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Blockchain Technology Will Improve Farmers’ Ability to Market and Sell Crops
Whether your crop is headed for human consumption or slated for animal feed, the journey it takes once that commodity leaves your farm is an imperfect and complex one. It’s also a trek consumers like Kristen Adams are interested in.
“It’s impossible to tell how food is grown, processed, and distributed before it reaches the point of sale where I casually put it in my shopping cart,” says the Wisconsin mother of two. “I want to know where that food comes from. I want to know how it is produced. I want more information on the ingredients.”
A recent survey by Trace One found that while 91% of consumers think it is important to know where their food comes from, only 12% wholeheartedly trust the safety of the food they consume, and only 10% trust the quality.
“It seems like there is a story every week about recalls and serious illnesses or even deaths from contaminated food. Some of those recalls are from well-known brands I trust. It is scary,” says Adams. “Unless we strap a GoPro on our food, we do not know its real journey. Food biographies would be a comforting wave of the future.”
Blockchain affords the myriad stakeholders along the supply chain the opportunity to chronicle that back story.
“Everyone must be accountable for what they are delivering,” says CoBank’s Tanner Ehmke. “Blockchain is going to help create transparency across our growing global food network. For consumers, this technology adds another level of trust in the products they are buying, and they are willing to pay a premium for it.”
A digital passport
To validate and test the viability of blockchain in creating a digital passport for products, Canadian start-up Grain Discovery is undertaking several pilots with multiple supply chain partisans. One of those projects will track the path of soybeans as they are transformed into tofu.
“Everyone in that journey – from the seed company all the way to the supermarket – will be digitally recorded,” explains Rory O’Sullivan, Grain Discovery founder and CEO.
As those soybeans move through the supply chain, each participant records the transaction in a decentralized online ledger. This creates an audit trail – in real time – through linked blocks that are immutable.
Once the tofu package reaches the supermarket, it will include a QR code Adams can scan using an app on her smartphone to view a complete biography.
Since that product now has its whole lifespan attached to it, tracking an issue back to the source, experts say, can be done in minutes rather than the days, and sometimes weeks, it takes existing tracking systems.
“With recall time significantly shortened, risk of further incidences of food poisoning among consumers would be greatly reduced,” says Ehmke.
Creating a premium product, adds O’Sullivan, means farmers can extract a premium price. “If we can prove tofu’s provenance and quality, it will resonate with both the domestic market as well as those value-add importing countries,” he says. “Let’s decommoditize agriculture.”
Not only is Grain Discovery trying to bring clarity to an opaque supply chain, it’s also working to move grain marketing into the digital age.
“While agriculture may be in the midst of a technological revolution, one thing has not changed – the way grain is bought and sold,” says O’Sullivan. “Farmers work as individuals and lack bargaining power, which undermines their ability to get a fair price for their product. They have been price takers for far too long.”
Utilizing blockchain, the company’s online commodity exchange connects farmers and buyers to a larger pool of customers locally, regionally, and globally. Both can view prior trade history, view what local cash prices are doing, as well as analyze the depth behind the bid and offer. This unique intelligence enables users to set a target price with confidence.
“Once a trade has been confirmed, self-executing smart contracts on the blockchain ensure instantaneous settlement, payment, provenance, and most importantly, the security of the transaction,” O’Sullivan explains.
the disappearing middle man
Since the technology does the heavy lifting of uniting seller and buyer, it is also going to reinvent transactions that now require a middle man.
“We’re leveling the playing field by lowering the divide between the money that is paid to a farmer and what is actually paid for the individual commodities,” says Luis Macias, CEO and founder of GrainChain, a blockchain-based contract for farmers and grain buyers that instantly transfers ownership of grain.
The Texas start-up officially launched its platform this past September with more than 500 farmers.
“This technology empowers farmers to get a bigger piece of the pie and has the potential to completely revolutionize the way things are being done today,” he says.
As it becomes more favorable to deal directly with farmers to preserve that farm-level traceability, Ehmke believes it could also encourage the expansion of on-farm storage.
“I’m not saying we’re going to get rid of the middle man completely,” he explains, “but for farmers who have their own storage, there’s going to be increased opportunity to partner with others directly in the supply chain, and that creates value for the consumer.”
exploring the possibilities
In the top soybean-producing state in the country four of the last five years, the implications of blockchain at the farm level have caught the attention of the Illinois Soybean Association (ISA).
“We want to help our farmers understand exactly what the possibilities are with blockchain and how they can play a part in that,” says Jayma Appleby, director of industry relations, Illinois Soybean Association. “What I do know is that the closer to the seed, the benefit and motivation is efficiency. The closer to the plate, the benefit and motivation is transparency.”
With 40% of its whole soybeans crushed in-state for animal feed and 60% exported, the benefits of blockchain for Illinois farmers, she believes, are going to center around efficiencies within their existing systems.
For example, Appleby says precision farming tools and data captured on a farmer’s operation could be leveraged to mitigate risk with financial institutions and crop insurance. The technology could also help enable transparency in input pricing, command premiums for certain products, and have implications in the process of titling land.
To better understand the landscape of what’s happening, ISA is not only tapping into experts like Macias but also is asking its board members to develop a task force.
“What it comes down to is the return on investment,” she says. “What can they apply on their farm and how much benefit is there?”
As with any new technology, there’s an opportunity for education at all levels, especially as more players enter this area. “Farming is a lot about relationships,” says Appleby. “Farmers have to be comfortable with who they’re working with and trust what they’re being told before navigating it on their own. They have to understand what the value chain enables them to do within it.”
change takes time
Reshaping the framework for a decades-old system is no small feat. It will take time – and proof of blockchain’s abilities – to get agriculture’s many stakeholders on board.
“Most platforms today address a limited number of users due to limited system throughput,” says Yong Guan, an Iowa State University professor. “Blockchain must prove it can be scaled to a wider audience. It must also offer the same advantages to farmers and businesses whether they are large or small.”
We must also understand that, by design, blockchain drives a number of other technologies. “Different solutions will need to be paired to it, which will be challenging. It will take a lot of open minds to absorb this technology,” says Macias.
“Today, blockchain is in its infancy in agriculture,” says Ehmke. “It’s at the macro level right now with a number of the major grain-trading companies and banks using it. As time goes on, blockchain will filter down to the rest of the supply chain and to farmers willing to participate.”
The main limiting factor, he believes, is the stakeholder’s willingness and ability to adopt the technology. “It’s going to be a gradual evolution and will likely take 10 years before we see widespread adoption,” says Ehmke.