Honduras is the world’s sixth largest producer of coffee, according to the International Coffee Organization. And it’s in trouble.
On September 20, the Honduran Coffee Institute flagged that exports are expected to fall by 4.6% in the next harvest. This is due to lower bean prices in the global market and climate change. Farmers are also abandoning their farms to try their luck at migrating to the US, said Francisco Ordóñez, director of the institute, in a Reuters interview. This, despite President Donald Trump’s efforts to halt the flow of migrants. Embittering the outlook for many coffee growers in the overall Central American pot is the La Roya disease. It has been devastating crops, causing coffee trees to lose the ability to grow beans.
Snapshot: What’s affecting Honduras’ coffee industry?
Source: Francisco Ordóñez, director of Honduran Coffee Institute
Texas-based GrainChain has inked agreements with all arms of the ‘disjointed’ coffee supply chain in Honduras – from farmer to exporter. The startup aims to deliver its blockchain-based platform to help cut down on risk, improve conditions and encourage reinvestment in the cafe industry of the Central American nation. The platform links farmers with banks to improve trust between the parties. GrainChain also hopes to introduce banking in rural coffee-producing areas.
“We’re offering secured, low-interest financing to many individuals who normally are not banked and would find it difficult to obtain this kind of financing. However, we are also streamlining and automating the grading and payments. This changes not only the fairness in quality grading for the buyer and the producers, but it allows for a reliability in the process that has never been seen,” says Luis Macias, CEO of GrainChain, speaking exclusively with AFN.
Snapshot: How does GrainChain reconnect Honduras’ coffee industry?
Connected with IoT, the product suite increases the accuracy of the entire process, thus minimizing the risks while maximizing the profit for all parties involved. Furthermore, this would increase the efficiency of the process and ensure that the farmers are paid on time. It’s unlikely that GrainChain can help with battling the mass migration of coffee farmers, climate change, and plant disease. But at least, it’ll help close the gap between the farmer and his (or her) earnings.
“In the long-term GrainChain gives farmers better access and credit conditions, such as better terms and rates, more financing; finally giving rise to development for the country’s coffee industry. Giving the industry products that allow for process management and true traceability will put us in the forefront of the export market. We consider blockchain technology is the right fit for this,” says Francisco Fortin, general manager of Confianza SA-FGR, a major insurance provider to Honduras’ agriculture industry.
“Our banks feel comfortable with the transparency and process flow, our buyers and exporters can offer a fully traceable and certifiable product and no longer has to play “bank” in the process. They know the quality of their product and the process exactly of what it took, and products used to produce the coffee. This implementation is a win for everyone, all the aspects of the system are designed from a true pain point in the supply chain and are pushing many of the existing barriers aside,” adds Macias.
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“Honduras is the first country in the region to adopt this tech, and it can be a pilot that spreads to the rest of the Central American countries because the region is very similar: all countries in the Central American region are facing the same problems,” adds Fortin. GrainChain’s rollout in Honduras comes as players in both coffee and tech embrace blockchain to tame the global coffee market. In May, Starbucks announced that its keeping tabs on its global coffee supply chain with Microsoft’s Azure to give consumers the benefit of following the bean’s journey – from plantation to coffee mug.
“GrainChain’s vision aligns with Medici Ventures’ core values, as the company helps support agricultural producers who operate on razor-thin margins by simplifying and securing the measuring and payment process,” says Joel Weight, COO at Medici Ventures, a blockchain incubator-cum-accelerator and subsidiary of Overstock.com. Wright’s company injected $2.5 million in funds into GrainChain in December 2018, in exchange for 10% of the startup’s equity. “GrainChain brings unprecedented transparency to the industry, by using blockchain applications to make grain transactions extremely efficient, safe, and secure.”
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“I feel the marriage of IoT and Blockchain is beautiful and necessary. In order to get authentic data on blockchain, we need to ensure that it is provided by systems and not people,” says the GrainChain CEO, “I feel the future is extremely bright. The industry is embracing our technology with mostly open arms. We all understand that things need to improve and progress for us to not only meet global demand but to insure the sustainability of our planet and our farmers. I feel these technologies are helping to do just that.”
The value of blockchain in food supply chains and agriculture is estimated to be $60.8 million in 2018. It’s expected to skyrocket by over 700% to reach $429.7 million by 2023, according to this report by ReportLinker. Blockchain has also shown to be useful to keep tabs on abundant commodities and reduce cases of illegal harvesting and shipping frauds. The United Nation reveals that food frauds cost the global economy around $40 billion per year because of illicit trades.
“Given that the blockchain space is so nascent, we generally get involved early (seed or A) with potential follow-ons in later rounds,” adds Wright, Medici Ventures’ bullishness on the tech.