One of the prevailing issues at the tail end of the 2019 hemp season is a problem that actually began at the very start of the hemp season—farmers not having a plan in place to get their hemp biomass and other hemp products to market. For some, contracts fell through. For others, contracts were never locked in to begin with. The supply chain showed its pressure points as oversupply prompted price drops and a general sense of unease in the early days of the legal U.S. hemp market.
The state of Vermont has homed in on a possible solution: blockchain-backed data tracking for the industry. On Feb. 10, the state’s Agency of Agriculture, Food & Markets announced an agreement with Trace, a private tech firm that developed a tracking platform for the hemp industry. Trace is a local Vermont company.
“The Agency is excited to partner with Trace, in developing blockchain technology to administer the Hemp Program’s registration, and crop and product tracking needs to help ensure consumer protection and quality control in Vermont’s growing hemp industry,” Cary Giguere, VAAFM Director of Public Health and Agriculture Resource Management, said in a public statement. “We are excited to partner in the rollout of this new and innovative work. Vermont producers and consumers will benefit from the transparency this partnership brings to the Vermont hemp industry.”
We talked with CEO Josh Decatur to get a sense of how this platform will alleviate some of the early growing pains that hemp farmers have been experiencing.
Hemp Grower: Did Trace exist before landing on hemp? Or was this always a hemp-related venture?
Josh Decature: Trace comes directly from the cannabis world. I have a background in cultivation, and I started medical grows and hemp grows on the East Coast, worked at rec grows on the West Coast. And it was really obvious, a few years ago even, that seed-to-sale tracking solutions that were being rolled out—at that time, only in rec—were awful for the industry and not great for the consumers. So, it seemed pretty obvious that there needed to be some innovation there. Trace got started—2018, really, is when we finally got started, and since then we've been working to try to find a way to create a technology solution that primarily protects consumers and makes it easier for companies to compete on quality in the hemp and/or cannabis markets.
HG: Does Trace operate in both markets now?
JD: Right now, just hemp. But the technology we've built definitely can work and apply to all cannabis industries and literally other industries as well.
HG: In terms of the seed-to-sale tracking systems that are set up in various cannabis markets, could you elaborate on the gaps that exist and what problems that that would pose for both businesses and consumers?
JD: In general, people know at this point that the seed-to-sale tracking systems that have been set up are not good for business and don't work well. They are hacked all the time. There are problems with their integrations and all kinds of other services. It's just a really messy system. And I think the issue is that all those seed-to-sale tracking systems were set up at a time when the No. 1 concern was federal crackdown, back in the 2014 era of the legal market, and that clearly is not going to happen. So, all the systems that exist now are addressing a problem that doesn't exist anymore.
The true purpose of tracking and sharing data about products is consumer safety—helping regulators get the information they need to inform the rulemaking process and helping businesses get their product to market efficiently. That should be the three pillars that any type of tracking system or any type of software that's touching consumers, industry and regulators is thinking about.
HG: For the hemp industry, of course, all throughout the 2019 season and certainly around harvest, we saw supply chain issues and farmers being left high and dry without buyers, contracts falling through. And that's not unique to Vermont. But could you speak to how the blockchain platform specifically would address those sorts of wholesale transaction issues for growers?
JD: We developed an exchange on top of our tracking software that allows inventory that's being tracked to be pushed out to market through that exchange. I think, in general, the hemp market especially is going to be a tumultuous place for the years to come. So, there's no magic bullet to solving that. But I think what we can do is make it easier for people to differentiate products based on their growing practices, based on chemical composition. If we do that, then there should be some ability for farmers to get products to market that stands out from large agri-business—which has its place! The large industrial hemp has its place and will serve its purpose.
But how do all the small farmers, more craft-focused growers, people making products with full-spectrum oils rather than broad-spectrum or isolates continue to stay compliant and stay in business and operate effectively? A ot of those farmers that got left high and dry, based on contracts or whatever else, were really because buyers opportunistically were moving and changing their plans in the face of a changing market that created opportunities with really cheap products in other parts of the country. Really, it’s about market efficiency from an exchange point of view.
HG: Let’s say I’m a grower in Pennsylvania. Will I be able to tap into this system and work with processors in Vermont—or vice versa? Across state lines?
JD: Yes. Our b2b software has no bounds. Obviously, the regulatory features are only available to users in states where we're working with their overseeing agencies, but the b2b tools, the exchange [works] all over the country. The exchange has orders right now from Texas, Florida, North Carolina, all over the country.
HG: Could you speak to the Vermont hemp industry more specifically? Any state-specific challenges that you noticed at the end of 2019?
JD: I think the main concerns are: What are people going to do with their product once it's harvested? How are they going to sell it? And I think a lot of people jumped into the industry without really thinking through the full cycle of growing and processing and selling hemp and everything they would need to be able to do that. In general, there was a lot of optimism, even up until this year's harvest, that has quickly faded the past few months as prices have dropped and people have realized that you really need to know how your product’s getting to market—ideally before you're putting it in the ground. So, that has definitely changed people's approach to hemp.
When it comes to Vermont, not just for hemp, but for really all agriculture, what we do best is quality, craft and selling products based on that—whether it's cheese, beer, milk, vegetables. Really, what Vermont does is small-scale, high-end agriculture. And that's not to say there aren't some pretty big farms in Vermont, too. There definitely are a few large—maybe “medium” in other places in the country—farms that are also maintaining really great quality standards. But there is a large segment of the Vermont market that is definitely five acres or less of really high-quality hemp flower that’s being grown.
HG: If I'm a grower in Vermont, I'm reading the news of the contract and just learning about blockchain just to begin with, what are what are some action items that that Vermont growers should be thinking of, in order to either get on the system or get in compliance or just incorporating this into their business?
JD: All this means from a regulatory perspective is that we're going to make the registration and compliance process with Agency of Ag easier for all farmers. Getting their permit, making changes to their permit— all those things will be done in our software that we're building for the state.
In terms of integrating Trace further, we have a series of other software tools, like the exchange or like b2b blockchain-based product tracking tools for businesses, which we're working with a number of companies in Vermont and outside of Vermont to go live with right now. But, in general, what this means for farmers in the state of Vermont: One, you won't interact with the blockchain anymore than you interact with a server on a traditional website. That's all in the background. But what it will mean is that Vermont products—it'll be easier product to market. Any regulatory software or regulatory rules that are put in place will be taken into account with how our software is designed, and we'll be working around the clock to make sure that it's cheaper and easier for businesses to stay compliant in the hemp market. Ideally, from our perspective, there's less than an hour of interaction with regulatory systems over the course of a year for any business. And the products will be uniquely documented and trustworthy within the national hemp market—compared to other states. So, hopefully that creates a marketing boost for all farms in Vermont.
HG: Anything else that you'd want to spotlight about Trace or about 2020 and hemp in particular?
JD: Right now, we really care about getting good and getting great before we get large as a company. That's our approach. But having said that, hemp has been legal in Vermont for close to 12 years now. It is really showing the nation what's to come in the market. And I think there are a lot of solutions out there that aren't really sensitive to the realities of agriculture and farming that are trying to make their way into the market. It's going to be vital for hemp that [tracking] systems that are sensitive to those needs of the industry and are building software specific to requirements and problems being faced by the industry itself—not just the government agencies overseeing it and not just the largest companies in the industry. It’s really important that systems and solutions like that are the ones that gain steam and become the industry standard. Otherwise, without being proactive about that, in terms of how regulatory systems are set up, the industry itself will suffer.