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How Blockchain is Disrupting the Ag Supply Chain

Food Regulations and Policy, Food Technology

How Blockchain is Disrupting the Ag Supply Chain

The Dirt

There is no doubt the ag industry needs a way to accurately and securely track and monitor its entire supply chain, and it needs to be scalable to handle the needs of one of the largest logistical operations in the world - a feat not for the faint of heart. Enter Blockchain.

Consider the lone chicken.

The modern poultry farm is a vast and complex place, a maze of houses, yards and transportation centers that can easily support more than 14,000 animals at a time. All part of an industry that raises more than 50 billion chickens annually.

But, even in such a large space, there are reasons to pay attention to each individual chicken. Maybe we want to keep track of what that bird was fed over the course of its lifetime. Maybe we need to maintain a record of the antibiotics it was given (or not given) and its associated disease history. Maybe we simply want to prove to the end consumer exactly where that chicken came from and how it was raised.

Because the path from farm to plate today is far from a straight line.

The poultry supply chain starts in the coop: when that chicken is hatched it begins its life on the farm. Then, over the course of the next three to five months, it grows into a mature bird, packing on several pounds of new weight and prepares for harvesting.

At that point, its time on the farm is over and it enters the production chain. Depending on what it will eventually be used for – maybe it will be sold as a whole broiler, or maybe it will be broken up into individual parts, or maybe it will be turned into something entirely different – the chicken is sent to a production facility, processed and sent on its way to the retailer. That retailer, also known as your local grocer, is the last step in the chain, finally delivering that chicken to the end consumer.

That’s a very high-level overview, and even at that level, there are a lot of moving pieces in the process that can cause problems.

Maybe that chicken was not raised in an organic manner but ends up on the wrong truck to be sold as an organic broiler.

Maybe it was fed a high-quality, low-grain diet that cost the poultry farmer extra, but that fact didn’t earn them anything extra at the sale because they couldn’t prove it to the wholesaler.

Or maybe that chicken contracted a disease somewhere along the way that went unnoticed, and it ended up being combined with healthy chickens from elsewhere and contaminating them as well.

Whatever the case, the industry has a problem. It needs a way to accurately and securely track and monitor the entire supply chain, and it needs to be scalable to handle the needs of one of the largest logistical operations in the world. After all, agriculture, on the whole, is a massive industry worth $1 trillion and accounting for 5.4% of U.S. GDP in 2017.

The solution is waiting in a somewhat unlikely place.

A new frontier for technology

The last few years might as well be renamed “the age of blockchain.”

What was, until fairly recently, a subject only well known among tech enthusiasts and cryptocurrency buffs burst into the mainstream in the fall of 2017, during Bitcoin’s epic run-up to $19,000 and beyond.

Seemingly overnight, everyone suddenly had an opinion on cryptocurrencies and the obscure technology underpinning them. Because that’s how blockchain technology got its start in 2009: as the fundamental technology on which the cryptocurrency market is built. Blockchain is defined as: “a digital database containing information (such as records of financial transactions) that can be simultaneously used and shared within a large decentralized, publicly accessible network.”

Essentially, it’s a way to digitally prove who you are and what you have that’s permanent and cannot be altered or forged. The information is recorded on a public ledger to ensure transparency.

When applied to cryptocurrencies, this functionality is very straightforward. Blockchain is a way for me to prove to you that I have the coins I say I do and, when I send them to you, is a verifiable way for you to prove that value has been transferred to you.

But blockchain has other applications across industries that are just starting to come to the surface.

For example, banks are using the technology to better facilitate cross-border financial transfers and speed up digital transactions. Western Union, for instance, has been using blockchain to power its money transfers for more than a year.

IBM is using it to create iron-clad “digital identities” and prevent identify theft.

And governments are even using it to improve public services and crackdown on crime.

But it’s in agriculture that the true power of blockchain technology might fully come to life, enabling all of the tracking and security measures that the industry has been working on for years while simultaneously stepping up to meet today’s consumer demands.

Adapting to a more engaged consumer

“The industry has been moving toward traceability for years, with the advent of natural and organic and so on and so forth,” explains Steve Sands, VP of Protein at Performance Food Group (PFG), one of the largest food distributors in the U.S. “But most of those systems were affidavit based, so they were only as good as the guy who signed the piece of paper saying, ‘I raised my animal this way.’”

That worked for a while, but in the face of new customer expectations and tastes, it just wasn’t enough.

“For us as a food distributor, we want to make sure that the brands that we own are infallible in those claims,” Sands says, “and that led us to introduce an extra layer of infallibility, or auditability, to ensure that we weren’t making claims that we couldn’t back up. In a $20-billion company like PFG, you better be doing what you say you’re doing.”

– Steve Sands, VP of Protein at Performance Food Group

Over the years, PFG has developed a number of processes to help make this a reality, establishing verifiable standards for the farmers it worked with, auditing the records, tracking the DNA of the animals it was purchasing and more. Blockchain is a natural evolution of these efforts.

“I think [blockchain] has different applications for different food products,” he explains, “so it might be better suited to things like produce that travel through the supply chain largely intact but may go through many different hands before ending up at a restaurant.”

That’s opposed to something like a 550-pound animal carcass that will be cut up into hundreds of different products and then combined with hundreds of other products before being shipped out. In those cases, DNA might be a better tool, but blockchain still addresses a need.

“Where blockchain would come in handy is on the live side, because that live animal may trade several times before it gets to the point of slaughter,” Sands says. “Typically, a cow-calf operation is going to try to sell that animal once it’s weaned, and off to a rancher who will put it on grass and let it grow for a year before selling it off to a feedlot. Every time that animal changes hands, blockchain would be very useful because it would be a way to maintain that chain of custody without having to go to the expense of DNA at every step, which you really can’t do.”

And PFG is far from alone in this.

IBM has teamed up with companies including Dole, Driscoll’s, Kroger, Nestle, Tyson, and Unilever on the so-called IBM Food Trust, which is leveraging IBM’s computing platform to improve data traceability and speed up results for all involved. According to reports, the time it takes to trace an individual item from a grocer’s shelf to the field where it was produced has been trimmed from seven days to as little as 2.2 seconds, enabling companies to quickly identify and isolate contaminated supply chains and issue recalls in real-time.

Starbucks is working on a new “bean to cup” program that’s built on the blockchain to promote ethical sourcing in the coffee industry.

French retail chain Carrefour in 2018 launched what it called Europe’s first food blockchain in order to track the one million-plus free-range chickens it sells in its stores every year, with plans to extend the technology to 8 more animal and vegetable product lines in the coming year.

And last Thanksgiving, Cargill expanded its popular “blockchain for turkeys” program to 30 states, offering consumers direct access to information about 200,000 turkeys from 70 farms under its Honeysuckle White brand.

What’s next?

If that is any indication, the potential applications of blockchain technology are broad and the industry is just beginning to scratch the surface. From traceability to verification, to sourcing, quality and more, blockchain stands to revolutionize not only the agriculture supply chain, but what consumers can expect from it going forward.

But questions remain, according to Christophe Uzureau, a blockchain and token analyst with Gartner and the co-author, along with Gartner colleague David Furlonger, of the book “The Real Business of Blockchain: How Leaders Can Create Value in a New Digital Age,” which discusses the pitfalls and possibilities of the technology for businesses.

“Today we’re at the stage of adoption where we’re reaching critical mass,” he says, “so now we need to complete the blockchain in order for it to reach its full potential. We’re moving in that direction, but we’re still only likely to see maturity post-2020, or more likely 2023.”

– Christophe Uzureau, Gartner analyst

In Uzureau’s view, there are five elements that need to be in place before blockchain can truly revolutionize the ag supply chain: trust, distribution, encryption, tokenization, and specialization, all of which the industry has up and running in at least their early stages. The next step, then, is what he calls the “enhanced blockchain,” which is when the technology gets fully integrated with existing ag system, including Internet of Thing (IoT) sensors, artificial intelligence and more.

“That’s the fundamental next step,” he says, “and it’s clearly a challenge, but the potential for what it could mean for the supply chain could be very big. Farmers today have many different sensors and capture lots of data. By bringing all of that information today and using it to make better decisions about the supply chain, even the smallest players in the market could contribute directly to the whole system. It would revolutionize what the supply chain can do.”

Now imagine reconnecting with that lone chicken in your grocery store. On its packaging label, you see a QR code. With your phone, you scan the code and immediately see the chicken’s farm, feed and medical information – the power of blockchain demonstrated for consumers and processors alike.

The Bottom Line

Agriculture holds the power to bring blockchain technology to life, enabling all the necessary tracking and security measures needed in the industry, while also meeting consumer demand for transparency. However, the infrastructure for an enhanced blockchain must still be established in the years to come for farmers, processors and consumers to reap full benefits.

D2D-illustration Bottom Line