Blockchain set to benchmark ag market supply chains

By July 15, 2019 Bitcoin Business
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The word blockchain may make many uncomfortable given its connection to the world of cryptocurrencies where fortunes have been made and lost with the click of a mouse.

But ag businesses are now seriously looking at what it can offer to improve transparency, trust and premiums in markets at home and overseas.

But, just what is blockchain?

Economist with the Royal Melbourne Institute of Technology's Blockchain Innovation Hub, Dr Darcy Allen, said the technology provides a way of re-organising how we record facts that are dealt with on an everyday basis.

"Bitcoin is really a proof of concept for blockchain," said Dr Allen.

Dr Allen explained that blockchain allowed all players in a particular product supply chain to update, approve and track its path from producer to consumer, proving that what is being sold is actually what is labelled.

"It is a managed and maintained decentralised ledger of information about that good," he said.

"The producers, distributors and suppliers all the way to the retailer, all uploading information to a ledger that everyone can see. Each block of information chained to the next and the one before it."

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"Throughout the 20th-century we solved a lot of the transportation costs of a supply chain, said Dr Allen.

"Things like the shipping containers and airfreight and all these fantastic technologies which brought down transportation costs. But now we are looking for ways to bring down the information costs of proving this good is what it says it is.

"Who owns it and all of those questions around the information about a particular good. As cattle move from production to consumer what we do is pass information. And that's costly, there's errors along the way and there's a potential for fraud."

Industry costs

Speaking at the recent Australian Ag Immersive Technology conference in Melbourne, the Head of Agri-Food Tech with KPMG Ben van Delden provided some sobering numbers on the cost of that fraud.

"Food and beverage fraud globally is a $10-$15 billion problem," he told delegates.

Ag insight: Ben van Delden from KPMG

Industry and Corporate Affairs manager with Teys, John Langbridge also spoke about the cost of inspection and the lack of transparency in his sector - an issue that some say blockchain could help solve.

"The current cost of inspection to the industry is about $113 million per year," said Mr Langbridge.

"We also have third party certification where customers want compliance with their standards, so you could probably take that figure and multiply it by four.

"Even importing countries come out and verify. In 2010 when I was with the department [of agriculture] 17 different countries came out to verify the supply chain. They all look essentially at the same thing, but again they don't share anything."

Early blockchain adopters

Some agricultural companies are already trialing blockchain concepts including one developing a process for beef exports to Asia.

Last year the Commonwealth Bank coordinated the trial shipment of a container of almonds from an orchard in Victoria, with every step of its journey from harvest to market and all shipping points in between, tracked using blockchain.

In 2017 Beefledger was launched with the support of the QUT-based Food Agility CRC. with the stated purpose of developing and commercialising an integrated blockchain enabled beef provenance platform.

Problems

While blockchain is seen as providing an effective and economical way of ensuring provenance for primary produce, there is still work needed.

The main issue is ensuring that each part of the blockchain gets correct, reliable and verified information to ensure the complete supply chain it supports can be trusted.

"If that information gets better we think that Australian producers will get much more premium prices for their produce," said Dr Darcy Allen from RMIT.

"We are in an early experimental phase. We have a lot of parties who don't necessarily know or trust each other all the way from the producer to restaurant at the other end. But certainly I think Australian producers should be thinking about this as the future of proving the authenticity of their produce."

KPMG's Ben ven Delden agrees that in the agricultural food supply chains, blockchains are absolutely going to play a key role.

But like Dr Allen from RMIT he see the issue for the future being the quality of information in the blockchain.

"What we advise clients is that is that as you think about these tools it is garbage in [means] garbage out," he said.

"Who are we going to trust to put information into that system? And trust in terms of not just valid use of where it's come from, but accurate quality data.

"I think that as we see more of these block chains come to light, you will find that there will be a higher standard of entry and rules of the game, or code if you like."

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