The enhanced Easy Trading Connect (ETC) blockchain prototype was coordinated by seller Louis Dreyfus Company (LDC); the buyer was Shandong Bohi Industry in China.
ABN Amro, ING , Louis Dreyfus Company, Shandong Bohi Industry, and Societe Generale and have completed the first agricultural commodity transaction on a blockchain platform, with improved overall efficiency compared to the paper-based process.
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.
The blockchain platform, Easy Trading Connect (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.
The trade consisted of a soybean shipment transaction from the United States to China and covered the full complexity of the operation. The transaction included Louis Dreyfus Company as the seller and 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. The US Department of Agriculture (USDA) provided valuable insights on how to include phyto-sanitary certificates in the process.
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 digitalisation and standardisation.