Blockchain has created a lot of excitement yet little is known about how this digitised technology could be implemented in the agri sector.
Rabobank’s agricultural analyst Wes Lefroy has been closely following the potential of this approach to managing supply chains and how it could revolutionise the food and agri supply chain.
So what is blockchain?
The underlying technology facilitating the trade of Bitcoin – officially known as a crypto currency – from one investor to another is blockchain.
Blockchain is a digital platform that facilitates the secure transfer of a physical commodity – such as grain, beef or sugar – along the supply chain, along with finance and associated production data.
Transactions are recorded in a shared record book, or shared ledger. Each entity has its own copy of the ledger, so, when a transaction is made, a new record (or block) is added to the blockchain, and is verified by all the other entities. This enables secure and near-instant interactions between businesses. Each “block” is encrypted and a non-replicable digital record, so it cannot be deleted, reversed or edited.
How will it change supply chains?
The three major benefits of blockchain are more transparency of supply chains, provenance, and financial efficiencies for participants.
Offering greater downstream visibility, this will not only give consumers greater verification of how the product was grown, with input data and production location verifiable, it will also provide farmers with a much greater understanding of changing consumer preferences. For farmers, blockchain will place a greater emphasis on collecting data (around product origin, quality attributes and production practices) and this information will be shared down the supply chain, to strengthen provenance.
How will it change the way producers operate?
Blockchain needs involvement from all stakeholders. It is pertinent for farmers to record and share production data. And it has the potential to see farmers forge stronger relationships with trade partners or deal directly with consumers.
Where have we seen blockchain in action?
CBH, in partnership with Australian agtech company AgriDigital, ran a pilot, testing blockchain for tracking oats through the supply chain. There has since been a separate proof of concept transaction by Rabobank in partnership with AgriDigital. Companies like IBM, Walmart and JD.com are actively working with blockchain.
While there are still barriers to wide-scale adoption, such as calculating a proper distribution of costs and benefits, blockchain is the way of the future.