How can blockchain help farmers in times of Corona?
The current pandemic, COVID-19, has morphed our daily practices into a ‘new’ reality that changed all recurring patterns present in our lives. In a previous blog, we examined what this pandemic means for the people behind our food. Today, we ask the following question: How can technology help us navigate the uncertainty of the pandemic?
The quick spread of corona within countries and across continents has revolutionised our way of living. In efforts of limiting the spread of the virus, citizens around the world have been asked to comply to new rules and regulations that limit human interaction. The ‘new’ reality is setting in as layers of industries and supply chains are being tested and exposed. The agri-food supply chain is certainly being tested as farmers and workers face economic instability, uncertainty regarding their produce and social (political) instability.
Within these new rules and regulations, however, a common denominator has emerged that helps to defeat the ‘new’ normal: technology. What used to be an important source of online interaction and information has become an even more pervasive part of our lives as we depend on it to conduct daily tasks for our jobs, do online (grocery) shopping and pass our free time. Seeing that technology has the ability to solve these first-world problems, is it possible to use this same technology to help farmers and workers in exporting countries to navigate the flawed food system?
In these uncertain times in which technology permeates us, blockchain has become an essential part of the ‘Internet of value’ as sensitive transactions are made on a daily basis. Basically, the ‘Internet of value’ is a way of transferring value between individuals – online – which eliminates the need for a third-party and any additional costs associated with it. Blockchain technology facilitates a new secure way to store and transact value, such as stocks and currencies, and information such as a specific event that did or didn’t take place in a value chain. For this reason, blockchain is gaining traction in the agri-food industry as well. The question, then, becomes the following: can blockchain truly help to ease the socio-economic problems that farmers are facing?
The agricultural industry has been characterised before for its untransparent and inefficient supply chains, which caused issues with the quality of products and fair pricing for workers and farmers. The current pandemic only aggravated these issues and brought them to a new level for the actors behind our food supply chain; now that consumers have proven to be more than merely ‘marketable consumers’, they are more concerned with the food that they eat, its origin and the sustainable process before their consumption. Therefore, blockchain could become a desirable solution for consumers and farmers alike.
Once information about a product or a transaction in a value chain is uploaded to a public blockchain, the information cannot be manipulated by anyone as it is not controlled by one single entity. So, the network of people who constitute the supply chain and their activities, then, become the reference points for accurate information. In less words, the supply chain becomes transparent. Now, we can see who is behind our food and – in some cases – even interact with our farmers. As more and more companies are adapting this new traceability system, farmers can undoubtedly benefit from such adoption.
EthicHub – an agri-food investment company – is an undeniable example of blockchain adoption: the platform allows consumers support farmers in Mexico by investing directly in our farmers’ necessities, such as: a new windmill, expansion or basic input for their next harvest. Using blockchain could make the process smoother because it lacks the unnecessary administrative burden or untimely transactions. Instead, farmers receive the money instantly and every activity of the farmer is transparent in such a way that the consumer can see where their investment is going.
With the current pandemic, exporting countries like Argentina, Uruguay and Ecuador have reported a sudden drop in the export of farmer products, like (soy) beans, shrimp and fish.
As mentioned in our previous blog post, the current decay of the export market forces farmers to sell their perishable products on the local market. However, selling on the local market oftentimes means settling for prices twice as low than what farmers are used to.
In a system ridden with quantity above quality, farmers do not have the incentive to provide better quality because there is no way to stand out. So, high-quality products are estimated at about the same prices as low-quality produce. With export markets at a new low, farmers’ incentives are aggravated. In this case, knowledge equals power; blockchain can play an important role as it potentially allows farmers that produce better quality to stand out so they can receive a fair pay for their extra work.
The agri-food supply chain can be crowded with intermediaries that create a clouded supply chain: farmers do not know where their goods are going, whether they obtained a fair price for their products or even if they are going to get paid for their work. The current pandemic has crashed economies as the needs for certain products have descended to astonishing lows; farmers do not have the certainty that they will sell their goods after acquiring the costs of production.
Farmers’ economic security, however, can be secured through smart contracts that run on blockchain technology. This new form of commitment has the potential to remove intermediaries that disturb the direct interaction between farmers and buyers and paves the way for predefined and automated clauses that ensure economic sustainability. Since settlements in smart contracts are automatically triggered once the agreed conditions are met, farmers can be sure that they will receive payment for the goods they produced for their buyers – unless the transaction is discontinued by both parties involved.
In the end, we can use the technology that is all around us to help those who are needing it the most during these difficult times. If we think about blockchain, the whole concept lies on the premises of transparency and traceability. These two concepts are nothing new; as corporate social responsibility and sustainability grasp the business realm, they are becoming more and more important each day. Before technology, there was no way to ensure ‘transparency’ or ‘traceability’, yet blockchain has emerged as a tool that trespasses borders and gives us the transparency and the traceability that we need. As farmers face the consequences of an unpredicted pandemic, this tool can soften the effects of a situation best described as unprecedented and unorthodox. Ultimately, the implementation of this technology can help build a food system that is more resilient and more just than the one that was subjected to corona and did not stand the test.