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Blockchain could solve agricultural issues

Published on 30th May 2018

Blockchain is what makes crypto-currency possible, and it may be very valuable in the agriculture world as it gets more accepted around the world. Blockchain is a decentralized world of record keeping, and that has great implications for farming, maybe even more than other industries. Blockchain allows complete transparency in real time, meaning everyone involved in the transaction can see every move that has been made and can see any move that is made in "real time" or at the time the move has been made.

Blockchain is a series of blocks of information, all chained together with computer systems. The person making the sale has one record, the person making the purchase has a record, as well as anyone involved in the process. Each record is kept - and constantly updated - in each computer or each block in the chain. It is immediate because there is not a central place - like a bank - that has control over the information.  There is still only one record, but that record is kept in each block of the chain with timestamps to prove when the record was made. Access is limited to those allowed in by anyone with a block in the chain, thus limiting exposure to hacking.

The primary ways blockchain will impact farming include:

  • Transparency

  • Food safety

  • Traceability

  • Costs

  • New markets

Transparency and security

The transparency makes it hard to commit fraud, and it is harder for there to be any confusion about the transaction. This gets interesting when it comes the commodities of agriculture. You could possibly be able to see what has happened to the commodity at every step of the operation, even before it was sold on the market. You could track the type of seed used, the types of fertilizer or pesticide used and so forth. In the case of meat, you could track what the animals were fed.

In many businesses, this would help with record keeping, but its implications for ag type businesses goes even further. Time is crucial when it comes to the commodities of farming. Imagine transporting grapes from South Africa to Holland, or peppers from Peru to New York City.  Blockchain allows much faster transactions and much faster and easier movement of goods, which obviously would shorten the time it takes to get from the farm to the kitchen table. 

A blockchain transaction

There is one example of this having been done. An American company - Louis Dreyfus Co. - sold 60,000 tons of Soybeans to the government of China. As you might imagine there is a lot of paperwork involved in such a transaction. Contracts have to be sent back and forth, paperwork and documentation have to be sent to various officials, and that has to all be translated into English and Chinese. 

This type of ag transaction - even before the soybeans are shipped - can take at least two weeks. If there is any kind of problem, even a typo, the whole thing can be set back for days. With Blockchain it took less than a week. Another great thing is that if there is a typo or some small problem, it can be fixed in real time almost immediately. Instead of several day delays because of having to fax papers back and forth, the problem is fixed with one keystroke which updates records in all the blocks off the chain.   There is also a record of the change, increasing transparency even more.

In the case of soybeans going to China, with blockchain everyone involved in can monitor temperature during shipment, as well as when it is delivered and where it was every step of the way. Someone in China could even look up what kind of pesticides were used on those soybeans.

Reduced time

The speed of blockchain in ag operations will help the food most faster and that will have a tremendous impact. As much as a third of food supplies go bad before it gets to market, and especially in developing countries, often as much as half of the crops simply disappear because of bad record keeping.

There are startups that are creating apps that farmers can use while growing their crops. This would give the farmers better and more up to date information about pricing and help them keep a larger share of the profits from their produce. It would help cut back on graft and corruption and would make lying easy to prove.

Record keeping

Currently, record keeping is centralized, and computers helped make it that way. All the records go to a central bank, and no one has to share information with anyone else. People can even use the information against each other, or gain an advantage by withholding information.  With blockchain there will be decentralization. Everyone involved, or every block in the chain, will have the same information everyone else has.

It can be a double-edged sword, however, especially for those that might stretch the truth. When companies make claims like "grass-fed beef," or "free-range chickens," customers want to know this is the actually the case. Currently, there are some records, but at times there is no way to prove the reality either way. You can't really prove a pound of chicken in your grocery store came from a free range chicken. With blockchain, you might be able to have proof. This would help weed out the unscrupulous and give even more validity to those farmers acting in good faith.

Customers are demanding more transparency in addition to wanting things like grass-fed beef, as opposed to beef from cows raised and slaughtered from feedlots. So it will not be enough to just make the claims in advertising campaigns anymore. Blockchain will allow you to have proof that your claims are true, and customers will also have proof, making them feel better about the product.

Assurance of safety

The website SuccessfulFramer.com says China is doing more than the United States because there has been more concern over food safety in that country over the years. They want to be able to assure citizens that the beef, pork or eggs, and milk, are indeed safe to eat.

The same website notes that in the United States farmers do a good job at keeping records of what they do. The dealers who buy and sell livestock do the same. The meat packing facilities also do a good job of keeping records. The traders dealing in ag commodities do the same.   It breaks down between each of those steps - or there is a gap because the information is not passed along. With blockchain there would be no gaps between the farmer and the meatpacking plant.

The same is true for any kind of produce.  A study conducted by Wageningen University in The Haag, Netherlands, went into great detail studying importing grapes from South Africa to the Netherlands.

The record keeping begins at the farming stage, or even the seed-making stage for the grapes to be grown. There would have to be some sort of auditor and certificate authority to make sure the farmer did what he or she said they did. The farmer would certify his product, and the auditor would certify that the certification is correct.

Opening new worlds

In their outlining of the steps, the Wageningen study said the farmer would create the certificates with the grapes, and the certification authority would approve this. An auditor would make sure it was as reported. All of this would be inputted into the system. The trader and shipper would do the same, certifying conditions the grapes were in, weather and so forth along the way. The supermarket would then put in its information as well. Everyone in the chain would have access to all the information throughout the process. 

In the blockchain each person involved in the ag commodity production process would have access to the chain. That is also part of the beauty of the system. Members can decide who to give access and ability to input information.  This makes hacking also very hard. Each time any piece of information is altered, it is noted - when and where - in every other part of the chain as well.

This makes fraud almost impossible, speeds up the process, and provides assurance to the end user. While it may impose some accountability on the farmer and every other step, it also provides proof that claims made are true.

Blockchain appears ready to pounce on the agriculture world. Customers want transparency, and the ag commodities business can benefit by being able to prove the background of its products. In the past there has been an issue of trust that has to be developed. There is even trust that a person can deliver the amount of produce the contract calls for, in addition to matters like trusting the quality and background of the product.

Lowering costs

Blockchain can take the uncertainty out of agriculture commodities. While trust is a good thing, with this technology you will have absolute proof. Often a broker is utilized, who takes some of the uncertainty out of the picture and takes care of the trust issues. of course, this person gets his or her cut too, which increases prices. Obviously eliminating this step, which blockchain would do with ag commodities, would eliminate at least one step of cost. In big transactions, or halfway around the world transactions, there could be several brokers or steps that involve taking a piece of the profit away. With all of the information of every step readily available to everyone involved, there would be no guesswork or uncertainty and there would be no need for a broker.

This could also have far-reaching effects in developing countries, or even in remote areas of the United States. A small farmer in Appalachia, or the plains of Africa, could have a seat at the table when it comes to agriculture because the farmer would have the same information everyone else has. 

As the agriculture world embraces blockchain, it will save time and money for the traders as well as the grocery store. This could increase their profits while increasing the profits to the farmer as well, which would be good for everyone.