Global food supply chains face major challenges: they are often inefficient, expensive and lack transparency. This creates an environment where farmers do not always receive fair compensation for their hard work, while consumers may face higher prices.
It is a systemic problem that needs a systemic solution, and that solution is staring us in the face: tokenization of agricultural trade.
Despite the enormous potential of this technology, adoption in the agricultural sector has been slow. Many organizations are hesitant to embrace change because they worry about regulatory complexity and uncertainty.
The real value of trade tokenization lies in its ability to solve real, tangible problems that have plagued the agricultural sector for decades. Eliminating middlemen can increase transparency, shorten settlement times and reduce costs.
But while some in the industry argue that the current system, while imperfect, is familiar and predictable, the benefits of tokenization far outweigh the short-term challenges of adoption.
Pitfalls of the current supply chain
Right now, our food supply chains are a black box. They are opaque, complicated and full of inefficiencies. On average, the agricultural trade suffers from settlement times of 3 to 7 days and fees ranging from 6 to 10%. That is unacceptable.
It’s not just about numbers. The system’s lack of transparency breeds distrust and allows bad actors to manipulate prices and engage in fraudulent activities. Ultimately, it is the farmers and consumers who bear the brunt of this unjust system.
Tokenizing trading could change all that. By bringing agricultural trade transactions into the chain, we can create a transparent, efficient and trusted ecosystem that benefits everyone.
Imagine a world where you can trace your food from farm to fork, knowing exactly where it came from and how it was produced. Imagine a world where farmers can get fair prices for their produce – without middlemen taking a 40% cut. Imagine a world where consumers can trust the food they buy, knowing it has been sustainably and ethically produced.
The benefits of tokenization don’t stop there. Smart contracts on high-throughput blockchains like Solana can automate transactions, shorten settlement times and minimize costs. This increased efficiency can lead to cost savings that can be passed on to farmers and consumers. Such systems also lower barriers to entry and create easier access to markets for smaller producers and farmers.
Furthermore, tokenization lays the foundation for future innovations such as fractional ownership and investments in agricultural assets. Over time, small-scale farmers could tokenize their land or crops, gaining access to capital and participating more equitably in the global food system.
In today’s world, small-scale farmers are often faced with a dilemma: they must either sell a significant portion of their holdings to one company to raise capital, or they may struggle to secure financing. However, with the ability to tokenize their assets, small-scale farmers can sell small portions of their business to interested parties while remaining the majority shareholder and in control of their business.
Tackling the skeptics
Of course, realizing the full potential of trade tokenization in agriculture will not be easy.
Many farmers and agricultural organizations feel they do not have the technical expertise to navigate this new system. They are concerned about the resources needed to adopt and use these new technologies.
There are also questions about regulations and legal frameworks. The legal status of tokenized assets is still evolving, and some organizations appear wary of investing in a system that lacks clear legal guidelines.
However, these concerns should not deter us from pursuing the transformative potential of trade tokenization onchain. The sector does not have to endure this transition alone.
By working with blockchain experts, policymakers and educational institutions, we can create a supportive ecosystem that helps agricultural organizations embrace this technology with confidence.
We need to invest in educational initiatives to make the benefits of tokenization accessible to all participants, regardless of their technological background.
We also need a supportive regulatory environment that recognizes the potential of tokenization and provides clarity on its legal and tax implications. Policymakers must strike a balance between promoting innovation and protecting the interests of all stakeholders.
The potential benefits of tokenization are too great to ignore, and the authorities are now getting on board. By symbolizing trade in agricultural products, we can take an important step towards a food system that is more transparent, efficient and fair. A system that benefits farmers, consumers and the planet.
Law graduate Harry Duckworth embarked on a unique journey that led him to become the youngest trader at global commodities giant Trafigura. He went on to establish desks for several hedge funds around the world, gaining over a decade of experience in trading, hedge funds and emerging technologies. Through his work, he became fascinated by the revolutionary power of blockchain technology shortly after the introduction of Bitcoin. Years later, he founded AgriDex International to provide digital marketplaces and supply chain information to all participants in the global food chain.