth that gets conserved in that process.”
What to expect: physical trades first, hedging later
“In this version in January, it’s cash for physical delivery,” Busch says. Hedging is product still in development.
He says that once the indices are published with a disclosed methodology, they could become “the source of truth in every state.” ClearCost would then partner or take the regulatory path to run an exchange, letting “any businesses that deal in physical fertilizer” lock in price. Cash settlement is “the next kind of complicated regulatory hurdle,” he says. Lending could follow. He says he has meetings this week with three companies about direct financing for farms “at competitive rates.”
Price information is the friction, Busch says.
“That’s the most sensitive part of everybody’s business.” As such, he expects pushback as ClearCost shows more. “I think there’ll be some retaliation when we do that,” he says.
But he’s also gotten feedback that is outwardly positive. In the U.S., he says, a Midwest governor asked him about three weeks ago “how fast can you put this in my state, and what do you need to get it here?” He did not name the governor or state.
Three things will show whether the platform delivers: whether the published indices become the prices farms and retailers cite, whether the blanket cargo coverage comes together, and whether cash-settlement approval comes through.
