Historically, wholesale coffee prices have been volatile, fluctuating widely over time. In the past two years, coffee prices have dropped from a high of $1.55 per pound to a low of 87 cents. Currently, coffee is selling for 99 cents per pound.

The volatility in coffee has been hard on small-to-medium sized coffee farms in countries where there are few banking options and where growers often get paid prices that don’t reflect the market, according to Luis Macias, CEO of blockchain-based supply chain service GrainChain. The company is based in McAllen, Texas.

“When coffee farmers don’t have access to formal financial systems and formal contracts for purchase, they are the ones pushed down in the industry,” Macias said. “One of the larger focuses in the overall industry…is to find solutions to not only have more financial inclusion but enhance the ability for coffee producers to have a marketplace.”

GrainChain this week announced that its blockchain network is being piloted by roughly 10% of Honduras coffee growers, or about 12,000 farmers, with an eye on going into full production around April 2020.

The relationship between coffee and blockchain has been brewing for some time.

In March, Starbucks announced a “digital transparency plan” that would let it verify their coffee beans as 100% ethically and sustainably sourced, but it didn’t reveal what technology would enable the insights.

Then in May, Starbucks and Microsoft announced plans to develop a blockchain-based supply chain tracking system and mobile app that will allow consumers to track the supply chain journey of the beans they buy and the coffee they drink.

How Blockchain Is Helping The Coffee Industry Count Beans Starbucks

Starbucks’ mobile “bean to cup” tracking app may look like this.

“There are quite a few initiatives involving the tracking of produce, in many different countries. Coffee alone has seen at least half a dozen initiatives,” said Martha Bennett, a vice president with Forrester Research.

Whether or not GrainChain can compete depends on the local ecosystem, who has the connections and the trust to convince the value chain partners to participate, and who’s already active with a network, she said.

“What’s not clear at this stage…is the degree to which these initiatives really need a blockchain. And none of them have so far gained traction,” Bennett cautioned. “The use case in principle is a good one, but I’ve yet to see a system that sees wide adoption and which is truly run as a shared system. And of course if the real issue is market structure – technology won’t solve that.”

Out of all the Central and South American coffee-growing countries, Honduras was chosen for GrainChain, Macias said, after a speech to the shareholders of a Honduran development bank prompted inquiries.

Honduras also has a large specialty coffee market, which commands higher prices and therefore affords farms the ability to maximize profits by cutting out middlemen. “We made several visits to analyze the market and decided it was a good fit,” Macias said. “What we’re really doing is integrating growers, exporters and buyers.”

Copyright © 2019 IDG Communications, Inc.



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How Blockchain Is Helping The Coffee Industry Count Beans
How Blockchain Is Helping The Coffee Industry Count Beans
How Blockchain Is Helping The Coffee Industry Count Beans
How Blockchain Is Helping The Coffee Industry Count Beans

How Blockchain Is Helping The Coffee Industry Count Beans

How Blockchain Is Helping The Coffee Industry Count Beans