Singapore bank DBS collaborated with agricultural commodity business Agrocorp to develop a blockchain trade platform. Initially, the blockchain platform will enable 4,500 Australian farmers in Agrocorp’s network to connect with customers such as supermarkets and restaurants.
The benefits of the platform are real-time price updates, shared delivery information, and automated trade finance approval. DBS estimates it will reduce Agrocorp’s working capital cycle by 20 days.
Mr. Raof Latiff, MD and Group Head of Digital, Institutional Banking Group, DBS Bank, said: “The blockchain platform solution provides not only transparency, but also greater speed with which the business and its vendors can transact and finance their cross-border trades. The traceability that blockchain provides also offers much-needed security when dealing with a new counterparty.”
Agrocorp plans to expand the platform to other markets including Canada, Myanmar, Ivory Coast and Ukraine. Additionally, it aims to extend the commodities traded on the blockchain platform from pulses such as mung beans and chickpeas, to cereals, cotton, edible nuts and oilseeds.
How it works
Farmer’s log on to a web portal to access real-time commodity prices and register a sale. The sale and purchase agreements are digitally stored on the blockchain.
When goods are shipped the digital ledger is updated and this triggers a smart contract to request financing for Agrocorp. The ledger is linked to DBS via an API so that DBS automatically receives the request and potentially a request to release payment to the farmer.
All the participants in a trade can upload and view trade-related documents. Any changes in contract terms have to be validated by counterparties.
In future, the plan is to capture details about the source of commodities such as farm details and practices including water, fertilizer and pesticide usage. Hence this will enable end customers to view the food traceability and sustainability data.
Other commodity blockchains
Last week for of the world’s biggest agribusinesses announced plans to digitize their global shipping transactions using blockchain. The companies are Archer Daniels Midland (ADM), Bunge, Cargill and Louis Dreyfus.
The other big consortium is komgo which focuses on finance. Some of its shareholders are in the energy sector, so this will likely be the initial focus. But it has plans for metals and agribusiness. komgo shares several shareholders with VAKT, the blockchain platform for energy post-trade processing.