Company completes first agricultural deal using the digital technology
Emiko Terazono in London
China’s LDC along with some leading financing groups have trialled the blockchain based digital platform for the sale of US soyabeans © Bloomberg
Louis Dreyfus Co, a leading agricultural commodities trader, and a group of financing banks have completed the first agricultural deal using blockchain in a further sign that the digital technology is set to change the way raw materials are bought and sold.
Originally built to process bitcoin deals, blockchain is an electronic ledger which stores records of deals in digital blocks. Commodities traders are among those hoping that the technology will lead to faster, cheaper and more secure ways of settling transactions, with oil trading houses and energy groups now actively trialling platforms based on blockchain.
LDC and Shandong Bohi Industry, a Chinese agricultural processor, along with the financing groups ING, Société Générale and ABN Amro trialled the blockchain-based digital platform for the sale of 60,000 tonnes of US soyabeans to China in December.
Commodity players have been hoping that technology could ease the cumbersome process of exchanging contracts, letters of credit, inspection and other paperwork by email or fax when one company sells raw materials to another.
Robert Serpollet, global head of trade operations at LDC, said: “Our expectations were high but the results were even higher,” noting that processing time for the documents was about a fifth of a paper-based process.
Other benefits include the ability to monitor the operation’s progress in real time, data verification, and reduced risk of fraud. “The cost benefits are significant,” said ING’s global head of trade commodity finance, Anthony van Vliet, who noted that an earlier test with an oil trader saw savings of 25 to 30 per cent.
Both LDC and ING said widespread adoption by leading agricultural traders, financing banks and other players in the supply chain would be crucial for a blockchain digital-trading platform to take off.
“For the new platform to work, we will need to design an industry standard which will bring together the main players of the agricultural commodity space,” said Mr Serpollet.
The blockchain-based platform in the transaction was used early last year for an oil cargo deal involving Mercuria, the oil-trading house, and ING and Soc Gen banks. Energy groups including BP and Shell, trading houses such as Gunvor and Mercuria, and financing banks later formed a consortium to further develop the blockchain-based platform.
Elsewhere, BP has been experimenting on a blockchain-based programme alongside Eni, the Italian oil major, and Wien Energie of Austria; and Cargill is operating a pilot blockchain technology to track the provenance of its turkeys, providing consumers with information on where individual birds were raised.
In other sectors, the Australian Securities Exchange is planning to use blockchain technology to clear and settle equity transactions, leading US investment banks have been experimenting with using the technology for equity swaps, while AP Moller-Maersk, the Danish shipping group, is using it in marine insurance contracts.
For the soyabean deal, two shipping companies issuing required certificates, as well as the US Department of Agriculture offering insights on how to include phytosanitary certificates, also participated in the latest agricultural digital process.
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