Analysis: Understanding blockchain and its implications for poultry

Blockchain is the technology behind Bitcoin. Now multi-national food giants such as Walmart and Nestle are adopting the same digital systems to monitor their food supply chains and some experts believe blockchain has huge potential for the poultry industry.

Bitcoin, a digital currency with no backing in gold, is a phenomenon that has been hard to avoid recently for anyone interested in the news.

Invented in 2009 in the wake of the financial crisis when trust in central banks was low, the currency is ‘mined’ by a network of computers around the world, which update its value every few minutes.

Its current phenomenal success on stock markets around the world has lead to huge gains in value for those who own any Bitcoin, and similarly huge warnings that the bubble will soon burst when investors realise it’s a case of the emperor’s new clothes, and there is literally nothing there to back up the bluster.

But for the food industry, there’s a more interesting part of the story. It’s the technology behind Bitcoin, called blockchain, which is increasingly being adopted by large businesses that have long and complex supply chains.

Blockchain is a beautifully simple idea. Instead of one person or organisation being responsible for overseeing a product (in the case of currency it would be a central bank; in the case of a supply chain it’s the next link in the chain from you), in a blockchain everybody has oversight of the whole chain and verifies information provided by other parties.

It relies on everybody in the chain using the same standard digital recording methods, but more and more companies are starting to embark on trials.

Walmart, the world’s largest retailer, announced in December 2017 that following a successful trial with IBM involving poultry, pork and mangoes, it would start using blockchain technology to manage its supply chains.

There are some huge benefits in food supply chains, including ensuring products are what their makers claims they are, rather than simply trusting your supplier is being honest, and their supplier is too and so forth. The longer the supply chain, especially ones spanning the globe, the more likely fraud can happen, which is worth remembering five years on from the horsemeat scandal.

“Blockchain holds incredible promise in delivering the transparency that is needed to help promote food safety across the whole supply chain. This is a fundamental reason why IBM believes so strongly in the impact this technology will have on business models,” said Bridget van Kralingen, senior vice president, IBM Industry Platforms.

For poultry, there are big opportunities, according to Aidan Connolly, chief innovation officer at Alltech. “Although touted as the world’s most efficient protein, poultry producers actually manage their flocks with very limited information,” he says. “Today, it takes 1.4 kilograms of feed to produce 1 kilogram of live-weight meat, and genetics offer the opportunity to reach a 1:1 ratio.

“Chicken producers know the birds’ weights when coming in and going out as well as average feed and water consumption. Egg farms at least have the daily data point of average egg production for a group of birds but managing for averages makes production inefficiencies inevitable.”

What would make for better poultry production? “From a production standpoint, individual real-time body weights, feed and water consumption,” says Connolly. “From a husbandry and welfare perspective, knowing the stress levels in the bird and bird comfort assessed through body temperatures and air quality factors, such as carbon dioxide and ammonia. From a disease management outlook, the ability to spot disease or find morbid birds before the entire flock is affected. From a food safety perspective, enhanced salmonella, campylobacter and e. coli detection. From a food processing perspective, increased yield.”

Greater oversight of the supply chain would enable these developments. “Blockchain’s opportunity in the poultry industry is its ability to resolve food safety and transparency issues,” says Connolly. “Walmart, Unilever, Nestlé and other food giants are working with IBM using blockchain technology to secure digital records and monitor supply chain management, ensuring traceability of the poultry products sold in stores. Blockchain can be used to monitor all aspects of the food supply chain, from farmers and producers to processors and distributors. This is Walmart’s third experiment with blockchain, and the increasing interest of other large food conglomerates demonstrates the unique capabilities of this technology.”

In China, ZhongAn Technology is working on develop blockchain technologies, citing that there is an expectation of specific applications within the poultry industry. The Chinese consume about 5 billion chickens a year but prefer dark meat rather than the breast meat favoured in the West. “Recently, the country has been allowed to export cooked chicken to the United States, and blockchain could be a way to alleviate any concerns about sourcing and production methods, eventually opening the way for raw exports,” says Connolly.

According to Rabobank, which has published a new report, ‘Blockchain: The Trigger for Disruption in the Food Value Chain’, companies that want to remain successful in the future food value chain should start to explore options for participating in blockchain initiatives in order to help them lower costs, increase efficiencies, offer sustainable products and explore opportunities for creating new value, which are also of benefit to the consumer.

Once implemented, the blockchain can be used to reduce costs and increase the value of end products or raw materials by using the information that accompanies products. There are opportunities for increasing the added value of raw materials—for example, by meeting specific wishes of consumers related to production method, such as fair trade, origin, and other quality attributes.

“One advantage would, for example, be when tackling food safety issues,” says Harry Smit, senior analyst, farming and farm inputs. “Product recalls can be much easier when the entire chain is transparent.”

Transparency of the food chain also means that the benefits of reputation that market leaders have will decline. Trust in a product will become less dependent on the trust in the supplier, but more dependent on the information available in the blockchain. This enables smaller companies to establish premiums based on the intrinsic characteristics of the goods they supply, without necessarily having a longstanding reputation.

The available data also creates opportunities for developing products and services based on intelligence. For example, data can be used in predictive models to predict demand for a product rather than simply responding to the market.

Key to reaping any of the benefits is a digitalisation of internal and external processes. “There are definitely benefits,” says Smit. “But two prerequisites have to be met in order for blockchain to become successful. First, processes within companies, and between companies, have to become digitalised and standardised. Second, a broad participation of stakeholders along the value chain is required; otherwise the value of blockchain is lost.”

 

 

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