A joint press release from the so-called ABCDs of global agribusiness — Archer Daniels Midland Co., Bunge Ltd., Cargill, and Louis Dreyfus Company — is both unusual and worthy of our attention. In a truly revolutionary development, the four agribusiness giants, who for years have waged fierce competition against one another for market share in the grain trading sector, announced on Oct. 25 that they plan to work together to modernize global agricultural commodity trading operations.
The companies said they are going to leverage blockchain technology and artificial intelligence to standardize and digitize international grain trading. The first area the ABCDs are targeting is automating grain and oilseed post-trade processes.
“Many aspects of agricultural trading are highly manual and costly: paper documents, facsimiles, manual retyping of data, and so on,” the companies said. “And many transactions still utilize hard copy transfers of documents.
What is blockchain technology and how can it improve the grain trading process? In a nutshell, blockchain is a shared record of data maintained by a network of computers, rather than a trusted third party. For the purposes of international grain trading, it’s nothing more than a shared digital ledger. It lists all the transactions that have taken place on the blockchain platform. New transactions can always be added to the ledger, but the existing shared data on the blockchain can never be tampered with or modified, because so many versions of it exist on other computers. Once the trade is entered on the ledger, a commodity’s seller knows he has been paid, and the currency resides in a digital wallet. The buyer knows he now owns the title to those goods. Sellers receive better payment security by seeing that currency immediately has been transferred, and buyers receive better access to the supply chain.
It remains to be seen if other international grain traders such as China-based Cofco and Japan-based Mitsui will join the blockchain movement. More than likely they will. When the opportunity arises to implement that time-honored business practice of cutting out the middleman, which results in cost-savings and better efficiency, companies usually don’t hesitate. Some of the biggest companies in the world, including Microsoft, Samsung and Nestle, already are using the technology for various purposes.
Remarkably, though, a 2017 Deloitte survey found that 39% of senior executives at large U.S. companies that were part of a survey on blockchain technology indicated that they had “little” or “no” knowledge of it. It would behoove them to quickly learn how it works and how it can benefit their respective companies.
Of course, nothing is perfect and one downside to this type of technology is the potential elimination of jobs, not just in the agribusiness sector but in all industries. This is nothing new, however, as the grain, flour and feed industries that our magazine covers have been reducing labor costs in the name of technology for decades. Commercial flour and feed mills, for example, which used to require dozens of workers to operate them manually, are now highly automated and require far less manpower.
Still, blockchain technology’s potential to help companies operate more efficiently, whether it involves streamlining the grain trading process or better tracking of global supply chains, is an overall positive development with far-reaching impact. Blockchain technology is no longer a far-fetched concept out of a science fiction novel. It is a reality, and it will be affecting grain trading and other aspects of our business in the not too distant future.