Among the early use cases proving the potential of blockchain technology in business is the supply chain of the agricultural industry.
Unlike financial blockchain, where the distributed ledger technology records financial transactions, the agricultural sector is also dealing with the transport, shipping and storage of physical commodities.
The immutable digital identifiers ascribed to items in the supply chain are already demonstrating the potential for blockchain to improve food transparency and integrity, creating traceable and auditable transactions.
This, in turn, drives better compliance with food safety regulations and environmental standards and helps to eliminate waste.
It also helps eliminate food “counterfeiting”, which is an increasing problem where suppliers claim false origins for produce.
The Australian agricultural industry has the scale and the technology focus to be an early adopter of blockchain, and its implementation is set to be one of the major industry drivers in 2019, a year some are calling the year of “agtech”.
The National Farmers’ Federation recently launched its ‘2030 Roadmap’ for agriculture and identified blockchain as a key technology in changing the way goods are certified, processed and delivered, and there are some significant initiatives already underway.
In a pilot project, a 17-ton shipment of almonds was sent from Victoria to Germany using the Ethereum platform, digitizing operations, documentation and finance on a purpose-built ledger.
BlockGrain (now being rebranded as Agrichain) is another initiative. The company is developing a software solution to automate the sharing of information across the agricultural supply chain, and is also looking at the potential of using the platform for peer to peer lending between farmers.
The company raised AUD 3.5 million from investors last year (which was oversubscribed) and is seeking to raise AUD 25 million in Australia’s first public token, or initial coin offering, to create its own cryptocurrency.
BlockGrain, which has developed a software solution which automates the sharing of information, estimates that 30 percent of the value in bulk commodities is lost due to inefficient supply chains in western economies, with the figure increasing to 50 percent in the developing world.
Caile Ditterich, born into a farming family in Victoria and a founder of BlockGrain said: “As we reach a stage of excessive product proliferation, both manufacturers and consumers alike are looking for the next level of differentiation. We believe this will come through our secure paddock to plate traceability allowing for single origin products to be adopted on a mass scale.”
Around 1000 Australian farmers have now adopted BlockGrain over the last two growing seasons.
Peer to Peer
On the question of peer to peer lending, BlockGrain sees it as a way of farmers helping each other out financially for mutual benefit.
There is plenty of room on each side of the lending equation: cash-rich farmers can hope for no more than 2.5 percent interest from Australian banks, while those who are accessing bank debt are paying more than 7.7 percent on overdrafts if they qualify, and more than 13 percent if they don’t.
“Using BlockGrain, farms of a size will be able to connect in a secure peer-to-peer lending environment that enables businesses with a cash surplus to offer short term loans to those needing access to short term capital,” the company said in a whitepaper released last year.
BlockGrain is focusing initially on grain and cereals, where it faces competition from another provider called Agridigital, but has plans to move into other agricultural commodities, hence its rebranding to AgriChain.
When it gets there, however, BlockGrain may find there is competition as there are a number of other blockchain initiatives underway.
The Queensland Cane Growers organization was last year given AUD 2.25 million in funding to develop blockchain technology to better track its products.
Coca Cola has mandated that it wants sugar sourced from “sustainable” farming methods and has a target of 100 percent sustainable sourcing by next year.
This is a key advantage for Australian cane growers, and a recent Rabobank survey of 1,000 producers found they had the highest level of engagement with sustainability accreditation.
While in its early stages, the development of agricultural blockchain technology is already heading for a key challenge: scale.
BlockGrain is already facing competition from another startup in its core grain industry space, while the Queensland cane growers are pushing ahead with their own solution.
This may be a task for Government, or industry-based organizations, but the real payoff will come through the creation of large-scale platforms and that will need consolidation in the future.
If 2019 is the year of “agtech”, then these are likely to be fragmented and focused on small verticals, leaving the bigger task for 2020 or beyond.