How to Use Blockchain in Agriculture: 10 Use Cases

Agriculture is the largest branch of the world economy, the annual turnover of which in the United States alone exceeds $ 1 trillion (1% of the country's GDP).

Moreover, this sector is one of the most inefficient. A huge number of counterfeit and spoiled products, an outdated accounting system, too long and inefficient supply chains, an excessive level of bureaucracy and a lack of transparency are only a small part of agribusiness problems.

And it seems that the only technology that can solve at least some of these problems is the blockchain. We analyzed 150 blockchain startups and identified 10 key areas of application of the new technology: the problem, its solution and the companies that deal with it.

#1 Product quality control

Problem. Studies show that about of fruits and vegetables in developed countries are thrown away due to improper storage and transportation conditions, with 34% of these products becoming unsuitable before leaving the farm. This is mainly due to the fact that neither the farmer, nor the freight carrier, nor the supplier can control the indicators of humidity, temperature, CO2, etc.

Blockchain solution. To track the storage and transportation of agricultural products, you can use special sensors that collect the necessary information and record it in real time in a decentralized distribution book based on the blockchain. So stakeholders (farmers, distributors, consumers) will be able to understand at what stage the product has spoiled, and prevent it in the future.

First successes (cases):

1. Arc-Net. Tracks a wide range of product data. For example, DNA information for meat products, data on grain, water, production method, and even specific distiller models for whiskey production and the like.
2. PavoCoin. Helps farmers control the growing, harvesting, processing and distribution of crops.
3. TE-FOOD. Uses identification tools for livestock, transportation, and fresh food packaging to track product quality as you move along the supply chain.

#2 Improving supply chains

Problem. The market for agricultural products is global. The food you see on store shelves comes from Africa, Latin America, Europe and even Alaska. A complex logistic mechanism that conducts goods through dozens of intermediaries is responsible for its delivery, the efficiency of interaction between them, to put it mildly, leaves much to be desired.

For example, the delivery of refrigerated goods to the United States from Africa requires stamps and permits from about 40 people and organizations that interact with each other in more than 300 cases. The total costs of processing documents with such logistics are estimated at between 15 and 50% of the cost of physical transport. At the same time, in such a complex structure, errors and inaccuracies inevitably appear, which lead to cargo idle time and long-term litigation.

Blockchain solution. According to research by the World Economic Forum, the use of new technologies to reduce bureaucratic barriers in logistics and supply chains will increase global trade by 15%, global GDP by 5%. At the same time, according to experts, the blockchain is the only technology that can remove these barriers.

For the agricultural industry, improving supply chains means:

• reduction of logistics costs and damage to shipping;
• the possibility of entering new markets, where they are willing to pay more;
• reduction of fraud and counterfeit;
• increased consumer confidence, as they can now trace the goods to the manufacturer.

 

First successes (cases):

1. Walmart and IBM completed testing for the blockchain in 2018, which tracks the movement of goods along the supply chain from the manufacturer to the shelves in supermarkets. The system monitors geolocation and storage conditions and in real time writes this data to the blockchain. All interested persons have access to them. The pilot project was so successful that Walmart intends to transfer this experience to all its products.
2. Foodshed.io. Connects farmers and buyers within a radius of 250 miles, making it easier for smallholders to sell products. In addition, Foodshed.io tracks the path of products along the supply chain and optimizes their routes.
3. Ripe.io. The system uses sensors to monitor humidity, temperature, and product ripeness. In addition, with Ripe.io, a farmer can track the route of products along the supply chain and customize the delivery and harvesting system.

#3 Upgrading Farm Management Software (FMS)

Problem. In 2017, the global market for farm management software (FMS) reached $ 1.5 billion and, according to research by business consulting company Grand View Research, it will expand to $ 4.2 billion by 2025.

Much of this growth will result from a combination of three factors:

• Perpetual water scarcity in the arid regions of Africa, Asia and Australia;
• rapid population growth in Africa, which will cause an increase in demand for food products and their means of production;
• development of new technologies.

 

Blockchain solution. As farmers integrate RFID tags into their business (collect environmental and location data), drones, and artificial intelligence, they will begin to realize that they need an operating environment that will effectively manage all of this and ensure the security of the system and the data collected.

The only contender for such an operating environment is the blockchain. Only this database architecture can provide openness and at the same time security of information storage. Openness is needed because the new FMS will have to provide unobstructed access to data for all parties, and security - because you need to be sure that the information is genuine and protected from falsification.

First successes (cases):

1. AgriDigital. Australian cloud platform for agricultural commodity management, which reduces the processing of documents to one-fifth of normal time.
2. AgriChain. SaaS solution that helps to improve and stabilize the grain supply chain. The service uses smart contracts and monitors the logistic process to show every detail of these processes on request. In addition, farmers can record all the data on fertilizers and feed that they receive to calculate their return in the form of crop growth.

#4 AgTech IoT-optimization

Problem. Studies show that the average efficiency of small farms in developed countries is at the level of 85%, large - 91%. The best way to increase efficiency is to use the capabilities of the Internet of Things (IoT) technology. IoT is a cloud network that uses sensors and special software to read information from digital devices and control them at a distance.

The problem is that implementing IoT requires:

• secure connection with all devices;
• secure data transfer and storage;
• scalable system, the capacity of which will grow with the number of connected devices and the information they collect.
• database protected from DDoS attacks and unauthorized access;
• tools for secure (and anonymous) identification of each user and device.

 

Blockchain solution. Blockchain is a decentralized storage of information that can reliably and safely save IoT data. Already developed specialized platforms, sharpened by working with the "Internet of Things" and they have shown themselves well in other industries: scalability, safety and reliability of the technology have been confirmed.

First successes (cases):

1. IOTA. Platform for launching decentralized applications of any orientation. The system has completely free transactions.
2. Ambrosus. IoT platform on the blockchain for supply chain solutions.

#5 Fair pricing

Problem. Weather conditions, inelastic demand and supply, as well as the conditions of the world market - all this contributes to the fact that most of the profits from the sale of agricultural products accumulate in the wallets of intermediaries and retailers. While incomes of farmers-producers of raw materials remain extremely low.

Blockchain solution. In terms of more honest pricing, new technology can help in several areas:

1. Blockchain reduces the number of intermediaries, so farmers can enter into contracts directly with retailers on more favorable terms.
2. Blockchain makes the market more transparent, which can be used to exert social pressure on parties that make excessive profits. The practice of eco-organizations has proven that this strategy is effective.
3. Farmers can use blockchain-based platforms to create a kind of international trade unions to protect their rights.

All this will increase the income of farmers. For developing countries, where a significant part of the population is engaged in agriculture, this will be a huge plus, which will save many people from starvation. An example is such a country as Uganda, where in the 90s of the last century nine out of ten people lived in the countryside. Studies have shown that the increase in the price of coffee beans by only 10% led to a decrease in the number of households living in poverty by 6% (2 million people).

First successes (cases):

• AgroStar. An Indian startup that, in conjunction with IBM The Weather Company, developed a mobile application that helps farmers develop effective management practices adapted to their specific cultures. This kind of application for practical knowledge that can increase the yield and efficiency of interaction with partners.

#6 Agricultural subsidies

Problem. Between 2008 and 2017, Concordia Allied Producers LLC in Ashburn, Georgia received $ 24 million in agricultural subsidies, making this company the most generously subsidized enterprise in the United States during this period. Concordia was one of ten large companies that received federal grants for $ 14 million or more during this period as part of the country's $ 20 billion federal farm subsidy program.

Thus, taxpayers financed the cultivation of nuts. Not wheat, not corn, not healthy spinach, but nuts. And the money spent on it is unlikely to pay off in the form of dividends. This is the support of the small farmer. Although in some countries things are even worse. There, 90% of the subsidies go to one or three companies owned by relatives or friends of officials.

Blockchain solution. This is unlikely, but with the blockchain there is hope that at least something in the agricultural subsidies may change for the better. The public may require the creation of a blockchain platform where subsidies will automatically be distributed between those who really need them.

Transparency and open source will allow taxpayers to control the process. In addition, the blockchain and smart contracts, reducing document flow, the number of intermediaries, unnecessary operations, etc., can help simplify these payments in terms of costs.

First successes (cases):

• In June 2018, NITI Aayog, together with Gujarat Narmada Valley Fertilizers and Chemicals Limited (GNFC), signed a Letter of Intent (SOI) to work on the introduction of the blockchain into fertilizer subsidy management processes.

#7 Crowdfunding of agricultural production

Problem. Agriculture is a business with significant transaction costs, most of which occur in a short period of time. In developed countries, farmers take money from banks on more or less favorable terms. In the rest of the world, a bank loan can be obtained on such conditions that a one-time delay in payment can bankrupt the farmer.

Blockchain solution. The new technology will make the lending market global, so that farmers, for example, from Africa will be able to take out loans in European structures on acceptable terms. In addition, the blockchain will allow you to create crowdfunding models where ordinary people can finance businesses from other countries. Now it is difficult, risky and associated with unnecessarily complex bureaucratic procedures. Tokenization will relieve crowdfunding of these problems.

First successes (cases):

1. Agriledger / Agunity. The platform provides access to credit and investment capital for small farmers (who supply 80% of the food consumed in developing countries). The system is being tested in Papua New Guinea, Myanmar, Kenya, Ethiopia, Ghana and other countries. The first results are positive, in some cases the income of farmers has tripled.
2. Lokaal. Microloans and investments for small and local farms.
3. EthicHub. Crowdfunding and any microloans for a small farmer.

#8 Small Farm Insurance

Problem. Uncertainty of yield due to unpredictable changes in the weather and pest infestation, high volatility in food prices, a long production cycle, etc., create unfavorable conditions for insuring agriculture. Especially in countries where there are difficulties with access to cheap loan capital. Because of this, agricultural insurance is expensive and often simply impossible.

Blockchain solution. As in the case of lending, the blockchain is able to localize the insurance industry, so that farmers, for example, in Latin America will be able to insure on more favorable terms with European companies.

First successes (cases):

1. Black. The insurance company on the blockchain, opening a centralized insurance market for crowdfunding, including for farmers' projects.
2. RiskBazaar. Blockchain-based P2P market allowing consumers to enter into contracts within a few seconds.
3. Teambrella. Mobile application for insurance P2P services.

#9 Stimulating sustainable practices

Problem. Worldwide, there are about 500 million small farmers. Various studies confirm that all these people are twice as likely to commit suicide than the average person: 20 suicides per 100 000 among farmers, compared to 10 per 100,000 for the rest of the population.

This is due to:

1. A large number of bankruptcies among farmers, which is bad for both those who have become bankrupt and those who are simply afraid of becoming (almost all farmers).
2. Relatively low predictability of the final result. In some regions (for example, Australia) the probability of making a profit is only slightly higher than in gambling.
3. Complexity. This kind of activity is physically difficult and time consuming (10-12 hours a day, often more).
4. Permanent life on credit.

Blockchain solution. The integration of the blockchain into many aspects of the activities of farmers can give a synergistic effect that will greatly simplify their lives, make it easier and even richer. This will reduce the stress level of farmers and make them happier.

First successes (cases):

• Too little time has passed for the effect (if any) to become noticeable.

#10 Corporate Responsibility

Problem. When you buy, for example, a tomato, you don’t know how much and what chemicals went into its cultivation, how it was stored, whether there is any strangeness in its DNA, and also where it grew: on the field, in the greenhouse or basement. In addition, you do not know who raised this tomato: an American farmer or a practically enslaved worker in one of the third world countries.

Blockchain solution. Those who are concerned with the methods of growing crops, livestock or fish will be able, thanks to the blockchain, to track down the “history”, for example, of corn from the shelf in the store to the seeds from which it originated. Or salmon “history” from the freezer to the farm on which it was grown. In this case, you can track everything - from the chemical composition of fertilizers to DNA.

First successes (cases):

• Arc-Net. The platform tracks production methods, equipment used, fertilizers used and even the composition of DNA products.