Digital innovation: Blockchain’s disruptive potential in ACP value chains

In recent years, new digital technologies such as blockchain have emerged, providing exciting opportunities for improving the ease of doing business in the agricultural sector of ACP countries.

Fisherman are using blockchain technology to increase the traceability of their pole and line caught tuna © Provenance

Blockchain, an emerging technological innovation, is a method of documenting data via a digital ledger that records and verifies transactions, agreements and contracts. The technology allows immediate transfer of digital assets and reduces – or completely removes – the need for intermediaries (e.g. banks and other financial service providers). With this decentralised approach, blockchain helps stakeholders involved in a supply chain network or contract farming scheme – from the farmer, the wholesaler, the financial service provider, to the supermarket – to trade more quickly and in a transparent manner. By eliminating the need for intermediaries, the evolution and uptake of the technology will disrupt banking, stock exchanges, and insurance provision and, as a result, is likely to completely change the way we do business in coming years. Nevertheless, in agriculture, there is currently limited knowledge and capacity for its adoption and use, particularly in ACP regions.

Though blockchain for agricultural value chains is still relatively new, the attraction of the technology is that it enables efficient and cost-effective business management, instant payments and helps stimulate innovative value chain partnerships. For example, a farmer can negotiate with an off-taker via a blockchain-enabled platform such as a mobile app, when they have produce to sell and the off-taker, in turn, can rapidly transact with a distant wholesaler. The advantage to all is that payments can be made electronically, with or without a bank, and transactions are tracked and validated. If a bank is not involved in making payments, then digital or crypto-currencies such as bitcoin, are also used.

Digital ledgers

Paper-based records, verbal promises and complicated agreements result in significant loss in crop value from harvest to the point of sale. However, with the advent of blockchain, these issues can be overcome by having a shared and secure digital ledger. This approach has been effectively implemented by AgriLedger, a social enterprise project established in 2016 to provide digital solutions for smallholder farmers.

The company has developed an immutable digital ledger to record the journey of produce through the supply chain, thereby guaranteeing authenticity and quality. Consumer trust is improved as the produce origin, journey and safety is traceable from field to fork. In addition, farmers are able to use the digitised ledger for better record keeping and proof of income, which allow them to gain better access to financial services. As all agreements within the supply chain are transparent, corruption is reduced and farmers receive improved prices for their produce.

Fair trade

Using blockchain, and mobile and open data, UK start-up company Provenance has developed a traceability system to provide greater transparency in the food chain. Established in March 2014, over 200 retailers and producers in the food and drinks industry are using the software service to prove the origin of their products. Provenance works with over 12 pole and line certified fish producers in South East Asia to track fish through the supply chain for Japanese, UK and US markets.

The company’s simple software system for sharing verified product information also helps to reinforce the work of awards bodies and sustainability standards organisations, such as the Soil Organic Association and FairFood, to make certification easier and support fair trading. "What we see as really exciting with blockchain is that there is finally a method of gathering data from far-flung areas where products are being produced and having that connected to an open ledger that isn't governed by anyone... So the information is committed in the ledger and can also help people who are already gathering that information – such as certification providers – to do so in a more interoperable way," says Provenance CEO, Jessi Baker.

Bext360, a US-based start-up, is also using blockchain to bring greater prosperity and equity to coffee farmers and improve efficiency in the supply chain from bean to brew. The company has built a machine that analyses and quality grades coffee beans on the spot at farms in Africa. The data is then entered onto the blockchain and can be viewed by buyer and seller alike, who can transact instantaneously with instant payment for farmers.

Whilst blockchain undoubtedly has the potential to impact agricultural businesses in developing countries, Hervé Pillaud, from the Chamber of Agriculture of Vendee (France), speaking at a recent CTA ICT4Ag workshop, insisted that though the technology can facilitate efficient transactions, what is of upmost importance is that mutual trust exists between business partners and that the contents of smart contracts are fair, particularly for farmers.

Despite the advantages of the technology, it is evident that much more needs to be done to educate value chain actors, entrepreneurs, and policymakers on the opportunities of blockchain in order for its benefits to be fully realised in ACP regions. A stronger adoption of ICT in the agricultural sector, notably by agribusinesses and farmer cooperatives, will be inherent to its use. However, Sheena Raikundalia of IntelleCap Advisory Services, which provides business solutions to social enterprises, also acknowledged that, “While the complexity of blockchain can put people off, it is still possible to appreciate the benefits.” 

Following CTA’s ICT4Ag Outlook workshop that partly focused on blockchain, the Centre will initiate some follow-up actions in this area. CTA is also looking for collaboration with interested institutions on this topic.

For more information about the ICT4AgOutlook discussions on blockchain visit: https://tinyurl.com/yavhuslu

The Technical Centre for Agricultural and Rural Cooperation (CTA) is a joint international institution of the African, Caribbean and Pacific (ACP) Group of States and the European Union (EU). CTA operates under the framework of the Cotonou Agreement and is funded by the EU.