Interest in blockchain and enthusiasm surrounding its potential benefits has led to a flood of investment and pilot programs from companies around the world as they race to harness its power to aid tracking and transparency. While blockchain innovations in agriculture are numerous, a new report from CoBank’s Knowledge Exchange Division said they have been slow to gain industry-wide acceptance, particularly in the realm of global agriculture commodity trading.
This has occurred, the report noted, because blockchain application to commodity agricultural trade brings a unique set of challenges. Obstacles include grain blending along the supply route and a lack of digital documentation within sections of the supply chain.
For example, CoBank explained that numerous documents in the grain trade must be digitized for seamlessness across the supply chain. These include, but are not limited to:
- Letters of credit;
- Bills of lading;
- Trading slips, and
- Certificates on weights, grades, phytosanitary specifications, fumigation and origin.
Additionally, the industry would need agreement on where in the supply chain the data would be committed to the blockchain, such as at the barge or railcar loading facility or at the farmer’s field, the report relayed. From there, the data on a blockchain for grain traded on the inland river system would have to be integrated with systems for oceangoing vessels heading to international markets, thereby requiring international standards for data and governance. Given the current geopolitical environment in global trade, the report suggested that such an evolution in international cooperation will likely be years in the making.
Even with these hurdles, CoBank said digitizing even portions of the supply chain could create huge cost savings for grain handlers, because the physical delivery of documents like bills of lading, letters of credit, contracts, letters of intent and invoices is cumbersome.
The good news, the report said, is that digital solutions are evolving quickly, creating an environment where blockchain technologies may become more viable in agricultural commodity trading in the future.
“Previous attempts to digitalize trade finance with tools like bank payment obligation have been slow to take hold, raising doubts among some market participants about new digitalization efforts like blockchain,” said Tanner Ehmke, manager of CoBank’s Knowledge Exchange Division. “Nonetheless, banks and agribusinesses remain keen on finding distributed ledger solutions to deploy industry-wide and potentially achieve efficiencies from faster transaction speeds, less cumbersome documentation and simpler and faster payments between buyers and sellers around the world.”