Among the many businesses Blockchain technology can benefit, agribusiness is a sector of the economy with strong chances of being impacted. Agribusiness has great importance in the constitution of the Brazilian gross domestic product and Brazil is one of the biggest players in the global agricultural market. The use of digital currencies in trading and in all agricultural production transactions is of interest to producers, consumers, governments of supplier countries, governments of consumer countries, the financial system and other links, as it can add value and time to all links involved.
Blockchain technology is known as the foundation of the bitcoin system. And what is bitcoin? Bitcoin is, basically, an online digital file that acts like a digital currency. In a bitcoin file, all transactions are recorded in a global index, a kind of decentralized database that records all information, like a digital ledger — something like a notebook where notes are made but not erasable and that boasts cryptographic security.
Blockchain is a technology that allows us to have systems such as bitcoin and other cryptocurrencies, in which the system allows the tracking of some types of information sent and received through the web. As the name suggests, Blockchain is made out of pieces of code web–generated that carry connected information (like blocks of information in a chain). Each block of the chain carries its own code and the code of previous blocks. As a result, to invade and modify a block in the chain, it is necessary to invade all previous blocks, making it increasingly more difficult for eventual data manipulation.
In times when increased agricultural production, environmental protection, rational use of water and healthier products need to go hand in hand, information about product traceability and their respective production techniques is of even greater importance. As the market matures, this information becomes increasingly more relevant.
Currently, the traditional chain of agricultural products does not have a secure way of verifying that all products were produced under the conditions specified by the buyer. Suppose that a large overseas supermarket chain wants to buy organic produce that comes only from a specific region. As much as markers or sensors for the detection of chemicals or aspects outside of regulations may be included at certain points, the degree of reliability of the data is still small. Information may be manipulated or omitted. Moreover, it is often difficult to detect where such manipulation may have occurred.
Suppose that, in a city in northeast Brazil, Matheus, an export-type grape producer, uses a Blockchain-based contract code and, because of that, records all the procedures performed on his crop, from fertilization, chemicals, production climate conditions and date of harvest, among others. The information included in the Blockchain contract cannot be changed. In addition, all information is properly audited and permitted. When he puts his production up for sale, all of this history goes with it. During exportation, all information regarding the shipping conditions (wait period, storage conditions) is also included.
Across the ocean is Carl, a manager of a large supermarket in England, who wants to have on his shelves table grapes grown in northeastern Brazil, whose region is known to have very high insolation and irrigation control, resulting in very sweet grapes. In addition, he would like to make sure that chemicals banned in England are not present in the grapes. Through Blockchain contracts, Carl would be able to identify Matheus’ products and purchase these products safely and with quality. Additionally, Carl would agree to pay a higher price for the product, as his clientele has a more demanding profile and the conditions demanded by his consumers would be verifiably satisfied. If there was any attempt to manipulate information, such irregularities could be detected and appropriate actions taken.
- Audience: uses the bitcoin system base, where anyone can participate and data is not traceable;
- Allowed: there is a supervisor, who controls who can enter data in a Blockchain or not. They are responsible for checking the identity of the members who make all the records. In this case, if there is any kind of fraud, it is possible to detect and take the necessary measures.
Possible Use Cases of Blockchain in Agribusiness
Although traceability is, apparently, the most striking term for the use of Blockchain in agriculture, there are some other items that allow us to believe in the viability of the solution in the field. In addition to tracking, there are items such as chain optimization, use in agricultural insurance contracts, agribusiness transactions and more.
Because the Blockchain technique is unalterable and marked at all points in the product chain, it is possible to check the long journey from production to table by tracking information — from production techniques, products used in cultivation, harvest date, time between the exit from the farm until it reaches the final consumer. With Blockchain, all of this information can be obtained in seconds and extremely reliably, delivering customer satisfaction and security.
Also, in terms of traceability, Blockchain:
- Helps to reduce waste, as products are no longer sold only based on their appearance. Additionally, it helps deliver fresher products, since grocers know the source and period from harvest to shelf;
- Provides data on when a product was harvested and techniques and products used in the production;
- Provides reliable information on product origin and date of harvest. Through Blockchain –contracts, this data needs to be correctly included in transactions.
Food Supply Chain Optimization
In addition to allowing traceability of all parts of the agricultural production process, the time needed to determine the origin of products is massively reduced. Taking an example from an international department store, to track a load of mangoes from Brazil, it can take up to a week to get all the process data. With a Blockchain frame mounted, it can be reduced to seconds. If a product does not meet the quality standards required by the purchasing company, the response checking time is very important in order to isolate the product much faster to avoid consumption or even to block business with suppliers that do not meet the company’s quality standards. In addition, the technology can:
- Help producers set their prices and optimize the quantity of their production;
- Correct the price imbalance by recording transactions in real time;
- Facilitate negotiation between the parties involved;
- Provide updated supply and demand information to stakeholders.
In agriculture, rural insurance is available to protect crop gains from environmental damage. Usually, this type of negotiation is an extremely slow process and a burden for both landowners and the financial system. At the time of any claims payments or other occurrences, the task of estimating amounts and reporting losses allows a large gap for fraud, as well as constitutes a traumatic process. Using a process configuration based on Blockchain contracts, all the history and events that have occurred can be obtained instantly and verifiably, making the whole process easier for both the farmer and the finance agent. In addition, there are other situations where technology could help:
- Detection of tracking of cargo, geographical reference points and basic carrier compliance information;
- Greater visibility throughout the supply chain;
- Information on price, date, location, quality and state of the product;
- Documentation security, action point detection and receipt documentation.
In terms of business transactions, the Blockchain technique in agriculture exists to simplify the processes of the transactions themselves, but also to balance out the level of information and data access in the business field, levelling out information of big or small producers, opening up new markets or allowing pricing to be agreed upon according to the current market. It is estimated that billions of dollars are wasted each year worldwide due to the fact that small farmers do not have access to the largest markets, failing to trade many of their products due to lack of information. Therefore, with Blockchain, it would be possible to:
- Assist farmers in selling their commodities by reducing the price of transaction fees;
- Avoid coercion in price generation and retroactive payments;
- Provide new opportunities to payments and microfinance deals;
- Provide lower cost and faster payment options to agribusiness chain participants.
The Blockchain technique has proven to be the technology that can reengineer many existing processes, including agribusiness. The technology that has won the world as the basis for the exchange of money among users of the cryptocurrency system may be the solution to ensure traceability, transparency and reduce bureaucracy in Brazilian agribusiness.
Even in government terms, Blockchain would allow the country to guarantee the quality of its products internationally, preventing fraud problems at points in the chain from being detected late and damaging the reputation of national products. There was a recent case in the country, Operação Carne Fraca (Operation Weak Meat), where the national image of livestock production was greatly affected internationally. In the case, some Brazilian meatpackers acted illegally, giving the false impression that the entire Brazilian livestock production chain did not comply with sanitary requirements. A Blockchain of all involved could demonstrate that this was a minority, demonstrating that the negotiation of the vast majority of processes was not tampered with. With this, it would be possible avoid the huge image tarnish of the country on this issue.
In other words, the technique of Blockchain seems to have a lot to contribute to Brazilian agribusiness. This technology is one of several that Venturus is currently working on. Here we are already studying the use of the Blockchain technique in its different possibilities and agribusiness is part of the focus of these studies.