Overview

Protected Food Pricing

The agriculture and food industry is sensitive to political and economic conditions and therefore inherently volatile, with increasingly frequent and dramatic price changes.

Due to a highly inelastic supply and demand curves in the food industry, small shocks in either lead to dramatic price changes. As such, the agricultural and food market is inherently volatile. For example, in Summer 2008, food prices reached the highest point of 30 years, before collapsing the following Winter, an instance of the type of extreme unpredictability  that affects producers, consumers, and governments.

Industry Categories

Agriculture
All STRATO Use Cases
Financial Services

Related Topics

agriculture | agriculture industry | AgTech | financial services | price volatility | protected pricing | STRATO Use Case

Key STRATO Features

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Context & Challenges

Part of the reason behind food pricing's volatility is agriculture's sensitivity to political and economic turmoil. Bayer performed a sensitivity analysis that found that a 10% change in commodity prices would have an effect of 40 million euros on equity. This level of sensitivity renders the industry inherently unstable.

More concerning, given the current context of political instability and frequent flux, agriculture can be predicted to suffer. Already, falling commodity prices and growing political instability affect farm income which relative to the 10-year average was down 28% in 2018.

Producers

Farmers' products lose value as food prices fluctuate, and it's near impossible for farmers to predict and prepare for these changes, or prevent them, threatening their long-term income. They might also be more confined to short-term thinking and less willing to invest in new technologies or long-term strategies,

Consumers

Price volatility threatens food security for all consumers, especially those from lower-income backgrounds. As food prices raise, people may no longer be confident in their ability to nourish themselves and provide for basic needs.

STRATO’s provision of a single source of truth drives price transparency in agriculture, alleviating much of the unpredictability and volatility currently associated with pricing in the industry and creating protected pricing, driving the below benefits. 

  • Facilitate a common source of indisputable data from which farmers can make intelligent decisions
  • Creates food security for society by building predictability
  • Integrate transparency into processes to create certainty
  • Build networks from which farmers can form communities to shelter from the impact of volatility

Solution Benefits

  • Facilitate easier usage of derivatives for protection against price volatility

  • Create peer-to-peer producer networks

  • Provide the data to enable data-driven decision making

  • Automated record of events creates transparency which in turn builds certainty

Any STRATO insurance solution leverages STRATO's enterprise grade features

  • RESTful APIs for direct connection of IoT devices to the blockchain network

  • Identity Management, OAuth and SSO capabilities for simplified IoT authorization and user login

  • Privacy via private chains to keep any competitive/operations data private

  • Enterprise Data Modeling for integration of existing and future food pricing models

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