Bread and pasta are disappearing from shelves around the world as shoppers stockpile amid fears that COVID-19 could limit supply of the staples. While everything from drought in Africa, to labor shortages in North America and rationing in Asia has been blamed for the shortage, another factor, the inflating Mexican peso, could be contributing to a different kind of grain dilemma, according to data from GrainChain, a newly launched blockchain startup.
As dropping oil prices resulting from a trade war between Russia and Saudi Arabia have caused the price of the U.S. dollar to increase 30% against the Mexican peso, the buying power of Mexico’s ranchers and other producers that rely on grain to feed their animals has dropped, according to Luis Macias, 39, the founder and CEO of GrainChain, which tracks millions of pounds of grain shipments a day.
As a result, while there appears to be plenty of grain in Texas, according to the data, purchases have dropped dramatically. That, coupled with concerns that even if an order is made, truck drivers might not be willing—or permitted—to deliver it, led to a 76% decrease in volumes month over month. While blockchain applications are slowly launching around the world, this is one of the first opportunities to see how a shared ledger of transactions can result in valuable, real-time data that might otherwise take months to gather.
“We have extremely fast, traceable data, stuff that people don’t normally look at, and we can take actions and change what we’re doing because of that,” says Macias, 39.“In the future, having this kind of tracking ability will help us pull from one area that doesn’t have a shortage and sell to another that does.”
While GrainChain doesn’t have visibility into each grain transaction, Macias estimates roughly 30% of the grain that moves between Southern Texas and Mexico is tracked from the 17 facilities on the border that use his software. Over the past year, more than 13 billion pounds of grain from 350,000 transactions have been tracked. Macias first started noticing something afoot in mid-February, when he says the oil trade war between Russia and Saudi Arabia started to impact Pemex, the oil firm owned by the Mexican government.
As the price of the Mexican peso increased from $18.50 in mid-February, where it had been for almost a year, to $24 today, purchases on GrainChain dropped 20% in just about three days. By the end of February, the volume dropped another 28%. “A lot of my customers are fearful, that if this continues the way that it is, and processing facilities for end products for food slow down, if trucks can’t pick up because they can’t travel easily, or they get sick, or there’s restrictions, the whole system breaks down.”
Access to this kind of data is possible because unlike a traditional supply chain, where every counterparty holds onto its own record of transactions, GrainChain comprises a single network of 46 nodes, each helping the group agree on a shared history of transactions. The nodes, managed by GrainChain, financial partner Rio Bank, large farming cooperatives and independent verifiers accounting for a total of more than 2,000 individuals, allow for nearly instant insight into supply chain data that might otherwise require months to audit. “It allows us to make sure that not only are we kept honest, but all of our participants,” says Macias.
Founded in 2012 as a traditional agriculture software firm, the Texas-based GrainChain has raised more than $11 million from Overstock,com’s Medici Ventures and others. It launched in 2018 using technology similar to the bitcoin blockchain that anyone could use, called Hyperledger Fabric, but with more privacy protections than bitcoin, and only for an invited members. Then, earlier this month the firm announced it had begun to transition to New York-based Symbiont’s Assembly blockchain for settlement of its transactions, and would soon move over entirely.
Because every participant of the supply chain is seeing the same record of transactions, fraud is more easily identified allowing digital agreements between the buyers and sellers, called a smart contract, to be executed in the same day instead of as long as 90 days it currently takes. In addition to enabling access to realtime data and payments, and showing where a glut of grain might offset a dearth, Macias says the company will soon announce a project that could let the actual participants of GrainChain monetize their own data. “We’re going to be opening up some global marketplaces,” he says. “It’ll really shake things up.”