Smart Agricultural Futures Market: Blockchain Technology as a Trust Enabler between Smallholder Farmers and Buyers

Abstract

Smallholder farmers produce over 70% of the world’s food needs. Yet, the socioeconomic conditions of the smallholder farmers are substandard. One of the primary reasons for this unpropitious situation is that they generate modest income by selling their harvest due to the lack of trusted buyers and organized markets. This research explores how technology can enable the trust to reduce transaction-related risks, empowering unknown parties to transact. Blockchain technology has the potential of mitigating transaction-related risks and promoting trust with a tamper-proof history of transactions and automatic execution of smart contracts. Based on blockchain technology to promote trust, this research has discovered a novel approach for smallholder farmers to conduct exchanges by generating social capital as an individual and using that social capital as collateral for financial exchanges when establishing contracts. This approach empowers farmers to trade smart futures contracts on behalf of the expected harvest at a better rate to receive some cash in advance to be used in the cultivation process to produce a high-quality harvest that attracts better rates. It also enables them to perform aggregated marketing with enhanced market linkages that, in turn, assist in increasing margins made by the farmer.