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Behind the Bitcoin craze, blockchain in agriculture

New online transaction technology is being used to secure interactions between grain buyer and seller

[Updated: Dec. 14, 2017] Winnipeg / Commodity News Service Canada – Across the world Bitcoin has caused a flurry of excitement. But as analysts warn about the potential downfall of the cryptocurrency craze there is a part of it that could survive and change the business world – blockchain.

“People are seeing potential here. They are seeing how (blockchain) can transform business and really introduce lots of business efficiencies,” said Victoria Lemieux, cluster lead for blockchain at the University of British Columbia research and education cluster.

Double entry bookkeeping was invented in Italy in the 1400s and viewed as a revolution for the business world. Now blockchain is being heralded as the next step forward.

Blockchain technology has been around for close to 10 years and first rose to prominence as the transaction software for the cryptocurrency, Bitcoin. However in recent years people began to see blockchain’s business potential.

In the simplest of terms blockchain is a record keeper. It can be used to track transactions which are chained together with a public and private key paired together in an algorithm. These transactions are then distributed over a large network where there is a partial copy of every transaction kept at each location.

The blockchain is transparent as all those involved see the same information. Changes can only be made when all parties using the blockchain agree. For centuries, transactions in business have been tracked on paper, but blockchain is set to change that.

“The problem with paper is that it got lost, or it could be tampered with. There was a lot of fraud in supply chains, so things could get changed,” Lemieux said.

There are three layers needed to use blockchain. The first is the interface, such as a website or phone application. The next layer is the blockchain, known as the trust layer, which handles and records the business part of transactions. The third layer is the communications layer, aka the Internet.

Once you have a blockchain system in place it can be used in numerous ways. International Business Machines (IBM) has been using the technology to create more transparency in the food industry by constructing a centralized record keeping system to track food along the supply chain. AgriDigital, in Australia, has been using blockchain to market grain, as it allows for direct and secure interactions between buyers and sellers.

Creating transparency in the food supply chain

When IBM started developing blockchain technology it approached the business community for advice on where it could be used. From there IBM found there was an opportunity to use it to create transparency in the food industry.

“Even though the different players (in the food industry) all have a view to the network they don’t have complete information … what the blockchain system allows us to do is to procure information between these different participants securely,” said Manav Gupta, chief technology officer for Cloud, IBM Canada.

In 2017, IBM launched a set of trials with Walmart, including tracking mangoes from Mexico. Walmart started by having employees manually track the origins of a bag of mangoes off the shelf of a store. It took the group six days, 18 hours and 26 minutes to track the mangoes.

During a food safety scare in the time it took to track the fruit, Walmart would have already pulled all mangoes off of shelves across the country and other retailers would have followed suit. In the end it would cost retailers, processors and producers a lot of money.

Walmart then completed the same experiment with IBM using Hyperledger Fabric blockchain software.* It scanned a code on the mangoes and was able to track the origins of the mangoes, from farm to shipment to store shelf, in seconds.

Following the success of the Walmart trial other major companies (Dole, Driscoll’s, Nestlé and etcetera) have reached out to IBM about using blockchain technology.

To track food along the supply chain blockchain uses technology such as quick response (QR) codes, hash codes and radio-frequency identification (RFID) technology. These codes are in some cases printed off and stuck onto the food and scanned at each point in shipment process. In other cases with food products such as milk, blockchain is being used to track milk cartons back to the distribution center where it was collected from.

“What blockchain is going to allow (customers) to do is to have visibility into the absolute source of where that data came from and what type of transactions happened around that asset,” Gupta said.

The companies IBM has partnered with so far all already have their own supply chain networks in place which used technology such as QR codes before. The only change is those scans are now being collected into one central record keeping system, the blockchain.

IBM as well is working on using blockchain technology to track a number of different commodities including grain. The details are still being finalized, but IBM is working on a project to help producers in Canada use blockchain for tracking grain.

The future of grain marketing

In Australia one company saw the chance to change the way grain is marketed by using blockchain. In 2016, AgriDigital used blockchain to successfully sell grain – it was the first time a physical commodity was sold using the technology.

A load of wheat was delivered to a site in Dubbo, New South Wales. Information about the wheat, including quantity and quality, was entered into the AgriDigital system, including the blockchain layer. A digital token or cryptocurrency, called agricoin, was then created to digitally represent the wheat.

“That all happened instantly. The farmer was paid at the point of delivery and they essentially walked away from the site having already been paid,” said Bridie Ohlsson, external relations manager for AgriDigital.

The tokens are tied to Australian currency and each represent AUD$1, and must be converted using a bank following the transaction. AgriDigital is working with banking institutions to create their own cryptocurrency for transactions.

This was a first for the world but AgriDigital had been working up to the day since 2015. The company was founded by a group of Australian agribusiness professionals who wanted to help farmers get paid sooner, rather than later.

AgriDigital’s first piece of software was a cloud-based commodity management application. Rural Australia, like rural Canada, faces connectivity issues, to bypass that problem AgriDigital’s cloud-based system allows farmers to update information while not connected and then once connected update to the AgriDigital cloud system. Farmers and grain buyers subscribe to use it.

Once the platform was developed and in use across Australia, AgriDigital set out to solve the payment issue by using blockchain technology, completing the first successful pilot project in 2016.

AgriDigital then decided to get more technical for future transactions. The company wrote a seven-day escrow code into the agricoins.

“Provided some conditions were met and that the payment was executed in seven days’ time the title token would move to the buyer and the payment would come from the buyer to the grower,” Ohlsson said.

In August, AgriDigital completed its second successful blockchain transaction using the new coded agricoins with CBH Group, Australia’s largest grain exporter.

After completing two successful trials AgriDigital is planning to make the blockchain based service available for commercial use in Australia in 2018. As well the company is currently working on expanding the platform to North America, and hope to launch in Canada as soon as possible.

*UPDATE: A previous version of this story incorrectly stated IBM as the owner of the Hyperlogic Fabric blockchain software, when in fact, Hyperlogic Fabric is an open-source project. We apologize for any confusion this may have created.

About the author


Ashley Robinson writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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