ISSUES WHICH CAN BE SOLVED WITH BLOCKCHAIN TECHNOLOGY
While agriculture is the most significant sector in rural areas and provides a livelihood for 70 per cent of the world’s poor, it is also the industry that provides the biggest disconnect between supplier and retailer. Using Blockchain, however, a more direct link can be established, ensuring that farmers receive fair payment for their produce and enabling retailers to verify that they are getting what they’ve paid for.
Produce Tracking Issues
One of the greatest problems facing multi-national companies who rely on agriculture is tracking down and paying for produce. While this process would previously have been reliant on the involvement of a regionally-based third party, using Blockchain, commodity buyers are able to deal with their supplier directly and transfer payment via mobile. Naturally, this saves the company money in agents’ fees and also ensures that the farm supplier receives a fairer share of the profits.
Tracing Origin of Products
By establishing a Blockchain-driven ecosystem for the registration, payment, and transport of crops or other agricultural produce, buyers can also verify that the product they are receiving is exactly what they paid for. With every step of the transaction process recorded on the Blockchain, if a supplier claims that its coffee beans are ethically sourced from Colombia, for example, this can easily be confirmed by tracing the journey from farmer to coffee shop, alleviating concerns about misrepresentation.
Reducing Multinationals’ Influence
Blockchain can also be utilised to solve a number of existing problems in community-supported agriculture, including governance, distribution, and equity shares. Blockchain-supported systems such as FarmShare enable shares in harvested crops to be electronically distributed to members, creating self-sufficient local economies. This in turn generates greater involvement within the community, and ensures there are incentives for local agriculture to be run more effectively.
With crop prices fluctuating wildly based on demand, weather, and global production levels, Blockchain can provide an easy solution for both buyers and suppliers seeking to negotiate a fair price for their product. By providing both parties with access to information on similar transactions, as well as on the current stock price of goods, even suppliers in rural areas are able to determine what their harvest is currently worth and sell it to distributors at a price that reflects global market conditions.
The agricultural industry could see increased global exchange of produce through the exchange of digital products and currency. This could affect everyone from rural farmers selling to consumers across the globe, to large nations accurately tracking their aid relief. This could lead to fairer distribution of goods and currency amongst some of the poorest regions of the world, as well as increase community-based agricultural models on a global scale.
- Community Agriculture
- Accountable Relief Distribution
- Rural Farmer Financing
- Remittances to Rural Areas
Community supported agriculture is an alternative economic model for the production and distribution of locally grown food. in which a community of shareholders funds the operation of a local farm at the beginning of the growing season in exchange for weekly deliveries of fresh produce and other food products (such as eggs, dairy, meats, etc). Although Farmshare has made a start with using Blockchain technology to create CSAs, there’s still huge potential for farming communities around the world to adopt this model of finance and distribution.
Accountable Relief Distribution
The average food and agriculture supply chain represents a loosely-coupled large-scale network with a minimal degrees of communication and trust between individuals. It involves hundreds of actors, thousands of processes, millions of products, and (potentially) billions of data points. But this data-hungry industry that has historically not been very well served. Regulatory pressure, food crises, and scandals are major drivers for greater data integration. Meanwhile, a recently-published report from the WHO’s International Agency for Research on Cancer that placed processed meats in the same category as asbestos and tobacco will certainly feed the need for greater supply chain transparency, and thus the need for data integration. Current solutions to deal with these issues are mainly focused on regulation and certiﬁcation. Today’s technologies are having a hard time responding adequately and cost-effectively. The costs involved are crucial, because the margins in the food system are very tight. Blockchain technology removes the need to formally identify both parties to the transaction, achieving major cost savings – Wilco Schoonderbeek – Linkedin Pulse
Rural Farmer Financing
Agriculture is the most significant sector in rural areas and provides a livelihood for 70 per cent of the worlds poor. What’s now, there are 500 million smallholder farming families that grow and harvest more than 70 per cent of the world’s food. A persistent issue for agricultural finance has been how to cost-effectively and securely provide financing to rural smallholder farmers in such manner that fraud is minimised while accountability and transparency is promoted. Recent and forth coming research by the Technical Centre for Agriculture and Rural Cooperation (CTA) reveals that cell phone-based crop payments by large multinational, regional, and local commodity buyers (e.g., Hershey, Starbucks, etc.) to farmers can create a mobile money ecosystem of cashin/cash out agents that can subsequently be leveraged as a distribution channel for the provision of targeted credit, savings, and microinsurance products to farmers. Mobile money is simple, convenient, affordable, and is disruptively innovative for agriculture finance – Lee Babcock – Digital Curreny Council
Remittances to Rural Areas
Diaspora remittances into agricultural areas in developing countries amount to four times the global overseas development funding for agriculture provided by donor countries. This has occurred in spite of the expensive fee constructs and inconvenience of traditional money transfer organisations. Integrating international Blockchain remittance payments into this next generation of mobile money – into rural areas – will further enhance the economic value proposition for rural rollouts of mobile money, enhance the efficiency of the entire commercial agricultural process, likely increase the volume of international remittances, and expand the target market of BitPesa, Rebit and similar startups as well as furthering mainstream the use of the decentralized blockchain payments system. – Lee Babcock – Digital Curreny Council
CASE STUDIES ON THE USE OF BLOCKCHAIN FOR THE AGRICULTURAL SECTOR
What aspects of Blockchain technology could the agriculture community adopt?
It is essential for smallholdings and agricultural concerns to be able to keep track of their transactions and contractual obligations with buyers, suppliers and other stakeholders in order to maintain accountability. This minimises fraud, maximises transparency, and ensures that each link in the supply chain is satisfied. The connection between commodity buyers (such as Starbucks and Coca Cola) and farmers can now be monitored more closely, and distribution channels streamlined yet further.
Firms operating within the agricultural sector often have extensive contractual obligations to a multitude of stakeholders, and many FinTech innovations – notably the Blockchain – can have a beneficial impact on contracting, particularly in areas such as hedging contract and pre-sales of harvests.
One of the most obvious uses for Blockchain is in data monitoring. Now, farmers have an opportunity to capture data in real-time that will help them plan their spaces more effectively and maximise the success rate of their harvests. For instance, wireless sensors can be integrated into fields to monitor crop growth, harvesting, and subsequent yield, with all of the data recorded onto the Blockchain. Over time, this information will become an invaluable resource to the farmer.
Minimising Human Error
There are a multitude of ways in which Blockchain can take tasks away from the workforce and automate them in order to minimise errors. It is often an individual mistake that causes physical and financial losses in the agricultural sector, and so adopting technological innovations can minimise the amount of resource that is wasted or misused. Also, Blockchain can present information to farmers regarding tainted products throughout their supply chain: what types of crop are they; where were they grown? By drilling down into this data set, the farmer can then minimise future losses.