Source: Cointelegraph Original: "{title}"

Views from: AgriDex Founder and CEO Henry Duckworth

We all need and buy food. Food is a common foundation globally. Therefore, the vast scale of the agricultural industry is not surprising. In 2023, the European Union alone imported 154 million tons of agricultural products and exported 134 million tons. The market is also growing, expected to increase by 3.45% annually from this year, reaching $5.52 trillion by 2029.

However, farmers and agricultural traders face a serious problem. They need to export food abroad and transact in foreign currencies. Yet, the financial system—especially in Africa—has not been fully developed. Inefficiencies in trade lead to high transaction costs, delayed cross-border payments, and high-interest loans. Large enterprises can better cope with financial challenges, but this is not always the case for small farmers, who are most affected by outdated banking systems.

Blockchain technology and stablecoins promise to help agricultural traders navigate unstable waters. By eliminating intermediaries and providing financial inclusion, technology offers farmers direct access to global markets. With Africa's food and agriculture market expected to reach $1 trillion by 2030, stablecoins will not just be another financial trend in the industry.

Hidden Significant Costs of Cross-Border Payments

Cross-border payments are at the core of agricultural trade, crucial for acquiring resources like equipment and seeds or conducting trade between countries. International transactions are vital for African agriculture, as exports within Africa account for only 17% of total African exports.

However, the local banking system is underdeveloped, severely hindering these payments. A major issue is that traditional banking systems charge high fees—between 3% to 6% from farmers. This is not a small problem when profit margins are already thin.

In transactions, the need for intermediary currencies—often the US dollar—leads to additional exchange rate losses, typically between 3% to 10%. This affects small businesses in Africa, which often pay nearly 200% more in fees than large companies when settling transactions through formal channels.

Worse still, the process is very slow. Farmers may have to wait up to 120 days to settle payments. These delays are disastrous for businesses that rely on quick cash flow. They are forced to borrow at high-interest rates without immediate liquidity, further eroding their profits.

Stablecoins Can Solve Agricultural Trade Issues

The frustratingly outdated financial system hinders the development of the global agricultural industry, but a glimmer of hope is arriving through stablecoins. Stablecoins are expected to reshape agricultural trade, providing farmers with three key transformative pillars.

Stablecoins mean that farmers and traders can bypass the inefficiencies of banks. By eliminating intermediaries, transactions can be completed instantly and at lower costs. Farmers can save 3% to 6% on each transaction, with funds arriving within minutes, no longer having to endure long waits. The result? These participants have the working capital they need to sustain their businesses.

Traders can escape the issues of unstable local currencies. By pricing goods in stable digital assets, they can gain access to global markets. Exchange rate fluctuations will become a thing of the past. Businesses operating in countries with volatile currencies will benefit the most, as sudden devaluations can wipe out profits overnight.

Significant Progress in African Agriculture

Agricultural trade is plagued by massive systemic fraud and supply chain inefficiencies, with global food fraud causing losses of $40 billion annually and the global counterfeit trade reaching as high as $500 billion. Stablecoins could be transformative in reducing the circulation of counterfeit goods in the supply chain, making the industry more efficient.

In African agricultural commerce, some results have already been seen. For example, the Zimbabwe-based conglomerate Parrogate is committed to adopting blockchain technology to streamline payments to suppliers while improving cross-border trade efficiency. The company prides itself on its growth and development across the African continent and is just one of many African businesses embracing stablecoins and benefiting from them.

Agriculture Still Faces Global Challenges

Stablecoins are undoubtedly a shot in the arm for agricultural practitioners. However, the road to this goal may not be smooth. One obstacle is regulatory uncertainty, especially in Africa, where many countries have strict capital outflow controls, meaning farmers and traders must comply with local regulations or face legal issues.

Another limitation is the technological barriers and educational gaps within the industry, preventing some farmers from fully understanding and utilizing this technology. For European farmers, due to better infrastructure, there is less demand for stablecoins, so they cannot fully leverage these mechanisms to facilitate trade.

Despite the obstacles, the demand for stablecoins in African agriculture is undeniable. There is a strong willingness within the agricultural community to adopt compliant stablecoins that support cross-border liquidity.

The widespread adoption of stablecoins will not happen overnight, but that does not mean the industry is not moving towards digitization. The proposition of stablecoins is highly attractive—instant transactions, lower fees, and enhanced financial access. It is only a matter of time before more farmers choose to turn to stablecoins.

Agricultural traders struggling under the weight of outdated and disruptive banking systems are ready to embrace greater financial inclusion. And we should be prepared as well. This industry will connect us all and will be uplifted by stablecoins. This technology will have a profound impact on the agricultural sector—not just as an innovation but as an essential evolution.

Views from: AgriDex Founder and CEO Henry Duckworth

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This article is for general informational purposes only and should not be considered legal or investment advice. The views, thoughts, and opinions expressed in this article are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.

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