Every time I open the tech section of my go-to news platform, blockchain is there. Banking, produce, charity, politics… it seems like there’s nothing this new payment tool isn’t relevant for.
And coffee is no exception.
I’ve heard varying opinions on the use of blockchain in the coffee industry. Some favor it for its potential to increase accountability and market access, and so improve green coffee prices. Others worry that it may not be accessible for coffee producers, thereby limiting its impact on the part of our supply chain that needs it the most.
So, what’s the truth? Can blockchain empower producers by improving market access? And, if so, how?
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A worker inspects flowering coffee trees on the farm. Credit: Yave
What Is Blockchain?
Scott Tupper, Founder and CEO of Yave, a blockchain provider specializing in coffee, defines blockchain as the “transactional technology that enables any trade between people to be distributed and verified on any network…
“Yave is a marketplace like Airbnb. Producers have something roasters want, and roasters have expressed a need to differentiate and validate their direct trade offerings. We enable these introductions to happen on a platform basis, assuring quality, transparency, and supply along the way.”
But what does that actually mean?
Scott gives me an analogy. “So, I’m going to sell you an apple. The other people in the apple-trading network are all sleeping or in different parts of the world, not a part of the transaction…
“A photo of the apple, or a proof of ownership of the apple and the quality of the apple, will be encrypted and shared to all of the computers in the apple traders’ network. A copy of the availability of funds you have in the bank that you promise to commit to the apple is also inspected by all the computers in the network.
“And then automatically, the trade is settled. So, the apple gets shipped and the money gets deposited to me.”
So, what’s happening in a blockchain transaction is that every step of the transaction gets recorded and monitored by people and computers on the network, even if they weren’t there for the actual trade.
The transactions then get grouped into blocks. The blocks, each containing a set number of transactions, are then linked to previous ones to form a chain, resulting in the name “blockchain.”
That makes sense. Now, let’s look at how it works for coffee.
Sergio Dias of Carmo De Minas, Brazil, sample roasts coffee on his patio after unseasonable rains. Credit: Yave
Blockchain in The Coffee Industry
Using blockchain for coffee trading means that a roaster will be able to purchase a coffee and access all of the previous data on it – providing that was entered into the chain. Where the blockchain is complete, they will be able to see information about the farm the coffee comes from, how much was paid for the coffee at that point in time, and more.
Similarly, the producer can view what happened to their coffee and how much was paid for it, not just by the person they sold it to but by every other body that used blockchain for their purchase.
Yet what impact could this then have on producers? Let’s unpack this.
Ivonne Herrera (left), a coffee producer from Guatemala, with Scott Tupper (right), CEO of Yave, at her cooperative, COINACAGRO. Credit: Yave
Traceability & Accountability
The traditional coffee supply chain involves a lot of actors: pickers, producers, millers, exporters, importers, roasters, café owners, consumers… Consequently, traceability often gets lost.
Yet traceability has lots of useful benefits. The more you know about your coffee, the more you know about its quality. In turn, the easier it is to communicate and work with producers.
For this reason, traceability is a key component of the third wave coffee movement. Yet while roasters and consumers are calling out for traceability, the reality on the ground is that achieving it is a challenge.
And when traceability is missing, accountability is lost.
Scott Tupper, CEO of Yave (left), and Ivonne Herrera (right) talk on Finca Las Parásitas, Guatemala. Credit: Yave
Gustavo De Leon, a director at Specialty Coffee Committee of Agexport, tells me, “I know a lot of people [doing] what’s called paper-trading. They have a farm. It can be a farm that looks great on paper… They may have a valid certificate… But how the certification works is that it is a fixed quantity [of coffee that is] certified. So, it gives [the buyers] the chance to sell the [uncertified] coffee as a certified coffee.”
In other words, the traders may purchase the coffee knowing it’s uncertified. Yet by the time it reaches the final buyer, that information has been lost and the coffee can be sold as certified. It makes it difficult for roasters and coffee shop owners to truly commit to their values.
Gustavo believes that blockchain can help enforce accountability in the coffee supply chain. The technology allows the end users to follow the entire value chain back to origin.
“It will be very difficult to modify the supply chain (and how it’s constructed to get to the end consumers). From the moment that a coffee cherry is picked, I can create the block. For instance, you pick x amount of cherry, then you create a block. You create another block after your mill. You create a block after your dry mill. You create a block after you’ve sorted.
“So, you continue creating a series of chains giving it traceability. It is a system that could be very useful depending on how it’s used.”
It will not eradicate the possibility of fraud, but if information is entered correctly, it cannot be changed, obscured, or “lost.” Since the quality and transaction values are recorded each time the coffee changes hands, it’s possible for us to trace the coffee all the way back to the farm and see what is really being traded – and how much for.
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Picking ripe coffee cherries during the coffee harvest. Credit: Yave
Market Access & Better Prices
Ivonne Herrera is a young coffee producer at Finca Las Parásitas in Guatemala. She’s also the mother of a two-year-old son, Martin, and a student pursuing a clinical nutrition degree at a university in Guatemala City.
Her coffee cups at around 84 points, meaning it is specialty coffee. Nevertheless, with the current record-low market prices, she has been finding it difficult to live on this income.
Yet Ivonne was also part of Yave’s pilot program to test the potential impact of blockchain. Based on their past experiences as green bean buyers, Yave calculated how much the consumer market is willing to pay for an 84-point coffee as a baseline. This price, Scott tells me, has climbed steadily reflecting the market’s move toward specialty and luxury coffees.
Using an algorithm, the team then used this baseline to estimate the price that roasters would be willing to pay for Ivonne’s coffee. Then, the costs of export, transportation, milling, and so on were recorded and taken out along the way. This left them with a price for Ivonne’s coffee.
And in the end, Ivonne earned US $2.50/lb – over US $1/lb more than the C-market would have valued her coffee at.
Ivonne Herrera among the coffee trees on her farm, Finca Las Parásitas. Credit: Yave
New & Stronger Relationships
Even more importantly for Ivonne, she had a platform on which she could connect with roasters and buyers. Through this, her coffee was even sold in Nordstrom, a US American department store chain.
Scott tells me that one of the major benefits of blockchain’s end-to-end traceability is that now you know your both your end consumer and your producer. This information is vital as it can help build and strengthen relationships between all stakeholders. In turn, this creates stability.
Ivonne says that it is simple. The information about her coffee and farm is made available on the platform in an encrypted manner. If buyers are interested, they contact her directly.
As the coffee harvest starts, from the picking of cherries through to the processing and preparation for export, she uses blockchain to record each step along the way. Information like how much coffee her farm is producing and when then becomes immediately available to buyers.
“The platform achieves transparency,” she says. “We can see about each other and talk. Everyone can see what we produce, and everything.”
Scott says that knowing this information is “valuable for roasters who then can honestly say that they are doing direct trade [and] valuable for farmers who then can work to build that relationship and strengthen the tie with roasters, providing marketing materials, access to farms, or just great coffee.”
As Ivonne says, “For me, blockchain has given me opportunities.”
Inspecting unripe coffee cherries. Credit: Yave
But Is Blockchain Accessible For All Producers?
One of the main criticisms of blockchain is that, while it may be a great resource for promoting traceability and accountability within the supply chain, its technology could be off-limits for producers. This is especially true for disadvantaged producers in more rural areas, who may not have as much access to the internet.
But Scott says that it doesn’t always have to be that way.
Yave is developing “producer-access modules,” easy-to-use apps based on producers’ feedback, to make sure that the system and interface are logical and easy to use.
This means that producers will be able to log their identity and find millers, buyers, and Q-graders. They can update their data and use these apps by sending a text message, making the product more accessible for producers even if they don’t have data or 3G/4G coverage.
As a new trading tool, one that can increase traceability and transparency, bring roasters and producers together, and result in better prices, blockchain offers up strong opportunities for coffee producers. And when the platform is designed with those producers in mind, offering easy-to-use access to this information, the impact can be even more powerful.
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Written by Sunghee Tark. Interviews with Gustavo De Leon and Ivonne Herrera conducted by Fernando Pocasangre in Spanish, and then translated by the author for the quotes in the article. Feature photo: Ivonne Herrera of Finca Las Parásitas and Scott Tupper of Yave check Ivonne’s blockchain account. Feature photo credit: Yave
Please note: This article has been sponsored by Yave. Roasters can sign up to participate in the world’s first coffee blockchain auction here, and any producers and roasters interested in Yave updates can sign up to their newsletter here.
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