The 3Bs: Bitcoin, Blockchain and Barges

Bitcoin has swept the world by storm, and the technology behind bitcoin has also made its way into agriculture. In mid-January, Louis Dreyfus, one of the largest commodity trading firms in the world, completed the first ever blockchain technology commodity trade by selling U.S. soybeans to China’s Shangong Bohi Industry. 

The blockchain technology has the potential to significantly optimize administrative processes around international trade,” Karin Kersten, global head of trade & commodity finance at ABN AMRO, told Jus Naturale. “We are excited that this test was successfully completed and that we can move to further exploring the added value and use of the blockchain technology.

Generally, soybeans headed for overseas markets face a complex web of regulated, labor-intensive processes. An export elevator in the U.S. sells its soybeans Free On Board (FOB), which shifts the burden of obligations, costs and risk to the overseas buyer. The buyer is then responsible for everything required to get the grain to market. This often includes transportation costs, insurance, registration fees and more. The process can be time consuming, confusing and costly.

Blockchain technology may benefit U.S. soybeans by getting soybeans to overseas destinations in a quicker and cheaper manner. Blockchain is a continuous list of records, called blocks, electronically linked using cryptography. Each block represents a transaction, or document, and has a unique identifier represented by timestamps and other identifying data. This permanent digital ledger of transactions cannot be altered without affecting all transactions down the line. This increase in security reduces the risk for fraud and human errors.

What does this mean for MN producers?

As consumers’ interest in food traceability grows, and with near-assurance that commodity buyers and food processors will use blockchain technology, U.S. farmers need to be aware of what this means for them. Blockchain technology will enhance transparency and traceability. Australia already has a National Livestock Identifications System which continuously tracks livestock from birth to market. The European Union has had a similar system in place since 2004.

However, blockchain technology may increase the liability to individual farmers through increased traceability. Soybean producers should be cautious of the technology for several reasons. For instance, recent Salmonella outbreaks illustrate the high risks for parties involved in food production. Unless the technology is accompanied by a grain purchaser who indemnifies individual farmers for such financial liability, traceability-to-farm holds uncontrollable risk for farmers because of FDA investigation practices following a foodborne illness outbreak.

“What needs to be understood is identification of a pathogen in a plant does not imply a link to a food safety incidence,” says Mike Robach, vice president of Food Safety, Quality and Regulatory Affairs at Cargill told World-Grain.Com.

Blockchain technology may not be immediately used on a private farms for commodity soybeans due to the high amount of blending at elevators. However, it is not unbelievable that a consumer in the near future will go to the grocery store and know exactly which region, farm and field the product came from. Blockchain may still offer opportunities for producers. Producers may market their crop for a premium based on recent track history of various production factors such as disease, weed, pest management, water quality and land use practices. It’s clear blockchain technology is here to stay and will change how the food conversation progresses.

Kim Nill is the director of market development at Minnesota Soybean and can be reached at 507-388-1635 or kim@mnsoybean.com