Roadblocks for blockchain

Agri people have a knack for capturing the baffling complexity of their industry’s supply chains through simple metaphors. Farmers prefer “from farm to fork,” while consumer types like “from field to fridge.” Logisticians also have their own: “from paddock to plate.”

In recent years that phrase has also become a favorite among tech aficionados.
“Paddock-to-plate” appears six times in a whitepaper released last month by Australia-based BlockGrain, a software business that aims to improve supply chains by converting the sector to blockchain. The company is currently selling nearly $20-million-worth of cryptocurrency to fuel its systems.

The benefits of blockchain, which allows for assets to transfer without intermediaries and for transactions to be recorded in an incorruptible “digital ledger,” have been touted in many industries – in particular those that rely on intricate supply chains. The traceability and transparency it promises could boost efficiency and accountability in many sectors subject to stringent regulations and quality controls, such as pharmaceuticals or automotive.

BlockGrain is not the first one to spot a similar opportunity in agriculture. Start-ups like Provenance or FarmShare are using blockchain to ensure farmers’ and consumers’ provenance data is trustworthy; food and retail giants, such as Walmart and Nestle, are exploring the technology to improve their global processes. Yet blockchain remains relatively underused in agriculture, industry insiders tell us.

Given the vast benefits the technology could bring, that is somewhat surprising. The FAO estimates that up to one-third of the food produced for human consumption is lost or wasted every year; Deloitte thinks 30 percent of the value of bulk commodities disappears due to inefficient supply chains and intermediaries. Different figures are available elsewhere. But clawing back even a share of these ballpark estimates, no matter how conservative, would be enough to feed millions of people every year.

With many market participants still relying on paper records and basic spreadsheets to store information, blockchain can help connect each link of the supply chain by reducing data fragmentation. Farmers and their equity backers also look at more immediate benefits. Inconsistent data and high perceived risk make it hard for farmers to obtain lending against harvested stock; insurance is also dear. By providing real-time visibility on farmers’ inventory, blockchain systems could help change this. They could also make it easier for farmers to leverage forward contracts, helping improve cash flow management.

Eventually, they could even foster peer-to-peer lending between farmers themselves, something BlockGrain is looking to promote in the future. But this hints at one obstacle standing in the way of blockchain’s dominance: farmers’ acceptance. As BlockGrain chief executive Caile Ditterich told us this week, it’s not clear “the average person on the street understands the blockchain side of things.” For farmers, he said, it remains “a hard sell.” Knowing how the software works is not necessary to use it – at least at first. But for farmers’ trust not to be built forever on blind faith, some basic education will in time be needed.

A second roadblock lies in the need for shared standards and inter-operability. BlockGrain says it doesn’t require all supply chain participants to be system users in order to function. But blockchain-backed features such as smart contracts and proof-of-origin, arguably those capable of making the greatest difference, require transaction parties to use the software. It is not obvious either how BlockGrain will interact with other traceability systems. Integration could hit a snag if the blockchain landscape itself is fragmented.

There are technological hurdles as well: network coverage is often sparse in the field. That’s one issue BlockGrain has pre-empted. The second iteration of its software is capable of caching key data on the mobile device until a connection is re-established. It is also aware of obstacles in other domains and working to alleviate them: it says promoting adoption among brokers, often trusted advisors to farmers, could help roll out the platform more widely – from crate to kitchen, that is.

Write to the editor at matthieu.f@peimedia.com