MARKNetwork Blockchain: Use Case Agriculture
Can blockchain solve the hunger crises we are about to hit?
The total rural population across the globe is near about 3.4 billion. Out of this, around 2.5 billion rural dwellers are earning their livelihood from the agricultural sector. Despite one-third of the world’s population being involved in producing food to suffice the global needs, 725 million people still suffer from hunger.
The challenges in the agriculture sector are spread far and wide!
For developing countries, agriculture (see Wikipedia) has proven to be a potential driver of economic growth. The sector is known to have helped reduce poverty and increase the annual income per rural family over the last few centuries. In the developing countries, agriculture has contributed almost 30% to the gross domestic product (GDP). Realizing the contribution of agriculture toward the fortification of the global economy, World Bank Group financed the sector with US$ 6.8 billion as per the 2018 IBRD/IDA commitments.
What concerns both developed and developing countries is the steep drop in the number of skilled workers in the agriculture sector. The employment in the sector has dropped down from 43. 247% to 25.957%. Although some of it is due to automation there are other reasons that are fueling the rapid decline in the working adult count of the farms.
Let us have a look at the reasons too.
While in the US the global trade-wars are hitting back the farmers, there are countries like India where 85% of the farmers who are earning the only US $1.5 per day. Despite government subsidiaries and ‘relief’ grants, the farming distress is expanding. The system which helps farmers monetize their produce is absurdly flawed and farmers are receiving only 40% of the price that a taxpayer actually pays.
Agriculture driven growth is a potential risk.
Blockchain torch-bearers believe that with efficient management and record keeping a humongous growth can be achieved in the agricultural sector. With customized Distributed Ledgers and smart contracts, the inconsistencies of the legacy systems can be eliminated and it will also help in the development of a transparent peer to peer set up between farmers and the consumers. This is just one facet of the solutions blockchain has to offer, in the due course of the article we are about to come across some brow-raising practical use cases.
Parity Pricing System
Parity pricing system was introduced to the US agro-economy in the 1900s. This was introduced to ensure the agriculture produce market pricing would change in accordance with the changing prices in the production. This is exactly how the other economic contributors also work. Implementation of parity pricing would preserve the real value of wages for farmers. Despite multiple attempts to successfully implement parity pricing, by 1983 it was completely phased out.
Another crucial aspect of the pricing system is agricultural dumping. The governments are exporting products and commodities at prices lower than the cost of production which is crippling the farmers.
According to the Institute for Agriculture and Trade Policy report of 2015, wheat was exported from the US at 32 % lesser than the cost of production. Dumping poses a serious threat to US producers where 90% of the market is controlled by just 4 agricultural commodity trading corporations.
The cost of dumping is paid by the farmers alone. Mexican producers were hit hard by the US dumping towards the end of the 1900s which cost them around $12.8 billion (in 2000 US$).
There is a wealth of information regarding government policies, global markets, and local markets but the farmers do not have transparent access to this data. Utilization of blockchain based IoT systems can help the farmers to track their produce, decide the market pricing according to the cost of production for the establishment of a fair price system.
The pilot blockchain-project by Ministry of Commerce and Industry and Eka Software Solutions in India is trying to digitize the coffee producing sector. The platform intends to 300 farmers holding 3000 acres of coffee plantation will be participating in global trade over the blockchain powered e-marketplace.
Improvising the Supply Chains
In 2016, the US agricultural supply chain learned an important lesson. The California nut shipment thefts led to an aggregated loss of $4.6 million spread over 31 reported cases in 4 years. As the industry was surviving without a track and trace supply chain, none of the shipments could be tracked. This theft was done by high-tech hackers who hacked into the cargo assignment websites and redirected the shipments.
According to the recent stats, food and beverages are among the most-stolen good in the US. In 2015 alone 28% of the 881 cargo thefts pertained to food products and out of it, the state of California accounted for losses of near about $18.7 million.
From land rights to produce selling the existing supply chain is utilizing legacy systems which are marring the transparency for the farmers. The system is in need of a system that is ideal for farmers of any scale where they have access to improved agricultural practices, where they can secure their key commodities. Such a platform will reduce the volatility and uncertainty of income for the farmers.
Adopting better technologies like blockchain promises the supply chain remains immutable and the product can be tracked in real-time thus optimizing the support system significantly.
Control the Farm Inventory wastage
Every passing year the farm inventory wastage stats are expanding. According to an applied case study in a North Carolina farm, approximately 65% of the unharvested crop was somehow not suitable as per the market specifications.
Around 57% of the estimated produce was contributing to farm level loss. As the farmers are not aware of the current market demands, they are not able to meet the requirements of demand-supply cycle even if the product is ready. Developing strategies that involve high-end technology promises that the wastefulness in the supply chain goes down. Utilization of a blockchain based platform ensures that all the data is recorded on the digital ledger in real-time without any chances of getting distorted. It can become a potent channel of record-keeping and instant communication so that the farm wastage is curtailed.
Projects like Agriledger are providing the stakeholder’s right tools to ensure digital identification, access to latest information, traceability, financial services support along with record keeping measures to make the existing set up efficient and lucrative for millennial farmers.
Meet the growing demands
The food demand is expected to grow by 59% to 98% by the end of the year 2050. There is an increased pressure on farmers to produce more crop and governments are under pressure to increase the amount of agricultural land. Along with that, the need for fertilizers, pesticides, irrigation facilities and different types of subsidies is bound to grow.
A potential solution to the upcoming challenges is to have advanced logistics, trackable transports, storage controls in real-time to make sure the food is distributed or exported uniformly to the locations where there is a dearth. There must be provisions where the farmers can demand financial help from government bodies and instead of inspecting the farming sites, the officials verify the IoT data over a trustless platform. To meet the growing needs, the system requires a blockchain based platform where the agricultural suppliers efficiently and transparently manage all of their inventory.
The distributed ledgers offer a perfect record keeping and monitoring platform that cannot be hacked or tweaked thus it helps in the creation of a single source of truth.
Projects like AgriDigital are offering farmers commodity management solutions where the farmers and consumers can manage their contacts, inventories, deliveries, and payments in a secure manner. Shifting the logistics burden to such platforms ensures the farmers focus only on the quality and quantity production.
Access to subsidiaries
By 2012 the farmers in major food-producing countries were receiving the US $486 billion as subsidies. These countries contributed 80% of the global agricultural value to the chain. But the challenge here is that the subsidiaries are not equally distributed among the farmers. While the EU spends $106 billion as agricultural subsidiaries, North America crosses $45 billion. For government bodies to gain better oversight into who is receiving these subsidiaries is a challenge and that is why the farmers suffer. These price supports are very critical for the farming sector, especially in the developing nations.
After using blockchain, the government, as well as the farmers, will be able to track the subsidiaries transparent so that there is maximum utilization of the grants. Such a system will ensure the economic footing of agriculture will strengthen and the market conditions will become better without bloating the prices of the fresh produce.
The agriculture sector is receiving a lot of support from World Bank, scientific organizations, engaged platforms (see RightToFoodAndNutrition.org) and government bodies but as the farmers are rurally placed, they do not have access to the single source of information they can trust and the medium over which they can engage with the stakeholders. Blockchain ensures that the existing system of agriculture sector become transparent, better organized and efficient so that no corporation can monopolize what the farmers will receive. MARKNetwork is working with a mission to empower the farmers so that they receive their due share for every single grain they produce. We are looking forward to the development of customized blockchain solutions that could appropriately address the challenges of farmers and the entire set of stakeholders.
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