Bringing blockchain to agricultural commodity trade
22 January 2018
ING has joined forces with global merchant Louis Dreyfus Company (LDC), ABN Amro and Societe Generale to complete the agricultural sector’s first blockchain commodity transaction.
Featuring no paper contracts, certificates or manual checks, the soybean shipment transaction from seller LDC to Chinese buyer Shandong Bohi was completed at five times the speed of a paper-based trade using ING’s blockchain prototype Easy Trading Connect (ETC).
“The fully digitalised transaction simulated the traditional 11-14 day process and took only four days to complete,” said Anthony van Vliet, ING’s global head of Trade & Commodity Finance.
But there’s much more than improved speed to it. With blockchain, there are significant improvements for all participants on the chain, including reduced fraud risk, lower costs, increased safety, and the ability to monitor the trade’s progress in real time.
ETC was first validated last year, after a blockchain oil-trade test revealed that the average time for a bank to complete its role in the transaction went from about three hours to 25 minutes.
“This time, ETC was upgraded to manage a more complex documentation chain flow for agricultural commodities,” said Anthony.
The Russel Marine Group, Blue Water Shipping also participated in this trade, and the US Department of Agriculture provided valuable insights into the inclusion of phyto-sanitary certificates* in the trade.
Disrupting a centuries old industry
Trade commodity and finance is still based on the exchange of paper documents and processes that haven’t changed much since the foundation of trader Dutch East India Company in 1602.
“What we’re after, is to adopt common standards and digitalise an industry with century-old paper and manual processes. We are expecting to see significant developments in the next 12 months,” Anthony said.
Anthony: “We are a the world’s largest commodity finance provider and given the progress we’ve seen so far in the agricultural and energy commodity trading experiments, we intend to reach out to a wider group of customers and stakeholders like logistics, shipping, storage and inspection companies. The chain will be the most efficient if everyone who is part of it also becomes part of the distributed ledger.”
*Phyto-sanitary certificates are import requirements related to the health of plants.