How Blockchain will Impact Agriculture

March 16, 2018 in Agriculture, Commodites and Hedging, Commodities
By Betsy Freese

Technology presents amazing opportunities for farmers, says Bill Even, CEO of the National Pork Board. Blockchain, for example, is in a space that’s moving very rapidly and is already impacting the meat industry. He shares the following thoughts about the new technology.

What is blockchain?

Blockchain is an emerging way for businesses, industries, and public organizations to almost instantaneously make and verify transactions using a digital transaction ledger —streamlining business processes, saving money, and reducing the potential for fraud.

How is blockchain used for businesses?

Maersk, for example, is starting a new company to build the system with IBM for international shipping. They estimate they can get $1 trillion out of the cost of global logistics and shipping alone. Trillion with a “T.”

What drives innovation in business is the ability to save money, make money, or drive efficiencies in the chain. When you’re dealing with international paperwork, whether it’s moving pork or flat-screen TVs, it doesn’t matter. That traceability is going to appear where there’s documentation occurring in all kinds of languages. That is where you’re going to see this hit first.

There’s an active effort to use blockchain to trace pork from farms in China.

Why is the Pork Board studying blockchain?

It is incumbent upon the Pork Board to figure out how we get engaged in these systems to understand what are going to be the rules of the road, and what are the implications.

Traceability and transparency is something that is becoming increasingly demanded by the supply chain. When a company or brand puts something on a label or website they want to make sure it is actually verifiable. There’s nothing worse for one of these brands than to have somebody say, “Aha, you were lying. These pigs weren’t well treated.” Or, “Aha, you were lying, these pigs weren’t in this environment or these chickens were not cage-free.” That sort of thing can really damage your brand.

When companies make sustainability, social responsibility, and environmental claims they want to make sure that everybody in that supply chain is doing what they said they’ve done.

What are the first impacts of blockchains for agriculture?

Most of the initial efforts in blockchain in agriculture is with traceability. China has used the technology to trace pork and beef. You can create an efficient supply chain that allows you to trace products and improve transactional efficiencies. It’s about improving margins by reducing bureaucracy while supporting business continuity via traceability. Companies like Wal-Mart are adopting it because it saves a lot of money.

Consumer-facing applications are a by-product that can be sourced from blockchain data. There is the ability of each of the players in that system to tell a little bit of their story. That ends up building consumer confidence. The consumer can look at a label and say, “Oh, I understand what diet this animal was fed. I understand where they were raised. I understand what packing plant they came from.”

Food safety has been a concern in China, so blockchain technology is developing at a faster rate there than in the U.S. People want to be confident in the food they’re eating, whether that’s U.S. pork, or Chinese beef. That’s why you’re seeing innovation occur in some of these countries that are really trying to get behind the fact that it’s safe to eat pork, or it’s safe to eat beef, or it’s safe to eat eggs or poultry or drink the milk. That seems to be really what’s driving it.

For full article: https://www.agriculture.com/technology/livestock/how-blockchain-will-impact-agriculture

Food System Shock…One Fascinating Report

August 3, 2017 in Commodites and Hedging

In 2015 insurance group Lloyds of London commissioned the report “Food System Shock: The insurance impact of acute disruption to global food supply.”  A research team by Aled Jones and Molly Jahn prepared the scenarios in the report with significant contribution from Tobias Lunt. Molly Jahn is a research partner at Pack Creek Capital.

Click here for the full report.

While the report focuses on the consequences of a food system shock on the insurance industry, the scenarios presented also amplify the devastating changes global crop production would face.

The scenario presents a strong warm-phase of the El Niño Southern Oscillation (ENSO) that develops in the central equatorial Pacific Ocean. The report breaks down the weather patterns regionally and the resulting production shock from the plausible climate shifts.

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These atmospheric shifts, may result in a shortage of grain production. This then generates increased terrorism, political instability, economic interruption, and other environmental consequences.

“Food stocks remain at a relatively low level (below approximately 80 days of consumption) following recent draughts in California and extreme weather events in Brazil and Asia, therefore grain prices remain high (double the levels seen around 2000).” (Pg. 14).

Specific to commercial agriculture, the report describes how a shock will cause operating costs to spike,  “…more resources are needed to recover pre-shock levels of production.”(Pg. 24).

“As was seen in 2008, public agricultural commodity stocks increased 100% in share value […] agricultural engineering supply chain stocks rise 150%.” (Pg. 16).

This report doesn’t consistently ingrain the political message of ‘climate change’ but is matter of fact in the ramifications of food shortages as the scenario discusses the current economic and political landscape with past climate and economic data.

At Pack Creek Capital the discussion we want to have is how to hedge for unforeseen risk as opposed to ignoring the facts about the climate changes we face.

We highly encourage this report to be read. The 2015 findings are playing out as the El Nino hit Africa with the worst food crisis since 1985 from widespread draught caused.*

*The Guardian: Across Africa, the worst food crisis since 1985.