The blockchain: opportunities and challenges for agriculture

The blockchain is being heralded as a new approach to data storage and transmission that has great potential for agriculture, both for agribusiness and consumers. It is undoubtedly attractive, combining cryptography to guarantee the integrity and permanence of data, a peer-to-peer architecture that avoids centralising intermediaries, and principles of collective governance where each player can access transactions and guarantee their legitimacy. As such, the blockchain promises increased trust, transparency and fluidity of transactions within multi-stakeholder systems.

More transparent traceability and efficiency

Not surprisingly, issues of traceability in the supply chain are the first uses being explored: blockchain is above all a ledger technology. It’s an effective tool for verifying proof of existence, full records, and the ownership or origin of exchanged information.

Food giants Nestlé, Tyson Foods, Unilever and Walmart have already joined up with IBM to explore the potential of blockchain for traceability. The French group Carrefour is also counting on it for its chicken quality line, as well as eight other quality lines, such as eggs (from hens reared without antibiotics), oranges (without pesticides after flowering), tomatoes (without herbicides) and Norwegian salmon (without antibiotics or GMOs).

The aim is total traceability: to store data about the location of production and slaughter, product storage and transportation in such a way that it cannot be tampered with, allowing one to retrace the steps to the source of any problem more quickly. As the blockchain is linked with the connected objects, it also facilitates real-time alerts (failure to respect a designated temperature, for example).

Furthermore, the blockchain can be used for certification. By integrating smart contracts (computer programs that run autonomously as soon as certain criteria are met) the technology promises to reduce procedural delays and costs, and systematise controls. The aim is to bring this traceability all the way to the consumer to restore public trust, which has taken a beating as a result of a succession of food scandals, particularly in Europe and the United States.

Bureau Veritas, an international certification company, recently presented Origin; the ‘first blockchain-based label to give consumers a complete end-to-end proof of a product’s journey, from farm to fork’. This is done by making data available to consumers through QR codes placed on products.

As mentioned, the blockchain is a way to earn trust and therefore develop greater synergy between players in the same network: each player feeds into his or her data and has access to other members’ data without anyone having exclusivity. ‘The use of blockchain only makes sense,’ says Emmanuel Delerm, project director at Carrefour, ‘if several people work on it. Its distributing and decentralised character is what is essential.’

From traceability imposed by public authorities, we move to a ‘value added’ traceability for companies, embracing a logic of strategic management of the value chain. The PlayitOpen start-up, for example, offers companies a web application associated with the Ethereum blockchain, reporting on their commitments to sustainable development during the production of goods and services. These commitments become digital assets (sponsorship funds, carbon, trees, quality certificates, etc.), which can be traced and exchanged. This tool was mobilised by the PUR Project company through the ‘International Platform for Insetting’ for an action aimed at supporting agroforestry.

A transaction accelerator

In early 2018, the Louis Dreyfus Company, Shandong Bohi Industry, ING, Société Générale and ABN AMRO announced they had completed ‘the first full agricultural commodity transaction using a blockchain platform’. This transaction of agricultural commodities included a full set of digitised contract documents and automatic data-matching, thus avoiding task duplication and manual checks. The transaction demonstrated significant efficiency improvements for all participants in the chain. It reduced the time spent on processing documents and data fivefold, introduced real-time monitoring, a shorter cash cycle and reduced the risk of fraud.

As an open register recording of who sells what, who buys what and at what price, the blockchain offers solutions to small producers who struggle to understand markets and benefit from fair remuneration. The peer-to-peer network can enable transactions from sellers to buyers without intermediaries and therefore without commission.

AgriLedger, a philanthropic initiative, applies the technology to create a circle of trust around small farmer cooperatives in developing countries. The company offers a mobile application connected to the blockchain to record transactions, a service bundle to plan product distribution more efficiently through a better understanding of markets, as well as secure identity management and a value ‘safe’, allowing small producers to access the world of banking services, micro-payments and loans.

Another example in the area of facilitating access to loans is Twiga Foods, which offers a mobile procurement platform for sales outlets, kiosks and market stalls in Africa. It has collaborated with IBM in Kenya to offer a pilot micro-credit application for food vendors. Traders enter their procurement purchases from mobile devices. Their creditworthiness is assessed and then blockchain technology is used for the administration of the loan until acceptance of repayment terms.

The blockchain and smart contracts for connected farms

By offering lower management and transaction costs, the blockchain is seen as a technology that provides an alternative to traditional agricultural insurance. It allows the development of index insurance, particularly in developing countries: compensation could be triggered for all farmers in a given area without expert intervention as soon as an indicator threshold is reached (such as the number of days of drought), under conditions defined in advance and written in a blockchain. This development is still in the idea stage, however, and still needs to be tested.

Finally, blockchains and smart contracts will definitely play an important role for tomorrow’s connected farming, whether for communication between connected objects and micropayment management linked to the actual use of objects (as proposed by the Filament start-up, for example), or to ensure greater transparency in the sharing of agricultural data. The issue of managing farmers’ consent in the use of data is currently being explored in France by the CASDAR project – an agricultural and rural development programme – (‘Multipass’ project), which will test the blockchain as a way of building greater trust.

A technology that needs to mature

There are many potential uses of the blockchain in agriculture, but there are several area in which we must remain vigilant:

The blockchain can only work if all the links in the chain feed into it and decide together how it will evolve. By eliminating certain intermediaries, new structures of power will be established and roles will be redistributed. A balance needs to be struck.

The legal framework of the blockchain remains vague. In the case of developments in the financial sector, there are still questions about the legal value of the ‘ledger’, about responsibilities in the event of poorly designed smart contracts, and about the adaptation of tax and commercial regulations.

Technologies come into play, but questions still remain about scaling up. Today, the blockchain exists mainly through proof of concept addressing a limited number of users. It needs to prove it can perform (speed of transactions, storage capacity, volume of the ever-growing chain) for a wider audience. There are also questions of interoperability, in particular regarding the integration of blockchains into existing information systems.

We also need to improve our understanding of the blockchain. In order for it to be used transparently, companies will need to understand its benefits while remembering that this type of technology is not a panacea. ‘It can’t do everything by itself,’ says Alexandre Stachtchenko, co-founder of Blockchain France. ‘While it knows how to manage digital assets extremely well, as soon as physical products come into play, it becomes necessary to add QR codes, connected objects, sensors… The blockchain is only an architecture that catalyses all these technologies.’

In the end, the blockchain is one technical option among several others. There are big differences between public blockchains that revolutionise relationships of trust and private blockchains that remain ‘under control’. Furthermore, there are many situations where this technology is not appropriate. It is therefore important to have a clear vision of the needs and to understand how the blockchain can contribute to these needs.

Supporting companies in the digital transition of agriculture

The explosion in new digital technologies such as the blockchain raises many questions for economic actors who need to adapt. The AgroTIC Chair, a French ‘business chair’ type of mechanism, was created to build strong links between the world of research and business in order to support the digital transition of agriculture. Since November 2016, three French agricultural education and research institutions (Montpellier SupAgro, Bordeaux Sciences Agro and Irstea) have joined forces with 24 ‘sponsor’ companies from the world of farming and digital technology, as well as technical partners, to lead actions of collective interest contributing to the development of digital agriculture.

At the request of its members, the AgroTIC Chair, therefore, took an interest in blockchain technology, in order to study its opportunities in agriculture, resulting in a study that is available in both English and French. After outlining the basic principles, the study sheds light on the key issues facing this technology by presenting different cases of its use. It also highlights the obstacles to its adoption and underlines the fact that it still needs time to mature in order to go beyond the stage of ‘excessive hopes’ to reach that of ‘real advantages and concrete applications’.

Beyond the technological aspects, the blockchain raises broad questions on the digital transformation of a particular sector (the roles participants play, the definition of added value and the evolution of production and distribution networks). Given the need for strategic thinking, it is important for the various players to work together to take better charge of the blockchain issue. For this, collective experimentation and demonstrating proof of concept is without a doubt the best approach.