First Agricultural Trade Through Blockchain Completed
ABN AMRO, Louis Dreyfus Company (LDC), Shandong Bohi Industry Co., Ltd (Bohi), ING, and Societe Generale have successfully completed the first full agricultural commodity transaction using a blockchain platform. The enhanced Easy Trading Connect (ETC) blockchain prototype reduces time spent on processing documents and data from hours to minutes, and allows for a larger trading scope.
For the first time ever in the agricultural commodities sector, the trade included a full set of digitized documents (sales contract, letter of credit, certificates) and automatic data-matching, thus avoiding task duplication and manual checks. The transaction, which mirrored the paper-based process, demonstrated significant efficiency improvements for all participants in the chain. Time spent on processing documents and data has been reduced fivefold. Other benefits include the ability to monitor the operation’s progress in real time, data verification, reduced risk of fraud, and a shorter cash cycle. The platform’s success demonstrates the immense potential of distributed ledger technologies to advance commodity trading and financing.
“Blockchain technology has the potential to significantly optimize administrative processes around international trade,” said Karin Kersten, Head of Trade & Commodity Finance at ABN AMRO.
The Easy Trading Connect (ETC) platform was designed to digitize and standardize commodity transactions. It was first validated with an oil cargo transaction in February 2017, with the subsequent launch in November 2017 of an energy consortium aiming to offer blockchain-based services to the energy sector.
The same principle was then applied to develop a blockchain-based platform tailored to agricultural commodities trading, in collaboration with the various participants in such transactions. This new, adapted ETC platform accommodates the agricultural sector’s complex and rigorous documentation chain flows, covering not only the financing aspects, but also the full set of relevant documents pertaining to a transaction, such as the signing and processing of the sales contract at the start.
In this test, the enhanced platform was used to execute a soybean shipment transaction from the United States to China and covered the full complexity of the operation, including a larger number of participants and a broader scope. The transaction involved user participation on the blockchain-based platform by teams from Louis Dreyfus Company as the seller and Bohi as the buyer, with banks issuing and confirming the letter of credit. Russell Marine Group and Blue Water Shipping also participated in the process, issuing all required certificates. The US Department of Agriculture (USDA) provided valuable insights on how to include phyto-sanitary certificates in the process.
ABN AMRO ING and Societe Generale and other major industry players such as LDC have a long-term ambition to improve security and operational efficiency in the commodity trading and finance sector through digitization and standardization.
Sepio Systems, Tech Data & SHI Partner for Cybersecurity