Don't Bite the Hand that Feeds You
It’s hard to believe how far agricultural production has come in the last 40 years. Various sectors such as farm power and equipment, plant and animal breeding, fertilizers, animal feeding, disease control, you name it, have successfully adapted to a world where population growth and consumerism are increasing at an all-time high. However, there is one crucial part that hasn’t been able to keep up: trade.
Farmers and ranchers of the mid 1980’s received only 31 cents for every dollar their produce earned. The rest was spent on sowing and distribution and every stage in between. Fortunately for farmers worldwide, technology has elevated agriculture to a level that would leave our underpaid protagonists weeping. Farm productivity has soared in recent decades thanks to intelligent machinery, automated packing houses, farm drones, efficient water systems, robotic scarecrows and the list goes on. For all those who snoozed during Econ 101, this should mean that modern farmers are making the big bucks- more supply, more money. Unfortunately, technological innovations have not been favorable for those on the production side of the agricultural equation. Farm profitably has actually decreased to 16 cents for every dollar earned. Adam Smith may be the father of economics but he clearly was not a farmer. So, where’s the dough?
It’s easy to point fingers at big corporations or blame unpredictable weather patterns but the bottom line is that the actual trade of produce has not evolved to suit modern business practices. Instead, it has remained an industry with an annual value of 3.1 trillion dollars that relies mostly on non-digital interactions such as paper records handshakes, and verbal agreements. These archaic practices have generated numerous problems including, fraud, murky pricing, and a dependence on costly intermediaries.
Throughout the trade process, suppliers and buyers exchange endless paper documentation: contracts, billing, and other trade related data. They are then tasked with reorganizing, presenting, and delivering this paper trail to each other and to third parties such as financial institutes, logistics, and insurance companies. It’s a tedious and cyclical process that, coupled with additional regulatory requirements, becomes a business of its own, with many companies hiring teams of specialists just to get it over with. Paperwork doesn’t just increase the workload it also affects commercial relationships and synchronization between the different bodies involved in agricultural trade.
It is generally accepted that paper trails are not the best way to do business but does that mean that all forms of digital interactions and transactions are efficient and beneficial? Sending emails to your customers and keeping track of your ongoing transactions using Excel and the cloud is not a digital way to conduct trade - it is using digital tools to conduct the same old fashioned trade. Perhaps if the agricultural trade industry was structured differently, these digital methods could be reliable. However, the truth is that for the considerable amount of farmers and commercial buyers worldwide interacting with even more third party intermediaries, it is simply not enough.
Non-digital interactions involve extensive manual intervention. Even when parties share information, they still lack a way to verify the authenticity of documents and understanding of their partner’s business practices. As a result, many companies that engage in agricultural trade tend to rely on trusted intermediaries, even if they increase external transaction costs significantly.
So this brings us back to trade, the last piece of the puzzle to be revolutionized so that our agriculture suppliers can finally get their own bread and butter. Technological adoption in the agricultural industry is higher than ever thanks to the production technology and it opens a door for innovation in trade.
The future of agricultural trade lies in digitization and standardization of the trade process, but not only between farmers and buyers. The entire trade process needs to be digital, including third parties and supportive services involved in the process. A complete ecosystem for agricultural trade, where dedicated sellers and buyers can trade in a trusted, transparent, safe, and secure environment. Does this sound too good to be true? Insert, Blockchain technology.
Creating a digital trade ecosystem that includes several parties is contingent on the giving and receiving of information. From an operational perspective, there's a need to combine several databases into one, a costly task made nearly impossible due to incompatibility of data storing methods of each party. However, the capabilities of Blockchain technology resolve these issues in a revolutionary way.
By using blockchain for agricultural trade, farmers, buyers and third-party service providers from the agricultural supply chain can share business data and trade-related information. The technology ensures validated and immutable information, allows for trust-less trade, and tracks transactions through the value chain with a click of a button.
The one (and only!) thing we can take forward from old-fashioned trade methodologies is fair reimbursement. Mesopotamians knew what they were doing; “You want this bag of rice? Give me something of equal value”. A few centuries later and the increase of printed money, trade remains the center of marketplace and society but farmers are not getting what they deserve. Trade always benefits those who engage, so we ask you to engage. Engage in the revolutionary technology that will support the backbone of our families, homes, and communities. Engage in hard work and profitability. Engage in efficient communication for the sake of mutual advancement.
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