Smart food supply chains

There have been a lot of advances in agriculture technology over the past few years, including remote-controlled harvesters, automated irrigation, biometric scanners, stock monitoring through drones and driverless tractors. However, a lack of connectivity on farms has meant that despite these technological advancements, the agriculture industry is, in general, not as digitised as other sectors.  

Now, with the National Broadband Network (NBN) promising high-speed internet connection to most rural communities by 2020, this looks set to change. The increased connectivity available through the NBN will mean that farmers are better able to build an integrated and seamless end-to-end experience that unifies customers, distributors and growers.

At a time when consumers are becoming more interested in how and where their food has been produced, this connection to customers and the ability to prove claims around products will be key factors in ensuring the continued growth of the agriculture industry.

“Increased consumer awareness is driving food consumption decisions. Producers who are able to answer… questions and deliver what the consumer wants are receiving a premium for their produce,” writes Deloitte Financial Advisory Benjamin Haire¹.

This is where blockchain technology comes in, helping farmers improve transparency and traceability along their supply chains by providing consumers with access to sustainability and compliance information. It also helps to reduce food fraud by showing customers where their food came from and all intermediaries along the supply chain.

Blockchain is basically a secure digital ledger that stores and verifies transactions between users, which cannot be changed or erased. These transactions are called blocks, and each have a timestamp and link to the previous block. In this way, a continuously growing list of chronologically ordered records is produced and encrypted to ensure security².

Digital currencies or cryptocurrencies act as a means of payment for data value across the supply chain. This means farmers, distributors and consumers can pay to selectively access, share and validate products. Computers with advanced encryption then keep track of the transactions.

All the information collected along the supply chain is stored in a QR code that is placed onto food packaging. Consumers are able to scan the QR code and receive full stock traceability, including proof of origin.

For example, if the final product is a packaged steak, then the QR code will show who the farmer is, when the cow was born, its genetics, when and where it was fed, the use of antibiotics and any vaccines.

There are already a number of companies in Australia specialising in blockchain for agriculture, such as AgriDigital, BlockGrain and BEEFLEDGER, and there have been several successful trials of the technology.

One of these was run by the Commonwealth Bank of Australia (CBA), which built a blockchain platform to ship and track 17 tonnes of almonds from Sunraysia in Victoria to Hamburg, Germany in 2018³.

The CBA partnered with Olam Orchards Australia, Pacific National, Port of Melbourne, Patrick Terminals and OOCL Limited to digitise operations, documentation and finance along the supply chain. A customised, private blockchain was built using the Ethereum platform, with all partners able to upload and access key documents including certificates of origin, import licence, insurance certificate and bill of lading. This streamlined the customs processes and enabled all partners to view and track the location of the shipment.

Underpinned by distributed ledger technology, smart contracts (which use blockchain to execute agreements) and the Internet of Things, the blockchain platform also stored container information so that partners could access data on conditions inside the container, such as humidity and temperature⁴.

Not only did this provide more transparency along the supply chain but it also reduced inefficiencies by reducing administrative burdens on the partners.  

Inefficient supply chains and intermediaries are estimated to cost Western economies 30% of the value in bulk commodities⁵ so technology such as blockchain that improves supply chain efficiencies can have a big impact on profitability. This is particularly important given that drought and other weather-related events have increased the costs of production.

For banks though, the big drawcard to using blockchain is the ability to access information that is usually unavailable to bankers, such as quality of stock, history of custody, financial obligations recorded on the ledger and true market value⁶. This is a good thing for farmers too as it gives banks access to real-time visibility of farm inventory. This makes lending against stock on hand easier by reducing the risk for banks⁷.

Blockchain technology therefore has huge potential in the agriculture industry.

However, like all emerging technologies, there are challenges to its implementation. The technology underpinning blockchain requires huge computing power and as a result, it can be an expensive platform to utilise. There is also confusion around regulation, the taxation of blockchain enabled business models and who is responsible if loses or damages are caused by smart contracts.

Despite these challenges, global blockchain spending continues to grow so it’s likely that many of these issues will soon be resolved. Watch this space!

Author: Adelle King

References

¹ Haire, B 2018, 'Blockchain: revolutionising the agriculture industry', Deloitte, , viewed 18 February, <https://www2.deloitte.com/au/en/pages/consumer-business/articles/blockchain-revolutionising-agriculture-industry.html>

² Ibid

³ Commonwealth Bank of Australia 2018, Commonwealth Bank completes new blockchain-enabled global trade experiement, 30 July, <https://www.commbank.com.au/guidance/newsroom/commonwealth-bank-completes-new-blockchain-enabled-global-trade--201807.html>.

⁴ Ibid

⁵ Pash, C 2018, 'Australian farmers have started to use blockchain to track produce from paddock to plate', Business Insider, viewed 18 Febraury, <https://www.businessinsider.com.au/blockchain-food-supply-chain-blockgrain-2018-4>.

⁶ Ditterich, C 2018, 'How agriculture can benefit from blockchain', The Global Treasurer, viewed 18 February, <https://www.theglobaltreasurer.com/2018/05/09/how-agriculture-can-benefit-from-blockchain/>.

⁷ Ibid 

⁸ Coker, B 2018, 'The problem with Blockchain in Australia', Medium, viewed 18 February, <https://medium.com/@Webreep/the-problem-with-blockchain-in-australia-8d2f59b7faee>.