- Shared Database
- Food Certificate of Origin
- Micro Credits
- Value Chain Financial Services
- Digital Identity
Farming supply chains are not efficient, which impacts all actors in the chain from producers to consumers. So it is estimated that the cost of operating supply chains makes up two-thirds of the final cost of goods. As a result, seven percent of the global value of the trade is used to document everything.1 Hence, the challenges for supply chains are the lack of transparency, high amount of paperwork, the lack of interoperability and limited traceability of the product.2
Blockchain is able to enable higher quality transactions and improve traceability. The technology can manage every process and transaction on the supply chain in real-time. So each transaction on the network can carry details and information for the product. Thus, supply chain actors can identify the product’s movement along every step in the supply chain. Blockchain stores unchangeable records that are transparent and accessible to any user. This technology has the potential to create more efficiency for everyone in the supply chain.
Food Certificate of Origin
Blockchain can also enable transparency by recording every detail of the production and processing of farming goods. It has the ability to ensure compliance with food and improve standards. So data will be available on the quality, safety, and sustainability of products. Blockchain will help companies, governments, and customers to track and monitor non-compliance with international standards. It is also able to improve the ability to control plant and animal diseases in order to maintain disease-free status.
In addition, everyone can easily, quickly and confidently issue export certifications. As a result, all the information that is linked with the product will be on the Blockchain. It is possible to even automate certifications.
Financial institutions help to exchange finance between buyers and sellers. But there are some risks when two parties send high-value products. Some potential risks are related to the transaction between the two parties. Because of these inefficient transaction systems, financial parties lock up billions of dollars as they process the transactions.
So farmers can use Blockchain and reduce their costs. They can also reduce risks for sellers and banks and bring greater efficiency gains to supply chains. With the help of smart contracts, you can automate payments in real-time. Once the physical delivery is made, the farmer gets the payment automatically. Blockchain can also provide trade finance for smaller farmers. In today’s world, farmers can no longer meet the immense demand for food. As a result, our economy can no longer grow. With Blockchain we can improve the quality of data and thus reduce the financing risk for banks. This gives them a greater incentive to extend loans to smaller companies or farmers.
Value Chain Financial Services
Blockchain will change the food industry and within financial services like payment, insurance, and credit. They play an important role in helping supply chain actors to reduce risk and improve efficiency. Blockchain has the potential to reduce costs and increase access to agricultural value chain finance, particularly for smallholders.
Thus, smart contracts are able to save consumers billions of dollars annually on banking and insurance fee. So greater efficiency in supply chains and financial services can lead to greater financial inclusion and stronger business development.
As we said before, the main reason for financial institutions to not provide smaller companies with credit products is the lack of data to assess the creditworthiness of applicants. The integration Blockchain could provide financial institutions with rich data on the operations of farmers and other value chain actors. These are needed to provide numerous financial services, such as direct credit or receipts.
So with Blockchain, a small-scale farmer will be able to build a digital identity which records their physical and digital asset. As a result, this transparency can enable financial institutions to increase financial services for small companies in agricultural supply chains.
“Blockchain Food Industry” – Conclusion
Blockchain provides a new chance for the food industry. This platform introduces a new digital form of trust to lower uncertainty between buyers and sellers. It also brings more efficiency, transparency, and traceability to the exchange of value and information. Smart contracts enable everyone on the supply chain is able to increase their efficiency gains. Because of the transparency and higher-quality transaction details, Blockchain delivers improvements to food safety and quality and also consumer awareness. The huge amount of data from transactions also can strengthen market information and market transparency, which could benefit low- and middle-income countries greatly.
Blockchain also can help governments to achieve their public policy goals for inclusive economic growth in the food industry. So this new technology will hopefully be adopted and shape the future of farming, as long as the productivity gains are real. But it is important for the food industry to understand and prepare for these changes and changes.