According to experts, the total investment in blockchain-innovative projects in the agricultural industry will grow from USD $ 41.2 million in 2017 to almost USD $ 430 million by 2023.
Blockchain is already changing the way it conducts business in the industry, reducing the risk of fraud, increasing the speed of transactions, helping farmers control and analyze crops, and much more.
We list the main areas of application of blockchain technology in the agricultural industry:
Optimization of food supply chains
Providing information on the origin of food is essential to ensure customer loyalty and trust. Blockchain, in fact, can help track the origin of a particular food product. At the same time, the tracking process can take only a few seconds and its result will be guaranteed error-free.
In traditional supply chains, food retailers do not have an effective way to ensure that all products are grown under the conditions specified by that supplier. For this reason, retail giants like Walmart, Unilever, and Carrefour are already using the blockchain to track where food comes from.
In addition, the time required to track the origin of food is also significantly reduced. Taking Walmart as an example, it took almost a week to trace the origin of their mangoes. Through the blockchain, this time is reduced to 2 seconds.
In the event that the product does not meet retail standards, limiting the time required to track the source of the product is crucial, as it enables retailers to isolate the product faster, minimizing the risk of harm to people.
In 2016, the world's first local transaction for the sale of wheat by a farmer, registered on the blockchain, was completed. Pilot projects are now periodically launched to track food quality, origin and supply chains, real-time payments, digital escrow and supply chain financing.
At the end of 2017, the first transaction on the sale of agricultural products using the blockchain for the sale of soybeans from the United States to China was completed. All transaction documents, including contracts, letters of credit and government certificates were digitized, and the data was automatically compared in real time using their blockchain platform, which avoided duplication and the need for manual verification. This reduced the processing of documents by five times from normal time and reduced the total transaction time by half, from two weeks to one.
Transactions between suppliers and consumers
The blockchain in agriculture has a unique opportunity to help not only simplify the process of conducting transactions, but also to level the playing field for small farmers and crop producers, especially from poor regions.
It is estimated that around the world every year USD $ 940 billion is spent on food. This is partly because manufacturers from less developed countries do not always have access to wide markets, which makes them unable to sell all their products.
Another advantage of the blockchain is the ability for agricultural producers to set prices more efficiently and effectively. This allows you to manage their products in accordance with the demand for their products.
Creation of digital trading platforms
One of the challenges for commercial food companies is finding enough quality ingredients. Farmers may not know who the big customers are or what the end customers are looking for. Historically, intermediaries controlled a significant percentage of profits. Digital trading platforms allow buyers and producers to connect directly, increasing the amount of profit that goes to farmers and investors to invest directly in food-producing farms.
Blockchain technology is ideally suited for implementation in such trading platforms due to a wide range of capabilities as well as high reliability of information.
Agricultural finance management
The lack of transparency in credit history and contracts, as well as the availability of financing are some of the significant problems that small food producers face. Today, financial services not allow small farmers to invest in agriculture and not help them to overcome liquidity constraints.
As a result, it becomes difficult for buyers to pay farmers, forcing small farmers to sell their products at lower rates. Thanks to the blockchain, the process of financing agriculture is becoming more transparent and fair, but at the same time, it provides general access to management.
Blockchain-based financing of transactions has great prospects for agribusiness due to its transparency and speed of execution.
Small farmers all over the world are trying to access financing through traditional financial models such as loans. The lack of a significant credit history, land title documentation, and other problems make it difficult to access bank loans, so small farmers are often forced to borrow from lenders at much higher rates.
Agricultural entrepreneurs with technical knowledge now use blockchain to create their own cryptocurrencies and raise funds for their agricultural business.
Despite the fact that the blockchain is much more than just cryptocurrency, payments are still a critical issue for small farmers and other agricultural enterprises.
Currently, there are practically no global payment systems that can satisfy all the existing needs of agricultural market participants. Market participants need to have modern decentralized payment systems with which they can make quick payments to their employees, distributors or suppliers, send money to local or international bank accounts, and accept payments from local customers in cryptographic or fiat currencies.
In agriculture, smart contracts have a unique implementation in the form of helping farmers to insure their crops and demand damages from insurance companies. This is usually an excruciatingly slow and burdensome process, both on the part of the manufacturer and the company that insures them.
Unpredictable weather anomalies make it difficult to correctly assess and quickly report the exact losses that they cause. This leaves room for fraud and turns the process into a real nightmare.
By concluding specialized contracts using the blockchain, claims for damages can be caused by changes in weather conditions that meet certain criteria, simplifying the process for farmers and insurers.
Companies that buy or invest in agricultural products are interested in obtaining product information before making a purchase. This can include everything from the level of salt and sugar in tomatoes, which can affect taste, to the collection of health information that can help banks and others predict if the farm will be able to repay the loan.
The industry needs a high-quality and operational data exchange tool that combines data from different sources and facilitates access to data for banks, insurance companies, retailers, agricultural suppliers and government agencies. One of the many advantages of having a large number of different types of data related to agriculture in a decentralized data exchange is that it provides improved access to finance for farmers, which in turn helps them buy seeds and other materials to increase production.
Quality control of food products
Demand for organic, local food is constantly growing. The blockchain allows consumers to check the path of their product, tracing it from the farm to the table.
Moreover, it also provides information about when the product was assembled and manufactured, as well as who produced it. This goes so far as to show consumers from which area their beef, the quality of livestock nutrition, etc., in a matter of seconds.
Since the information recorded on the blockchain is unchanged, it is reliable and excludes the possibility of falsification.
In agriculture, the blockchain turned out to be a technology that can reorganize many existing processes - from calculating the value of transactions, tracking the origin of food and consumer demand to creating new markets.
Given the rapid development of this technology, it has become necessary to keep abreast of the latest developments in this area in order to get ahead of its competitors.
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