Can blockchains deliver value to farmers?03/12/2019 | Soybean News
By Joseph L. Murphy, ISA senior communications manager
More and more, blockchain is becoming a buzzword. Years ago it was associated with the instability of bitcoin and other cryptocurrencies. Today farmers and agribusinesses are realizing it could be the business tool for the future.
According to experts speaking at an educational session at Commodity Classic in Orlando, Florida, the biggest obstacle for agriculture's entry into the blockchain is leaving the pencil and paper behind.
"Agriculture is one of the least digitized sectors," Mark Pryor, chairman and CEO of The Seam, told the crowd. "That presents a real challenge. We also have data silos that benefit only one company." But Pryor said that every once in a while a technology comes along that revolutionizes the system. He believes blockchains are that technology.
Simply put, a blockchain is an openly distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way.
"A blockchain provides the single version of the truth between multiple competing parties in the supply chain," Pryor said.
A blockchain has multiple characteristics. They are rules-based, distributed in real-time, permissioned and can’t be changed.
“Participants have the ability to interact with each other with full trust that the agreement will execute on time and as agreed upon no matter if you know the person or have ever done business with them, Luis Macias, CEO of Grainchain said. “They could be located in Africa, China, Morocco or anywhere in the globe.”
But before massive adoption can take place, some hurdles have to be overcome. Pryor illustrated that among individuals and companies, the basic terminology of farming could be different. As an example, in the shipping industry one company may call a ship a vessel. Another company may call it a boat or a conveyance and on and on.
"We are starting to see ADM, Bungee, Cargill and Dreyfus form a partnership that investigates standardizing and digitizing global agriculture transactions," Pryor said. "They have recognized they aren't speaking the same language."
For blockchains to work, the terminology has to be defined and agreed upon by all parties involved. Pryor said it is leading to "coopetition" or collaboration between business competitors for mutual and beneficial results.
What does all this mean for individual farming operations? It improves accuracy, transparency, efficiency and trust. Those factors can help farmers navigate and negotiate the narrow margins that exist in farming today, according to the panelists.
"With razor-thin margins, we need to figure out how to enhance our marketing opportunities," Macias said. "How do we market our products the way we deserve and use the empowerment of data to make more money?"
To do that, Marcias started Grainchain, a company built from the blockchain platform utilizing suites of software products designed to increase efficiencies for farmers.
"We are providing the technology to level the playing field for the small-to medium-size farmer to be able to compete at the levels that ADM, Bungee, Cargill and others do," he said.
Macias said Grainchain provides the farmer two distinct advantages: It gives them the ability to market grain so they can negotiate a better price, and it creates a system that allows them to trust others from around the world with their paid contracts. The person buying farmers’ grain will know precisely where it came from, how it was put together and the path it took to get to them.
"We've developed a system that will pay you instantly when you drop your grain off," Macias said.
He told the group that with complete trust in the blockchain, farmers will be more open to accepting contracts outside of their normal trading areas that may offer better premiums.
"Once you get used to that, you can venture out into markets that you never would've have considered before," Macias said. "This technology ensures the funds are there when you drop off your grain, directly to your bank account without the fear of the other party backing out of the contract."
Blockchains are only as good as the information entered, according to experts. Macias said individual entry of data needs to be removed. Systems are already in place to grade and measure grain. That data will be added to the blockchain for each transaction.
"The combination of our systems creates an environment where nearly 99 percent of data is entered by systems and not people," he said.
He told the group that the final piece of their software suite manages the trucks going to farmers’ fields, tracking where they went and what they picked up. This provides an authentic dataset that genuinely shows where it came from. That data is used to pay the truck driver for the route taken and the cost of maintaining the fleet of trucks used to transport the products.
"At the end of the day we have an infrastructure that changes the way we are doing business," he said. "We've got customers right now that are going from the field all the way to the end producers. So when that tortilla chip goes in your mouth, you can authentically know where it came from."
According to Grainchain's website, they have already logged 84,410 transactions with more than 5,264,205,815 pounds of commodities processed.
In the future, blockchains will also have implications in food safety traceability, identity preservation, certification of sustainability practices and more.
Contact Joseph L. Murphy at email@example.com.
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