A recent soybean shipment from the US to China has become the first full agricultural commodity transaction to use a blockchain platform.
Louis Dreyfus Company (LDC), Shandong Bohi Industry Co. (Bohi), ING, Societe Generale and ABN Amro have successfully completed a trade that included a full set of digitalized documents and automatic data-matching.
In a statement, LDC, the merchant and processor of agricultural goods involved in the transaction, said that the processing of documents and data had been reduced fivefold by using the Easy Trading Connect (ETC) blockchain platform — designed to digitalize and standardize commodity transactions
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.
LDC said that the transaction involved user participation on the blockchain-based platform by 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.
ING, Societe Generale, ABN Amro 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 digitalization and standardization.
Global financial institutions ING and Societe Generale launched the trade finance platform called Easy Trading Connect to digitalize all the documents involved in trade by using blockchain technology. This video shows how the platform works:
Read Port Technology's range of technical papers which focus on the different ways blockchain will be used by the container shipping industry
The US Department of Agriculture (USDA) provided valuable insights on how to include phyto-sanitary certificates in the process.
ETC 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.
Learn about how blockchain will impact ports and terminals at Port Technology's Container Terminal Automation Conference
Gonzalo Ramírez Martiarena, Chief Executive Officer of Louis Dreyfus Company, said: “One thing is clear: the digital revolution is transforming the commodities sector.
“Distributed ledger technologies have been evolving rapidly, bringing more efficiency and security to our transactions, and immense expected benefits for our customers and everyone along the supply chain as a result.
“The next step is to harness the potential for further development through the adoption of common standards, and welcome a truly new era of digital trade flow management on a global level.”