How Blockchain Could Disrupt Agriculture

July 19, 2018

Written By Adam Buckallew

Frank Yiannas walked into his staff meeting with a package of sliced mangoes. As he set it down on the table, he looked at his team of Walmart colleagues and said, “The traceback study starts right now. Hit the clock.”

Yiannas wanted to know from which country the mangoes came and the name of the farm where they were picked—the type of crucial information needed when tracking down potential sources of foodborne disease outbreaks.

“We timed how long it took to get through each point in the food system all the way back to the farm,” Yiannas, who serves as Walmart’s vice president of food safety, shared on the company’s Outside the Box podcast.

The process took six days, 18 hours, and 26 minutes to track the origination of the packaged mangoes. It involved contacting the supplier, requesting paper records and reaching out to the importer. That’s considered fast by current standards, but Yiannas wanted to do better.

In an effort to accelerate the world’s largest food retailer’s traceability capabilities, Walmart began working with IBM on ways to digitize the journey food makes on its way through the supply chain to the retailers 12,000 stores. The collaboration led to the use of blockchain, the recordkeeping technology made famous by the cryptocurrency Bitcoin. The result?

“We’ve gone from nearly 7 days to 2.2 seconds in the ability to track food back to the farm,” Yiannas said. “And not only do we track it back to the farm, but now because we’re capturing that information on blockchain, we have additional information and insights at each point in the chain.”

“That’s food traceability at the speed of thought — as quickly as you can think it, we can know it,” he said.

What is Blockchain?

Still very much in the early stages of its technological development, blockchain was launched in 2009 as the accounting method behind Bitcoin. While the details of the technology are complex and a formal definition has yet to crystallize, it’s broadly defined as a shared digital ledger system for tracking anything of value across a decentralized network of computers.

Individuals or companies use blockchain for peer-to-peer transactions of currency, commodities and data. The ledger is encrypted so that only parties allowed to view it may do so. Once a transaction is documented in the ledger, each computer linked in the network saves an identical time-stamped copy of the record. Each of these “blocks” of data are uniquely encoded and non-replicable. As new entries are added to the ledger, the information is shared across the network in real time, enabling near-instant verification and transfers.

So long as the coding behind a blockchain is written correctly, its information can never be deleted, reversed or edited—guaranteeing the legitimacy and trustworthiness of the data. All participants in the ledger share access to a secure, confidential exchange with no need for third-party validation.

Brigid McDermott, vice president of blockchain for IBM, compares the irrevocable nature of the technology to completing a crossword puzzle in ink rather than pencil. “When you do a crossword puzzle in pencil, your friends are like, ‘Did you do it? Did you cheat?’ You do it in pen, they know whether you crossed it out or not. That’s what blockchain does. It records in a way that everybody trusts the information.”

The breakthrough of being able to share records of every event or transaction within a supply chain on a distributed ledger has captivated the attention of businesses around the globe. IBM is working with hundreds of companies to unlock the potential of the technology.

“Blockchain changes what is possible because it’s about trust…it will transform transactions the way the Internet has changed communications,” McDermott said.

Change is Coming for Ag

A recent report from Farm Credit lender CoBank stated interest from the agribusiness sector in distributed ledgers is “rapidly growing” as companies recognize the technology’s potential to “lower transaction costs, optimize logistics, increase traceability, and enhance food safety protocols.”

The International Data Corporation forecasts worldwide spending on blockchain solutions to reach $2.1 billion in 2018, and food giants like Unilever, Dole, Kroger, Nestlé and Tyson Foods have joined with Walmart and IBM to identify new areas where the technology can improve the supply chain all the way back to farmers and ranchers.

Last December, global commodity trader Louis Dreyfus Co. sold a cargo of 60,000 tons of soybeans to the Chinese government using a blockchain platform. It was the first ever agricultural trade of commodities processed by the technology. The company said the time it took to process documents and data related to the trade was reduced significantly. What normally would have taken two weeks was completed in one.

Automating administrative processes and paperwork through blockchain simplifies transaction settlements due to both sides of the deal being executed simultaneously. Since all parties receive matching sets of paperwork with no reconciliation or intermediaries required, opportunity exists to cut costs and speed up the supply chain.

Tracking bulk commodities could also reduce the likelihood of fraud. The United Nations estimates food fraud costs the world economy more than $40 billion per year in illegal trades. The CoBank report suggests blockchain tracing could be linked with DNA testing to create a more accurate traceability system capable of aiding in investigations of illegal diversion, tax evasion, misuse and adulteration in the food chain.

The way traceability in the food chain works today, farmers, processors, distributors and retailers all handle their own records, many of which are kept on paper copies or stored on closed systems. Walmart’s Yiannas said that makes it difficult to track the provenance of foods and handle recalls when each segment is handling its business in its own way.

“What we hope to do with blockchain is bring all food system stakeholders together and collaborate so that we do it one best way…very quickly and efficiently,” he said. “The food system is a shared responsibility and for blockchain traceability and transparency to work, we need a lot of people working together.”

Enhanced traceability could also aid farmers and livestock producers with documenting regulatory compliance and meeting consumer expectations of sustainability and social responsibility.

The Road Ahead

While blockchain technology could usher in new possibilities to increase transaction efficiencies and improve traceability in the global agricultural supply chain, there are some challenges that will need to be overcome before it gains widespread acceptance.

“In order to achieve value, blockchain requires the involvement of all stakeholders along the value chain,” said Wesley Lefroy, an agriculture analyst with farm lender Rabobank. “This means, inputs suppliers, farmers, traders, port authorities, banks, logistical providers and processors all participating in a common interface and entering their digital information into the same blockchain. Illustrating value and calculating a proper distribution of costs and benefits may take considerable time, and remains the largest barrier to wide-scale adoption.”

As it stands today, the nascent technology is currently at a similar stage as that of the Internet in the 1990s. There’s clearly excitement and momentum behind building blockchain applications, but a continued push toward standardization and integration is needed before the disruptive technology reaches its potential. As blockchain uses continue to evolve, possible future applications born from innovation may be beyond today’s conceivability.

While speaking at a “Business of Blockchain” conference sponsored by the Massachusetts Institute of Technology, Yiannas summed up his belief in the future of blockchain. “Let me be crystal clear, I can promise you Walmart is not chasing the new shiny coin, or after the new fad. That’s not what we’re doing. I know blockchain is vogue and in fashion, but what we are trying to do is solve business challenges…(and) we’re now beyond proof of concepts. We’ve tracked millions of food packages and over 100,000 traceability events.”