Blockchain is set to disrupt agricultural supply chains, proponents of the technology believe, but how widespread its use might become in coffee – and in what time frame – is open to question
Blockchain, the distributed, digitised ledger that claims to be able to provide a tamper-proof record of transactions, has been heralded as a transformative force for agricultural supply chains.
There are a growing number of Blockchain projects in the coffee industry, and much talk of their revolutionary potential, but analysts suggest that we are several years away from widespread use of the technology and believe that it may not be necessarily be the most appropriate solution to every supply chain challenge.
As research and advisory company Gartner highlighted recently, supply chains are becoming increasingly complex. Coffee has an especially complex supply chain, and the need is growing for all of the players in the chain to know who they are trading with and ensure that coffee is traceable and that its provenance can be verified.
“In theory,” said Gartner in a recent analysis of the potential of Blockchain, “organizations should know all of the parties in their supply chain network and trust them, but this is far from reality today.”Blockchain, it believes, could be an answer to the problem, help combat counterfeiting and fraud, and enhance traceability and efficiency.
Disrupting supply chains
Combined with other innovative technology, such the Internet of Things (IoT), Blockchain could disrupt existing supply chain models, Gartner said, but Martha Bennett, a Vice President and Principal Analyst at Forrester, another well-known research and advisory firm, told C&CI she believes it will be some time before it is widely used in the coffee sector. She said it is also questionable whether Blockchain is always the most suitable platform for agricultural supply chains, and whether or not it is “depends very much on the nature of the problem.”
Mrs Bennett told C&CI, “I think there are probably a number of projects in the supply chain where Blockchain is being used for which it isn’t really necessary. There are a lot of challenges and problems that can be addressed by digitizing what have long been paper processes – but that doesn’t mean that Blockchain has to be part of the process.
“There are ways of providing actors in the supply chain with access to information in real-time that don’t imply the use of Blockchain, but there are undoubtedly a number where a Blockchain platform can provide a lot of advantages.
“If Blockchain does seem to be the answer, a lot will also depend on the local ‘ecosystem,’ who has the connections and the trust to convince the other partners in the value chain to participate.”
She said another thing anyone thinking of implementing a Blockchain-based platform needs to think about is, who will actually run it and implement it? And how do you want to run it?
These are all important issues that need to be resolved before embarking on the development of a Blockchain-based supply chain system. There are others too, but advocates of the technology and those involved in its application to the coffee supply chain are pressing ahead with projects at a fast pace.
Among the growing number of Blockchain projects in the coffee sector is one in Honduras, where a suite of blockchain-based and IoT technologies will be used “to promote trust among the participants in the supply chain and provide greater accuracy and efficiency.”
GrainChain, a software platform, says it has signed agreements with stakeholders from every part of the coffee industry in Honduras to deliver an e-commerce platform that, it claims, will help minimize risk, improve conditions and encourage investment.
Bringing the entire supply chain together
GrainChain said it plans to bring the entire supply chain together on a single platform for the first time. The “unprecedented” step of uniting parties along the supply chain will help accomplish three primary goals that will help guide the future of the industry, it claims.
Firstly, the blockchain-driven platform will improve trust between farmers and banks, ultimately opening more services for people in remote areas who were previously unbanked. Second, a full suite of connected IoT tools will help improve accuracy throughout the entire process for all stakeholders. And thirdly, the commerce system should dramatically improve clarity throughout the process, protect farmers and ensure that they receive quick and proper payment.
GrainChain’s platform includes a ‘digital wallet,’ enabling remote and unbanked farmers to apply for loans to enhance their farms. Banks can then direct the use of money that is lent so that it can only be used for its intended purpose, which helps mitigate and control risk. GrainChain’s ‘unchangeable smart contracts’ will further improve traceability and operational logistics for vendors and buyers.
Growing coffee involves so many different actors and so many variables that it has been very difficult to “get people on the same page,” said GrainChain, “which reduces trust across the entire supply chain.”
Minimizing risk and enhancing visibility
Francisco Fortin, general manager of Confianza SA-FGR, an insurance provider to the agricultural industry said that, with GrainChain’s blockchain platform, “we can ensure that all parties are able to participate in the product with much greater visibility and minimized risk at every step.”
Use of the blockchain e-commerce system will have a number of additional benefits for stakeholders in the Honduras coffee industry, it is claimed. Banks will use GrainChain to manage thousands of loans to small- and medium-size farmers, including using the digital wallet for unbanked farms to enable loan disbursements, and insurance companies will use it to simplify and automate underwriting of farmer loans backed by banks and the federal government.
Co-ops and growers will benefit from GrainChain’s traceability tools, farmer management, logistics management and farmer loan programmes. Exporters and buyers will benefit from using its ‘smart contracts’ for settlement, traceability, purchasing commodities and instant transfer of title.
GrainChain’s products give farmers access to their commodities via mobile apps, enabling them to see inventory in real-time and giving them the ability to make decisions in the field. Through its suite of blockchain-based and IoT products, it believes it can improve efficiency, create transparency and reduce human error. Important data such as quantity and quality are captured by GrainChain and applied to the appropriate inventory, which enables immediate contract settlement.
In another initiative, a number of well-known companies in the coffee supply chain are to collaborate with Farmer Connect, a tech start-up building farm-to-consumer traceability solutions, to create efficiencies in the supply chain.
The partners in the project’s initial phase include the Colombian Coffee Growers Federation, Itochu Corporation, JM Smucker Company, Jacobs Douwe Egberts, RGC Coffee, Beyers Koffie, and Sucafina. They plan to work together to build what they described as “an intelligent ecosystem” for the coffee supply chain. The platform will be available to the coffee community and ready for expansion into other commodities starting in 2020.
“Blockchain has potential to help address challenges in the supply chain because it establishes an immutable, transparent environment for transactions,” said Farmer Connect. “Growers, logistics providers, traders, brand owners, retailers, regulators, and consumers can use Farmer Connect’s platform to share permissioned access to information. This can enable coffee members of the ecosystem to trace products to their source and share sales and customer feedback with the growers.
Building an intelligent ecosystem
“Blockchain technology, combined with digital identity and the ability to support sustainable projects across borders, is poised to bring radical transparency, efficiency, and data-driven sustainability metrics that have the possibility to bring about a new, more equitable economic model in one of the world’s most vital commodity markets,” said Dave Behrends, Founder and President of Farmer Connect.
With the Farmer Connect enterprise solution, coffee in the supply chain can be tracked and traced in near real-time, including every transaction, all the way to the consumer. The solution recently completed months of testing, tracing coffee originating in Colombia and Rwanda from production to delivery. The provenance of each bag of exported coffee was captured in detail.
Farmer Connect has also worked with IBM to develop an application called ‘Thank My Farmer’ that gives consumers a full description of the coffee they are drinking and pulls data from the Blockchain to highlight the journey that the coffee has taken through an interactive map.
The app also allows consumers to learn about, share, contribute to and follow sustainability projects that are linked to their coffee or by region, variety, or brand. The first version of the app will be available to test users in select markets of JM Smucker Company, JDE, and other partners before opening up for general availability in 2020.
Allied to the introduction of the app is a farmer-owned decentralized digital identity with Streetcred ID based on the Sovrin Network. This will allow traceability to individual farmers and the ability for consumers to use a feature within the app to contribute directly to their favourite growers or communities. Farmers will also benefit by having a digital track record of production and payment data that will, in turn, make many of them bankable for the first time.
Asked whether she agreed that farmers will really benefit from the introduction of Blockchain, Mrs Bennett said there was no doubt that becoming part of a Blockchain system could enhance their bankability.
“Over time, a farmer in a Blockchain could certainly built up a track record that would demonstrate to a lender that he or she was bankable,” she told C&CI, “and another advantage of any technology available to farmers on a mobile phone is that using a mobile phone brings with it a lot of other technology – such as geospatial data – that could help prove that a farmer really is who he says he is and really grows the coffee or cocoa he or she claims to grow.”
The problem as she sees it is scaling up from small-scale demonstrations and pilot projects that make use of Blockchain and IoT technology to enable their advantages to be made available on a large scale, and she is less certain than some of the developers highlighted above that a Blockchain revolution is about to sweep through the coffee sector.
“I think it will be at least five years, possibly more, before Blockchain is widely available to farmers, and it will need to be rolled out alongside other technology, most importantly, the IoT,” she said.
And she finished with a word of warning about some of the hype around Blockchain: “Blockchain isn’t some kind of truth machine,” she said. “Blockchains require a lot of governance.
“Much is made of Blockchain’s ability to prevent fraud and ensure provenance. To some extent that is true, but a Blockchain cannot prevent fraud.
“Blockchains are not truth machines,” she said. “Just because something is on a blockchain it doesn’t make it true. If you make a false declaration or issue a fraudulent certificate and enter that into a blockchain, it’s still fraud.”■ C&CI
This article first appeared in the November’19 issue of C&CI. Click on subscribe now if you wish to read more informative articles in the current and future issues of C&CI.