Block Chain and The Impact on Ag (Part 2)
In my previous article here, I attempted to lay down some thoughts and begin a conversation about the coming impact of Block Chain technology (BC) on production agriculture at the farm and field level, particularly the not so pleasant bits concerning farmers being required to adapt in order to participate in markets, public health risks being pushed down the supply chain, and the difficulty for smaller producers in keeping up.
In this second post I’ll take a crack at some potential positives of BC at this level as well as it’s impact to farm land and land values. Don’t get me wrong; I’m not claiming to have it all figured out. Indeed the points I’m trying to make is that BC has the potential to be disruptive enough to change agriculture in ways we haven’t imagined yet. But let’s at least get a realistic conversation started.
The Potential (mostly) Positives:
BC need not be solely a new cost to production agriculture. As an example, British startup Hectare is utilizing a BC platform to provide market transparency and multiple bidders in both commodity grains and livestock, act as a financial clearinghouse, and even provide a “Tinder” app for livestock breeding.
Additionally, we in the industry have long responded to increasing interest group allegations and consumer concern and anxiety with some version of “but we are driven by science, provide the safest food supply in the world, and no one cares more about the land we live on and the food we grow than those of us who live on that land and feed it to our own children”. BC could provide the opportunity to both document this and communicate it. Hopefully this has been noticed by our agricultural trade and commodity groups.
What about the Farmland itself?
Farmland and farm real estate values and transactions will also be affected. Anyone in farming or farmland transactions knows of “problem farms” with reputations for productivity or cost issues or of their successive “failed” operators. Those tracts suffer in market value whether those issues are real or coffee shop talk. Is there also potential for value loss due to association with a public health outbreak traced to a specific field? How about the ability to document irrigation water source “sustainability” and long-term access rights in western states or nutrient runoff potential and prevention in the Midwest?
At Scythe & Spade we are constantly thinking about the threats and opportunities of BC and other factors for our clients and their bottom line. On the real estate side much of what we do from a time and value perspective for the client is in due diligence; expert acquisition and verification of property records, assets, history and analysis of impact to property value. This involves all three service firm products of Brains, Experience, and Replicated Procedure.
As we all know, real estate transactions and underwriting are complex, with numerous title, geospatial (boundary, physical attributes) and historical record collections and verifications required; i.e. transaction costs. It's easy to see how BC can change government and public record keeping and access (although that has its limits in real world implementation, with many counties still utilizing paper land records). We are actively aggregating this information into our proprietary FarmBase© geospatial data base and mapping software to identify potential issues and minimize transaction cost and time.
On the farm management side, our value to clients is to maximize returns, protect and enhance property value, and free up investor time to do other things of greater value to them. BC can make this more robust, but the human contact bits still must be performed each year, including choosing tenants with the will and ability to adapt to coming change and helping them to do so.
In the interview Werbach states “..the value of BC will unfold over a long period of time. Far from an overnight revolution, BT will gradually integrate into existing systems much like the internet did in the 1990s and 2000s”. Perhaps this is true. But the internet was a new technology platform that required both the build-out of physical infrastructure and a from-scratch imagining of how to use it. For agriculture, BC is a provider-to-end user record keeping platform that piggybacks on that previous infrastructure and intellectual architecture. The full value of BT and its full disruptive potential may and probably will unfold over a long period of time, but like the I-phone’s impact on cell phone manufacturers, the brunt of the impact may well be felt up front.
As the title of the article and its content states, part of what BC potentially provides is a "New Form of Trust" and thus verification, which is a big part of the value Scythe & Spade provides to our clients. BC impact to agriculture and farmland isn't a puzzle we'll work out entirely in this article or will become fully realized within a few months. But when someone solves it, it could strike quickly and in unexpected ways. We’ll be ready.