From the article:

Depending on the loan, almost any valuable farm asset can serve as collateral, such as farmland, equipment, crops, livestock, etc. If the borrower defaults, the lender may seize and sell the collateral like farmland or livestock to recover the loan balance.

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The Brazilian market has come up with a new model for farm loans in which tokenization plays a key part.

The country's financial market has carried out its first formal credit operation using tokenized dairy cows as collateral in a transaction registered with the Brazilian stock exchange (B3), CNN Brasil reported on July 21.

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The initiative in Brazil, structured by Target FIDC, involved R$ 100,000 and leveraged data collected by the agricultural technology company Cowmed to turn animals into digital assets that can be accepted as collateral to secure loans.

Each cow has a smart device attached to it which monitors details such as its health, behavior, and location. The accompanying data gets turned into an encrypted code, which acts as a unique digital identity for each cow.

Loan inspectors don't need to make a physical visit to examine cows because they can analyze data on an online platform.

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Target FIDC director Humberto Brenner told CNN Brasil that the market applies large discounts to the value of the livestock due to uncertainties. A cow valued at R$ 20,000 could be considered as a guarantee of only R$ 8,000. But its valuation begins to reflect an animal's market value with continuous monitoring, he added.

As of now, Cowmed monitors around 100,000 dairy cows worth more than R$ 2 billion on over 1,000 farms in Brazil and other countries in the Americas.