Farmers are switching to stablecoins

Opinion by: Henry Duckworth, founder and CEO of Agridex

We all need and buy it. Food is a common universal terrain on the planet. It is therefore not surprising that the agricultural industry is enormous. In 2023, the European Union alone imported 154 million tonnes of agricultural products and exported 134 million tonnes more. The market is also growing, planned to develop 3.45% per year compared to this year to reach 5.52 billions of dollars by 2029.

However, farmers and agricultural merchants face a serious problem. They must export food abroad and interact with foreign currencies. The financial system – in particular in Africa – is however underdeveloped. The ineffectiveness in their exchange cause high transaction costs, delayed cross -border payments and high interest rates for loans. Large companies can better navigate financial obstacles, but this is not always the case for small farmers, who suffer from the most obsolete banking systems.

Blockchain technology and stablescoins promise to smooth unstable waters for agricultural merchants. Eliminating intermediaries and providing financial inclusion, technology gives farmers direct access to global markets. With the African food and agriculture market which should be evaluated at $ 1 Billion by 2030, Stablecoins are much more than a simple financial trend for industry.

Cross -border payments hide significant costs

Transfrontal payments are the beating heart of agricultural trade, at the heart of access to resources, such as equipment and seeds, or engage in trade between countries. International transactions are vital for African agriculture, as exports to Africa represent only 17% of total African exports.

Local banking systems, however, are underdeveloped and hinder these payments to a shocking degree. A huge bonding is that traditional banking systems are expensive – they charge farmers between 3% and 6% in costs. It is not a small matter when the beneficiary margins are already thin.

In transactions, the demand for an intermediate currency, generally the US dollar, leads even more exchange rate losses, often falling within 3% to 10%. This affects small African companies, which can pay almost 200% more than large companies to erase their transactions through formal channels.

As if the expenses were not enough, the process is also painfully slow. Farmers can expect to wait up to 120 days for payment regulations. These delays are devastating for companies that rely on rapid access to funds. They are obliged to contract high interest loans without immediate liquidity, by eroding their income more.

Stablecoins can correct agricultural trade

The frustrating financial systems beyond the global agricultural industry, but a glimmer of hope arrives in the form of stablecoins. Discussing to reshape agricultural trade, Crypto offers farmers three key pillars of transformation.

Stablecoins mean that farmers and traders can bypass bank ineffectiveness. With intermediaries out of the photo, they can instantly transform and with lower costs. Farmers save between 3% and 6% per payment and funds are received in a few minutes rather than in painful expectations of weeks or months. The result? These players have the working fund necessary to stay in business.

Traders can forget the unstable local currencies. By assessing their goods in a stable digital asset, they can access the global markets. Fluctuating exchange rates will become a problem with the past. Companies operating in countries with volatile currencies will have the most relief, because sudden devaluations in a currency have the power to eliminate the profits overnight.

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Agricultural trade is paralyzed by immense and ineffectiveness of systemic fraud and the supply chain, global food fraud costing $ 40 billion per year and world trade in false products of $ 500 billion. Stablecoins could be transformers to reduce the original movement of counterfeit goods between supply chains, which makes industry much more efficient.

Results are already observed in African agro-industry. The parrogat of the conglomerate based in Zimbabwe, for example, undertakes the blockchain to rationalize payments to its suppliers while improving the cross -border commercial efficiency. The company, which prides itself on growth and development across the continent, is only one of the many African companies to put itself behind stablecoins and by collecting the advantages.

Agriculture is still faced with global challenges

Stablecoins should be music with the ears of those working in agriculture. The road there could however be rocky. Significant regulatory uncertainty, especially in Africa, is an obstacle. Many nations have strict controls of capital outings, so farmers and traders must comply with local regulations or deal with legal problems.

Another limitation is technological obstacles and a difference in education in the industry, which prevent some farmers from fully grasping and using technology. European farmers, who need stablecoins less because the infrastructure is fairly well established, will not have full access to these stable mechanisms to facilitate trade.