Agriculture is the lifeline of the global population. Most of the biggest economies in the world still thrive on agricultural income.
In India and China around 70% of the population still depend on agriculture for their livelihoods.
Technology innovation in agriculture, or agritech, is becoming critical to ensure the productivity of a small holding farmer increases at a sustainable pace, in line with global demands.
Blockchain has been in the news for all the wrong reasons for the past 24 months. However, as a technology paradigm, it is here to stay
Here are some statistics to understand the size of the market. The global agriculture analytics market size is expected to grow to $1.2 billion by 2023 from $585 million in 2018. That represents a Compound Annual Growth Rate of 16.2%.
Smallholder farms in sub-Saharan Africa number around 33 million, represent 80% of all farms in the region, and contribute up to 90% of food production in some sub-Saharan African countries.
Of the estimated 570 million farms in the world, 74% are in Asia. China represents 35% and India 24% of the total.
Despite the demand for agriculture produce from eight billion people in the world, the farmer’s need has often been ignored.
In November 2018, my home state in India, Tamil Nadu, was hit by one of the biggest cyclones in the last 100 years to hit the state.
The worst part of it was that the cyclone moved inland quite quickly and hit the most fertile part of the state. Farmers in that part of the state, called Cauvery delta region, had moved on from rice cultivation to coconuts due to the unsustainable water requirements of rice.
However, unlike rice, coconuts took a decade to grow from the trees, and when the storm hit their coconut farms, their 10 years of hard work was lost. None of them had any clue about crop insurance.
I was born and brought up in that part of the world, where monsoons were the primary source of water, and when monsoons failed, farmers committing suicide was a weekly headline. Every time I see an innovative product that could change their lives, I see a massive opportunity to effect impact at scale.
Crop Insurance and Blockchain: Blockchain has been in the news for all the wrong reasons for the past 24 months. However, as a technology paradigm, it is here to stay. Let us take a simple example of a farmer in India. The government in India has now mandated an identity card called Aadhaar. It provides economic identity to farmers and helps them open a bank account. This could now form the basis for financial inclusion of a different kind.
As these farmers open a bank account, they could be asked to pay a very small monthly premium towards crop insurance. In some states where monsoons often fail, it could be made mandatory. The insurance details are registered on a Blockchain and the farmer doesn’t even have to understand any other part of the process.
If monsoon fails, the data from the weather station, the soil moisture levels, and the average cost of the crop that year could be fed into the Blockchain. Depending on this information, claims are disbursed, even without the farmer having to claim for the money from a bunch of inefficient, corrupt official.
This model is being tested in some parts of the developed world, where most of these data points can be sourced through the Internet of Things, and data feeds. In emerging markets, the data is still manually fed. In either case, the real benefit is the farmer receiving the money in the bank without having to wait for a bureaucratic, and mostly corrupt, process.
Food Supply Chain: In developing countries, 40% of food loss occurs at the post-harvest and processing stages of the supply chain. Roughly 59% of edible produce fails to reach those in most need due to food waste. Creating an efficient food supply chain will not only save a lot of money to the entire ecosystem and the consumer of the food, but also help the farmer in many ways.
Recently, I had the privilege of leading an investment programme in partnership with Deloitte and Crowdcube, focused on financial inclusion. The plan was for my fund to back 2-3 firms with a £500,000 cheque. We had 70 applications and we chose seven finalists from there. One of the firms was Agriledger, who are working on a Blockchain solution to bring efficiency to the food supply chain. The World Bank is trialling its technology to track food from its source to the supermarket.
In today’s world, the farmer sells their produce to a logistics provider, who collects and ships the produce to a supermarket. I have already cut down several middlemen here and simplified the supply chain. The food produce is sold at every step of the supply chain with a margin.
When the process is on Agriledger’s Blockchain, the farmer is registered on the Blockchain as the owner of the produce. The farmer could do a handshake with the logistics provider, who would be providing packing/shipping services to the farmer for a fee. The logistics provider would add their signature to the Blockchain and move the goods to the supermarket – who in turn provides shelf space as a service and charge a fee for that. The end consumer purchases the product from the farmer, knowing who they are through a simple QR Code.
From a consumer standpoint, this is good, but for the farmer, this would be leapfrog innovation. This does expose the farmer to the risk of their produce not getting sold, however, it also provides much-needed transparency to the farmer on the costs of selling their produce. They can price their crops wisely and avoid being exploited by middlemen. Over a period of time, this can allow for innovative business models and possibilities for the farmer.
This doesn’t come without its challenges, and the world bank is trialling this solution in Haiti with Agriledger. Every middleman needs to be convinced/coerced by a governing body to bow down to this innovation. This will benefit the agriculture industry across the world and could potentially be a case study to replicate.
With the traceability and audit that Blockchain provides, the data stored on the network can be used to provide farmers with an economic identity and help them with access to supply chain financial services. There are other interesting Agritech ideas like precision farming using Artificial Intelligence, and the Internet of Things and that is an article for the future.
In countries like India, the government loses a lot of money in writing off farmers loans and paying them subsidies. Instead, if they invested in integrating innovation into the agriculture value chain, it becomes a sustainable route to helping the farmer.