Blockchain for Agriculture: Improving Supply Chain Efficiency and Access to Finance for Smallholder Farmers
Editor’s note: This post is part of NextBillion’s series, “High Tech Buzzwords: Hype or Real Impact,” — one of several topic areas we’ll be covering through special series this year. Click here for more details on our 2018 series.
Blockchain technologies present an opportunity to transformationally improve the operations of agricultural supply chains, from farm to fork. Potential benefits abound for all supply chain actors, ranging from small-scale producers to middlemen (including processors, distributors and others) to end consumers. I come to this conclusion after analyzing 193 organizations using blockchain to drive social impact as part of a Stanford University study (more on that in a bit).
Within agricultural supply chains, blockchains play a couple of key roles. The first is in tracking and tracing the origin of food products. One application, for example, is in tracking the provenance of food that is certified as organic or fair trade to make sure that it was appropriately labeled, as well as to address incidents of contamination or food fraud. Food contamination and food fraud present serious health risks: the WHO estimates that 1 in 10 people fall ill every year from eating contaminated foods, resulting in 420,000 deaths annually.
In each of these applications, the blockchain replaces whatever supply chain tracking system or centralized record-keeping system that is already being used. In a blockchain-based system, as opposed to the alternatives, records are immutable and trusted, eliminating the need for third parties to be involved. Potential farmer-facing impacts include ensuring that farmers receive timely and complete payments through the use of smart contracts, and helping farmers to capture real-time data to more effectively manage their crops and harvests.
Tracking the Supply Chain
Where is this occurring? In Arkansas, a small, farmer-owned agricultural cooperative called Grassroots has partnered with Heifer International and the blockchain technology provider Provenance to create an interface that allows farmers and other supply chain actors to immutably track the path of poultry as it moves through the supply chain. The ultimate goal is to create a value chain of integrity, from start to finish, and to use blockchain technology to effectively tell that story for consumers, who appreciate the increased transparency and traceability when purchasing Grassroots’ premium products.
Agridigital is an Australian startup using blockchain in a similar way in the Australian grains industry, helping to track and manage grains as they move throughout the value chain. Their platform also facilitates financial transactions in order to increase the speed by which farmers receive payment for their commodities, improving efficiencies across the whole supply chain.
Leveraging Blockchain’s Financial Component
Other organizations are focusing specifically on the financial component, specifically in leveraging blockchain technology to increase smallholder farmers’ access to finance. Coin22 is an Amsterdam-based technology company that has developed a blockchain-based Agriwallet, currently being implemented in agricultural supply chains that ultimately end up in Kenya (with a reach that spans Europe and North America). The interface is simple, operating through SMS messages and based on the already widely-used MPesa mobile money platform. Four thousand farmers are currently using the AgriWallet, and Coin22 is working toward scaling up to 100,000 farmers across Kenya, Uganda and Rwanda. Because the platform is blockchain-based, it can easily be scaled across different countries, without needing to adapt the platform in each country based on varied financial regulations or restrictions.
ICS, the parent company of the East Africa-based agricultural social enterprise Agrics, is exploring a blockchain-based savings product, utilizing Coin22’s Agriwallet, that will enable farmers in Kenya to purchase “drought coins.” Depending on weather conditions and satellite data, the virtual coins can be cashed in at the end of the season and transferred to farmers’ mobile wallets.
Another example is Bext360, a startup that has developed a device that combines machine learning and artificial intelligence to increase efficiency in the coffee supply chain. Bext360’s machine weighs, analyzes and prices coffee directly at the source, using digital/mobile payments to transmit payment directly to the farmer, via a blockchain-enabled smart contract. Bext360 is currently reaching hundreds of farmers in Ethiopia, Nicaragua, Colombia, Uganda and California, and expects to reach thousands by the end of 2018.
Research into Blockchain Applications for social impact
What is the overall status of blockchain applications in agriculture? I have been part of a research study at Stanford University, in collaboration with Rippleworks, that analyzed 193 organizations, initiatives and projects that are leveraging blockchain to drive social impact, including 15 organizations focused on agriculture – about 7 percent of organizations overall. The results of the study were published in April 2018. Top findings from agriculture include:
- For-profit companies drive 60 percent of blockchain applications in agriculture
- The majority of use cases focus on supply chain management, although 20 percent focus on payments and money transfers, to help ensure that farmers receive timely and complete payments for their crops
- Investments in agriculture are still early stage. Most initiatives are less than two years old, none currently reaches more than 1,000 beneficiaries, and 93 percent are either in concept stage or have started a small pilot
Ultimately, blockchain applications in agriculture are early and unproven at large scales, but the potential for the technology merits increased investment and exploration. We’re just at the beginning of figuring out where blockchain can be most impactful in the sector. But so far, there’s ample reason to believe that it can have a transformational effect on agricultural supply chains.
Photo credits: Heifer International and Bext360