A project carried out by Wageningen University & Research with the World Bank and Haitian government has shown how blockchain technology can contribute to a fairer trading system for Haitian fruit farmers.
Haiti is one of the poorest countries in the world. While the mangoes, avocados and pineapples grown by Haitian farmers are primarily consumed in the country itself, part of the mango production is exported to the United States. Unfortunately, farmers only receive a fraction of the sales price, with the rest being divided among intermediates between them and US supermarkets.
In a project financed by the World Bank, Jan Brouwers (Wageningen Centre for Development Innovation), René Oostewechel (Wageningen Food & Biobased Research) and Yves-Laurent Régis (Haitian government) worked together to find improvements in the supply chain that would provide better prices for farmers. “The initial idea was to build a packhouse for processing fruits,” says Brouwers. “This approach fails however due to the lack of capacity to run such an operation. It was through a joint analysis and reflection that the idea of using blockchain technology to achieve a fairer trading system arose."
A different kind of trading system
As Oostewechel explains, a blockchain creates a different trading system: “If you look at mangoes, there are now five large trading parties that buy the fruit from the farmers for low prices at a collection point and export to the US. With blockchain technology, the role of exporters changes to that of service providers: the farmer remains the owner and is paid after the products have been sold in the US, minus the costs and fixed margins for intermediaries. Blockchain guarantees that the process is transparent and secure, resulting in a much higher market price for the farmer."
Standard Operating Procedure
To ensure a safe and transparent process, a Standard Operating Procedure (SOP) is needed for each product chain. This handbook outlines the procedures that all the value chain parties involved must carefully follow. Oostewechel: "After the farmer has harvested mangoes the crop is transported to a packing station, where an obligatory hot water treatment is necessary to eliminate fruit flies and larvae. If this and other processes are properly adhered to, good quality mangoes are served to consumers in the US. But if the mangoes are picked too late, left in the sun for several days or the temperature of the hot-water treatment is too high, the fruit will rot."
"The SOP describes exactly which requirements have to be followed throughout the entire process from harvest to delivery to the supermarket. You can see it as a guideline for all parties in the chain, including which data they should record in the blockchain. Taken as a whole, all the recorded data shows whether the product has been handled correctly."
A prerequisite for a properly functioning blockchain is that all parties are willing to contribute adds Brouwers. “All actors in the chain must be professionally trained so they know what to do and stand behind the concept. We organised dry runs to find out how everything worked in practice and adapted the SOPs for the various chains based on the lessons learned. In this sense SOPs are living documents in that they can be updated based on practical experiences."
Blockchain technology seems to be widely accepted, Oostewechel observes: "For farmers it leads to higher revenues, not least because a minimum selling price is agreed. The intermediary trade parties face fewer risks and have a stronger competitive position. The US Animal and Plant Health Inspection Service is backing blockchain too as it realises that the existing system excludes Haitian small growers. And banks are also very interested in the technology as an easily scalable way of financing farmers based on a secure track record instead of collateral.”
Can be used anywhere
The project in Haiti has provided a proof of principle for blockchain technology and agreeing on SOPs as a means of changing the playing field in favour of poor farmers. “It is a principle that can be deployed anywhere so we are in the process of developing SOPs for other agricultural blockchains around the world," says Oostewechel. "Each SOP is different: it makes a significant difference whether Kenyan tomatoes are transported to a local market two hours away or on the road to Europe for three weeks. The handling requirements for products and the investment capacity of the chain partners as well as the capacity of market prices to pay for investments are all factors that need to be taken into account. And that illustrates why blockchain technology cannot be applied to perishable products without post-harvest knowledge."