The world’s first fully-fledged agricultural blockchain transaction has resulted in transaction times being cut in half and document processing being reduced to 1/5 of the time normally required.
Louis Dreyfus Co, Shandong Bohi Industry Co, ING, Societe Generale and ABN Amro took part in the trade where the sales contract, letter of credit and certificates were digitalised on the Easy Trading Connect (ETC) platform.
Louis Dreyfus Co., one of the world’s biggest foodstuffs traders, teamed up with Dutch and French banks in December to use the ledger-based digital technology known as blockchain. The 166-year-old Rotterdam-based trading house used a blockchain platform to sell a cargo of U.S. soybeans to China’s Shandong Bohi Industry Co.
The new technology enables all parties involved in the transaction to digitize contracts letters of credit as well as government Inspections and certifications. All relevant data can be automatically tracked and matched in real time avoiding duplication and eradicating the requirement for manual checks.
Blockchain technology is already being implemented to facilitate other types of international transactions including oil shipments.
Commodity trading and trade financing is a sector currently dominated by Dutch and French financial institutions who are now embracing blockchain as a way to reduce transaction costs administration.
“We not only proved that this blockchain transaction is technically possible, but also that it yields what it promises,” said Karin Kersten, global head of trade & commodity finance at ABN Amro. “The trade saved labor and time, but also reduced the risk of fraud or human errors.”
“We believe in this particular example the efficiencies were a multiple of the energy side,” said Anthony van Vliet, ING’s global head of trade commodity finance, adding the documentation could be more complex in agriculture than in energy.
“This (cost saving) is key as we operate in a business that has high volumes and very low margins,” ING’s van Vliet said. “If not months, then in a year or at max two, I think the world in this space will look quite different,” he added, referring to the potential widespread adoption of the technology in agricultural commodity trading.
The U.S. Department of Agriculture (USDA) provided insights on how to include phyto-sanitary certificates in the process.