Blockchain technology has gone far beyond its application in the financial sector. The disruptive technology, of late, has been flooding the newspapers and mainstream media for all the right reasons.
We have already seen its substantial impact in food traceability and supply chain management. Currently, as many industries are experimenting the vast inherent capabilities of the technology, the agricultural domain is also eyeing the integration of innovative technologies in its intricate supply chain. The premise on which blockchain technology is based, that is, recording of transactions in a decentralized log which is transparent and accessible to the involved parties can prove to provide essential advantages in the agricultural sector.
Ensuring food safety
Food adulteration and quality manipulation have been a constant occurrence in the agricultural sector. This increases consumer demand to know the source of the foods they buy and blockchain technology can be used to align with these demands. Consumers can, with ease in accessibility, obtain information regarding the origin of their food. Food traceability, and establishing accountability becomes easier, and this simultaneously decreases occurrences of fraudulence.
There has been significant progress in this aspect, since it is in both farmer and producer interests. This is because of the instances along the way for farmers to get their profits eaten up by those higher up the supply chain or the retailer’s brand image being tarnished by counterfeits or duplicates. Hence, blockchain technology could be a win-win situation. In fact, the fast-moving consumer goods sector (FMCG) is already seeing many companies trying to get an edge over their peers.
Establishing source and transparency
Perhaps the most prominent use of blockchain technology in the agricultural sector lies in the fact that it could provide transparency in the supply chain. There exists a highly intricate flow of resources in the agricultural sector. With this, it becomes increasingly difficult to verify the accuracy and attest to the transfer of commodities or money from the farms to the fork.
What this essentially means is that the provision of information to the involved parties in the supply chain can be manipulated to align it with the interests of certain people. Farmers do not get access to basic information of things such as the volume of their products being sold and the amount they are sold at. This ambiguity could create a sense of vulnerability among them leaving them at the hands of parties involved higher in the supply chain.
Blockchain provides a solution to this problem. It can track the information relating to the supply chain with great accuracy, without it being prone to manipulation. This means that farmers and retailers will have access to data in relation to the products and can justify any excess charge levied on them. This ultimately leads to customer satisfaction as they gain information about the foods that they consume. In addition, this transparency facilitates the smooth conduction of transactions among farmer and buyers as it increases mutual confidence. All of this significantly removes the existence of unnecessary middlemen, food adulteration and manipulation.
Optimizing payment options
It is not an unknown fact that one of the major concerns pertaining to the agricultural sector is the authenticity of the financial transactions. Farmers have to wait for long periods of time to receive money from buyers. In addition, farmers have to previously know their buyers to have the element of trust between them — a pre-requisite for them to enter into business. The transaction cost is also significantly high and can sometimes prove to be a hindrance due to their risky nature.
The adoption of blockchain technology can address the aforementioned problems. Firstly, it would facilitate faster movement of funds while being transparent. This means that the farmers would not be left wondering about due payments. In fact, Ethereum-based smart contracts could be used to immediately conduct the transaction as soon as the action is complete. This reduces the need to individually analyze and assess the trustworthiness of their buyers, which previously served as a hindrance. As a result, time and money of the farmers is protected and the chances of fraud decrease.
In addition, governmental subsidies, although meant for the benefit of the farmer, do not necessarily reach them. The transparent nature of blockchain can help in making sure that the correct allocated amount reaches the right hands at the right time.
An agricultural revolution?
The inclusion of blockchain technology in the agricultural sector gives rise to a new scenario. Previously, those who could not conduct business due to trust or accountability issues, can now do so without any concerns. This will lead to the formation of many more chains of business between the farmer and their buyers. The expansion and scope of this market is unprecedented, and could possibly revolutionize the agricultural sector.
There are many startups that have worked towards integrating blockchain technology in the agricultural sector. Agri-ledger, stores transaction data and helps in tracing back to the origin. Agri-chain helps in conducting peer to peer transactions. California-based Ripe helps in assessing quality of food which creates transparency right along the supply chain. Crop insurance is also facilitated by blockchain technology with Worldcover using satellites to constantly monitor factors such as rainfall which affect the growth of crops, and triggers instantaneous payment. Provenance has vested its funds into food safety by giving consumers access to product origin and history. In July, Aon plc unveiled a blockchain-based platform for the provision of agricultural insurance policies for smallholder paddy field farmers in Sri Lanka.
This clearly establishes the fact that blockchain technology has already started to find its way in the agricultural and food sector. In May 2019, research by Gartner, Inc indicated the major shift of global grocers towards blockchain. The research claimed that 10% of the top global food conglomerates would adopt blockchain for food traceability by 2025. As reported in March 2019, French president Emmanuel Macron urged the EU to embrace the use of blockchain technology to exploit its benefits and enhance the agricultural industry.
Agriculture, coupled with blockchain technology, has a lot of scope for expansion and adoption thanks to the plethora of functions it brings along.
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