2018 is the year of the blockchain, and it’s much more than a buzzword. The technology is seeing unprecedented levels of enterprise adoption, governmental support, and entrepreneurial zeal, but it is the year of the blockchain because of the tangible benefits that are resulting from the blockchain’s rise to prominence. One, perhaps unexpected industry benefitting from this technology is the food industry.
There is mounting evidence of the blockchain’s obvious importance.
In June, The Wall Street Journal released its list of tech companies to watch. It’s a future-focused compilation of companies that is developed by experts and industry analysts. This year, five of the twenty-five companies listed are blockchain initiatives. Moreover, earlier this month, South Korea became the first country to integrate blockchain technology into the public sector. Finally, entrepreneurial zeal is producing more new blockchain platforms than ever before. In this first half of 2018, there were more than 400 new digital tokens launched that brought in more than $10 billion in startup funds for these initiatives.
For all of its use cases, one of the ways the blockchain is most frequently applied is toward supply chain management. Its decentralized network, tokenized data or value transfers, and unchangeable records make it especially well suited for this work. As research and consulting firm, Deloitte, recommends, “Using blockchain in the supply chain can help participants record price, date, location, quality, certification, and other relevant information to more effectively manage the supply chain.”
While this has implications for virtually every business, it is a right on time development for the food industry. Pressed by a growing population that demands higher yields and more affordable food, the food industry is looking for cost efficiency anywhere that it can find it.
The Current Global Food Supply Chain
The global food supply chain is robust, and it provides a constant supply of diverse foods to people around the world. According to The United States Department of Agriculture, the U.S. imported more than $137 billion in food last year, which is nearly triple the amount from just two decades ago. As the report indicates, the scope of these imports increased as dietary patterns changed, the population diversified, and out of season produce received year-round interest from consumers.
Of course, the complex supply chain that manages these imports adds a lot of miles to a meal. For example, The WorldWatch Institute estimates that meals in the U.S. “travel between 1,500 and 2,500 miles from farm to table.” That’s 25% further than food travelled a decade ago.
It’s not uncommon for food to travel through 7 – 10 transition points before it reaches the consumer, and these transfers are not making food more affordable. Indeed, last summer, global food prices rose 17% from early 2016 levels. The Bureau of Labor Statistics notes that fruits and vegetables are experiencing the most significant itemized price increase.
To be sure, the entire food operation is only going to become more complicated. The World Economic Forum estimates that global food production will have to increase by 50% – 100% by 2050 to keep up with population growth and increased demand.
A Better Method
This is where blockchain technology can step in. While it can’t solve all of the food industry’s problems, it can vastly improve its supply chain management to ensure that the food that’s being produced is being effectively and efficiently shipped to market while verifying its origin, safety, and freshness.
The blockchain can bring cost efficiency to the food industry in several ways.
#1 Specified Food Industry Recalls
Unfortunately, food contaminations are bound to occur, and that food has to be recalled by the distributor. Last year, there were 131 recalls totalling nearly 21 million pounds of food. Because current supply chain data can’t pinpoint an items origin or travel points, companies cast a broad net to ensure that all the contaminated food is removed from distribution. The average recall costs a company $10 million, and those costs are, to some extent, passed on to the consumer.
Using blockchain technology, food companies can identify an items precise point of origin, and they can examine its entire transfer route. Contamination can occur at any point, and the blockchain issues pinpoint specificity to the cause, which can save lives and dollars.
#2 Direct Distribution
Using the blockchain and its accompanying digital payments, farmers can connect directly with shipping agents to bring their food to market. In this way, farmers can operate on an independent and direct basis with transport agents. Using things like smart contracts and digital tokens, the blockchain can facilitate direct collaborations that are predicated on trust and validity.
This methodology can reduce transportation transitions that make food more expensive. More direct collaborations can bring food to market for efficiently and cheaply.
#3 Authenticity Verification
Organic food is a growing sector of the food industry. Organic food consumption is expected to grow by 14% by 2021 as health and safety conscious buyers pay a premium for more naturally produced food.
The “organic” label comes with strict production and tracking standards to guarantee that the food is actually organic. These processes increase the already high cost of organic food, and the blockchain can help streamline that process. Its unchangeable, auditable records can track and verify every step of organic food’s lifecycle to provide consumers with confidence in the products that they buy.
For regulatory officials, this technology streamlines the complicated verification process, which means that food producers can spend fewer resources on important but costly regulation.
An Industry In Need
The blockchain’s use cases seem as endless as their users’ creativity. As a result, it’s receiving a lot of hype, but hype doesn’t diminish actual value. Blockchain technology will have a felt impact on numerous industries, and none feels as timely as making the food industry more affordable.
Food is one of our essential requirements, and the industry and consumers are already feeling the pressure of that. The blockchain can increase cost efficiency for producers, which can lower costs for consumers. That’s a good start to providing what everyone desperate needs.