Blockchain Can Improve Supply Chains, Sustainability for Farmers of All Sizes
Agriculture is one of the most important industries on Earth. Without it, we wouldn’t be able to feed our planet’s expanding population. However, the agriculture industry is facing a wide variety of challenges. This means that new innovations will be required if the industry is to keep pace with consumer needs and provide safe, nutritious food to the people who need it.
Current issues in agriculture include world hunger, climate change and global warming, global supply chain issues, resource and soil depletion, water issues, food waste, food quality control, and the financial insecurity experienced by smaller farmers around the world.
While it’s not a panacea, blockchain technology has the potential to help solve many of these issues by creating innovative solutions that can help move information and resources to essential agricultural stakeholders.
Via its novel distributed ledger technology (DLT), blockchain tech can usher in an area of secure, accurate data sharing between governments, farmers, and non-profits. It can also provide new and innovative financial solutions through DeFi protocols that can reduce costs and risks for smaller farmers.
In this article, we’ll review some of the key problem areas in the current agricultural ecosystem while discussing the solutions that blockchain may be able to provide. Specifically, we will discuss blockchain’s potential impact on:
- Reducing world hunger through better food distribution
- Improving agriculture through slowing down climate change
- Reducing food waste through better information sharing
- Helping improve food quality through improved supply chain management
- Helping smaller farmers through cryptocurrency and blockchain
- Providing crop insurance to insure small farmers from weather events
Blockchain May Be Able to Provide Solutions to Reduce World Hunger
Currently, the United Nations estimates that over 690 million people are currently food insecure, including 38 million people in the United States. Some estimate the number of hungry people will increase to upward of 800 million by 2030. With the U.N. also estimating that the world’s population will grow to a staggering 9.7 billion by 2050, fixing the agricultural industry to create more equitable food distribution will become even more important in the years to come.
While much food insecurity is the direct and sole result of poverty, it can also be attributed to the lack of available food supplies in various regions, particularly poorer areas of the developed world.
By integrating data from each part of the food supply chain, from seed to harvest, packaging, sales, transport, and resales, crop and livestock production can be estimated more accurately. This can help balance supply and demand to ensure that food goes where it’s actually needed, not simply where farmers and distributors think it may be needed.
Fraud can also exacerbate the problem of food insecurity. Agricultural fraud often manifests itself in the form of non-existent, contaminated, low-quality, or partial food shipments. The prevalence of fraud in today’s agricultural industry reduces food availability and increases prices for already struggling consumers. By creating an immutable ledger for each part of the supply chain, blockchain can disincentivize fraud, data manipulation, and mismanagement, therefore reducing food prices for the most vulnerable populations.
Blockchain’s Potential to Positively Impact Climate Change and Global Warming
Most scientists agree that global warming is one of the major environmental, social, and political issues of the 21st century and that a substantial contributor to this warming is man-made carbon dioxide emissions. Global warming is predicted to cause a variety of serious environmental and economic problems, including flooding, droughts, severe weather events, and agriculture issues, including crop shortages.
While it’s true that global warming may open up certain areas of the world to agriculture, particularly those in cold climates, its overall impact on global agriculture could be disastrous.
According to EPA studies, if the temperature in a certain area increases beyond a crop’s “optimal level” crops yields could be severely affected. However, it’s not only temperature increases that could impact crop yields. An EPA report also states that “elevated CO2 has been associated with reduced protein and nitrogen content in alfalfa and soybean plants, resulting in a loss of quality.” The report adds that “reduced grain and forage quality can reduce the ability of pasture and rangeland to support grazing livestock.”
In addition, the EPA notes that that “in 2010 and 2012, high nighttime temperatures affected corn yields across the U.S. Corn Belt, and premature budding due to a warm winter caused $220 million in losses of Michigan cherries in 2012.” This is but one of many examples of rising temperatures resulting in massive crop losses.
Blockchain may not be able to directly influence climate change-related crop losses, but it could bring many new ways to incentivize energy conservation and the reduction of CO2 emissions on both the institutional and individual levels. On the individual level, blockchain applications are already allowing energy-conscious individuals to sell excess energy to others for a profit. This incentivizes personal reductions in energy use and therefore, personal contributions to global CO2 emissions.
Blockchain’s Impact on ESG
On the institutional level, ESG (environmental and social governance) is becoming one of the fastest-growing concerns for investors in multinational corporations. This is particularly the case for companies involved in energy production and agriculture. Billions of dollars are flowing into funds and companies that claim to be implementing substantial ESG programs, but major concerns remain about the validity and accuracy of this reporting.
Adding granular tracking [via blockchain]… has the potential to provide significant transparency to a variety of ESG initiatives around the globe.
By using blockchain technology, companies can alleviate investor concerns about the true impact of corporate ESG initiatives. Due to the immutable nature of blockchain databases, supply chains can be tracked efficiently, and carbon emissions can even be tracked with a direct connection to IoT (internet of things) hardware devices placed in power plants, manufacturing facilities, or farms.
Respol, a global energy company, has already implemented blockchain technology in its supply chains. Respol converts physical assets, such as plastics or natural gas, into digital assets that can be tracked at all points of the supply chain. Employing granular tracking in this fashion has the potential to provide significant transparency to a variety of ESG initiatives around the globe.
Blockchain can also facilitate the creation and use of digital ESG bonds. In 2018, the World Bank issued its first blockchain bond for $83 million, which attracted investors including the Commonwealth Bank of Australia, which co-issued the bond. These bonds can include smart contracts that require the reporting of various ESG factors, including carbon output, pollution, and overall energy use.
Blockchain May Be Able to Reduce Food Waste Via Improved Data and Information Sharing
According to the USDA, between 30% and 40% of all food in the United States is wasted, despite the fact that nearly 40 million Americans experience food insecurity. That wasted food leads to increases in food prices that only make it harder for poor Americans to afford food. The problem is not limited to the U.S., however, with similar food-wasting rates also plaguing many developed and developing countries.
[Blockchain allows] companies to better understand exactly how much food they should produce in a particular season, bringing down waste across their entire supply chain.
In addition, all that wasted food is a drag on the economy, with an estimated $218 billion dollars per year spent on the removal, production, and transportation of uneaten food, which generally ends up in landfills.
By utilizing blockchain technology to create an immutable ledger tracking supply chains, combined with predictive analytics analyzing weather conditions and customer demand, companies can better understand exactly how much food they should produce in a particular season, bringing down waste across their entire supply chain.
In addition to the growers themselves, innovative blockchain applications are attempting to repurpose unused food to help feed the hungry. One company, Goodr, has created an app to help restaurants deliver their unused leftovers to local charities. The company uses a blockchain database to tell restaurants exactly what food they are wasting when they waste it, and how much they waste, which should help them adopt more sustainable food practices.
This type of collaboration can also be used by municipalities and governments to avoid food waste, track garbage volume, and reduce costs for taxpayers by incentivizing reduced waste.
Blockchain Can Increase Food Quality Through Better Supply Chain Management
In addition to food scarcity, global hunger, food waste, and climate change, food safety is another one of the most pressing issues in agriculture today. According to the World Health Organization (WHO), an estimated 600 million people fall ill each year after consuming contaminated food, leading to approximately 420,000 preventable deaths.
After a series of embarrassing food safety scandals, Walmart instituted blockchain technology through its entire agricultural supply chain. The food and retail industry giant partnered with IBM and is now a member of the IBM Food Trust provenance project, which helps food companies track the supply chain of their products from the initial farm or factory, through the entire distribution chain.
In many cases, products reaching giants like Walmart go through 20-25+ stops on the supply chain before reaching the consumer, making it extremely difficult and time-intensive to discover the source of a contaminated food product. This lack of data forces companies to pull tons of products off of their shelves, sometimes unnecessarily, while still leaving them open to risk for future contamination.
In the case of Walmart, the company now requires most of its suppliers and distributors to utilize IBM’s blockchain tracking system. The system is reportedly so comprehensive that every piece of produce sold can be traced back to the farm– and sometimes the very field, that produced it. Other companies that have partnered with IBM’s Food Trust program include Nestle, Dole, Kroger, Tyson, Driscoll’s, and McLane.
Blockchain Can Help Smaller Farmers Through Cryptocurrency, DeFi Microloans, and Blockchain Crop Insurance
Smaller farmers are an essential part of the agricultural ecosystem, especially in developing countries. In smaller communities in the developing world, local farmers may be the only source of food available to an entire town.
However, without access to the credit easily obtained by large corporations, independent farmers often struggle. Many local farmers are among the $1.7 billion adults who are currently unbanked. Despite this large number of unbanked individuals, according to the World Bank, “two-thirds of them own a mobile phone that could allow them to access financial services.”
Farmers can utilize cryptocurrency applications to get microloans to sustain and expand their operations.
With the proliferation of cryptocurrency exchanges, wallets, and applications, as well as the development of stablecoins, blockchain technology can often replace banks for many smaller farmers. Instead of having to wait to barter goods for their crops, farmers can easily use a bitcoin or ethereum wallet to receive funds for their goods.
Local farmers can also use blockchain and crypto banking applications to purchase essential goods and services, such as fertilizer and farming implements to maintain and sustain their farming operations. In addition to paying suppliers for essential goods, crypto banking can also be used to pay workers in order to expand local farming operations, increase food supplies, and potentially reduce prices.
On the consumer level, individual customers can also pay for food using cryptocurrency, providing a powerful alternative to traditional banks in areas where such services are hard to find or completely unavailable.
In addition to directly paying or being paid for goods and services, farmers can also utilize cryptocurrency platforms to get microloans to sustain and expand their operations. More traditional crypto loans are available on DeFi platforms like AAVE, though platforms focused specifically on microfinance are also beginning to proliferate.
However, blockchain can also be utilized by traditional microfinance institutions, as evidenced by a study by the Inter-American Development Bank that used blockchain to facilitate loans in Peru for toilets, showers, and other essential water purification and safety products. The study discovered that blockchain was highly efficient in speeding up the loan application and process. It was also highly effective in facilitating KYC (know your customer) protocols, helping avoid fraud and financial mismanagement.
Blockchain Crop Insurance Can Help Small Farmers Deal With Adverse Weather Conditions
Severe weather is another major issue in modern agriculture, as it can massively reduce crop yields with little advance notice. For example, in February 2021, winter storm Uri hit Texas, causing approximately $600 million in crop losses.
While U.S. supply chains can recover from these losses with relative ease, similar events in the developing world can often lead to food availability crises and can ruin farmers financially.
However, sufficient insurance can help protect farmers financially from these events. This can give farmers the funds they need to continue their farming operations despite adverse weather conditions.
One company, Arbol, is leading the blockchain agricultural insurance industry by offering weather insurance to farmers worldwide using blockchain smart contracts.
Specifically, Arbol protects against too much or too little rainfall, crop yields, snow, wind speed, wind direction, temperature, and humidity. According to the company’s website, users can specify the desired insurance amount they wish to purchase, and, using GPS and digital weather data, the platform automatically pays claims out in two weeks or less.
As the industry develops, it’s likely that more crop insurance solutions will come into play to provide an even wider set of solutions to farmers of all sizes.
Blockchain Oracles Will Be Needed to Provide External Data to Blockchains
Blockchains are inherently closed systems. That’s why they typically need a third-party information provider, known as an oracle, to provide the blockchain with “off-chain” data. In the agricultural industry, this could include weather, climate, and rainfall data, as well as data about potential food contamination. While oracles are necessary for blockchains to function properly, they do have several vulnerabilities, specifically in the realms of data security, speed, accuracy, and finality.
SupraOracles is Positioned to Provide Powerful Blockchain Oracles for the Next Generation of Agricultural Production
SupraOracles provides an innovative oracle solution combining security, accuracy, speed, and fast finality to allow both public and private blockchains to operate efficiently and effectively. Whether helping a crop insurance company populate its blockchain with weather data, or helping various suppliers securely input information, SupraOracles can provide secure, decentralized oracles to make sure blockchain data gets where it needs to go, when it needs to get there.
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