Adoption of Blockchain for Agricultural Commodity Trading Brings Challenges
Despite potential for transformative benefits, the complexity of grain supply chains may slow widespread uptake of blockchain technologies.
DENVER (June 05, 2019) — Blockchain, the distributed ledger technology behind cryptocurrencies like Bitcoin, which allows multiple computers to store identical transaction records, is still in its infancy. Yet interest in blockchain and enthusiasm about its bevy of 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.
Blockchain innovations in agriculture are numerous but have been slow to gain industry-wide acceptance, particularly in the realm of global agriculture commodity trading. According to a new report from CoBank’s Knowledge Exchange Division, 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. However, digital solutions are evolving quickly, creating an environment where blockchain technologies may become more viable in ag 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.”
Blockchain data for grain traded on the inland river system would also have to integrate with systems for ocean-going vessels heading to international markets, thereby requiring international standards for data and governance. Given the current geo-political environment in global trade, such an evolution in international cooperation will likely be years in the making.
A video synopsis and the full report, Blockchain in Agricultural Commodity Trading: Dream or Reality? are available on cobank.com.
CoBank is a $138 billion cooperative bank serving vital industries across rural America. The bank provides loans, leases, export financing and other financial services to agribusinesses and rural power, water and communications providers in all 50 states. The bank also provides wholesale loans and other financial services to affiliated Farm Credit associations serving more than 70,000 farmers, ranchers and other rural borrowers in 23 states around the country.
CoBank is a member of the Farm Credit System, a nationwide network of banks and retail lending associations chartered to support the borrowing needs of U.S. agriculture, rural infrastructure and rural communities. Headquartered outside Denver, Colorado, CoBank serves customers from regional banking centers across the U.S. and also maintains an international representative office in Singapore.
For more information about CoBank, visit the bank's website at cobank.com.
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