Analysis of blockchain technology implementing and financing provision strategies in contract farming supply chains

Many platforms involved in the contract farming supply chain (CFSC) are planning to implement blockchain to improve customer trust in agricultural product quality and offer financing services to support agricultural production. However, blockchain cannot fully ensure trust, as some data may not be effectively uploaded onto it, and inevitable risks, such as climate changes and natural disasters in the agricultural production process, also make platform decisions on providing blockchain and financing more challenging. To explore how the platform should provide blockchain and financing in a situation where risks and blockchain’s limitations in improving customer trust coexist, we consider a CFSC containing a farming cooperative and a platform that procures agricultural products from the former and sells them to online customers. Intuitively, the higher customer trust in agricultural product quality can encourage the platform’s blockchain provision due to the increased customer consumption. Surprisingly, we find that the platform prefers to provide blockchain only when customer trust is relatively low because the increased consumption raises the farming cooperative’s production financing costs, in turn increasing wholesale prices and negatively affecting the platform’s profits. Interestingly, we also find that the farming cooperative chooses platform financing even though it faces a bank interest rate that is lower than the platform interest rate. Finally, we identify the equilibrium results for blockchain implementation and financing strategies and provide extensions to consolidate our conclusions. Our findings shed light on how platforms should work with farming cooperatives in agricultural digitization and financing.