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1March 2018
Digitisation within the Soft Commodities Supply Chain
Techruption presentation
2
Agenda
• Blockchain easily explained
• Current Issues
• Grain Value chain
• F&A Blockchain view
• Proof of Concept SIP Case
3
Bank
Insu
rer
Ship
pin
gBlockchain easily explained – Trade finance example
Next Generation of Internet with transactional and trust elements
Blockchain features• Decentralised• Distributed• Trust-less • Digitalisation of assets• Auditable
4
Current issues within Trade Commodity Finance
The administrative pain that clients
perceive in some of the processes is a slow down in doing business and a business prone to errors:
• Manual contract creation
• Manual invoice factoring
• Manual AML review
• Delayed timeline
• Delayed payment
• Delays in shipment and late financing due to issues around documentation
Banks have a lot of issues around documentary fraud and credit risk
Lack of transparency surrounding trade and trade finance
High cost associated with supply chain management through the use of Bill of Lading
Multiple versions of truth, Siloed systems, data analytics difficult
Duplicative bills of lading
Difficult entry for SME smaller transactions
Corporates are moving to Open Account Trade (>80%)
4
5
Contracts
Do
cum
ents
&
Agr
eem
ents
Flo
wFi
nan
cial
Flo
w/
B
anki
ng
Pro
du
cts
Ph
ysic
al
Co
mm
od
itie
s Fl
ow
Serv
ice
pro
vid
ers
FO
B(Free-O
n-B
oard
)
Mai
n
Pla
yers
Farm inputs
Transport
Storage
Insurance
Quality reports
ORIGIN SHIPPING DESTINATION
Grain value chain
Storage confirmationincludes Q&Q
Invoicefarmer
Storer
Railway
Transportation Company
Insurer(Grower)
Transportation Company
(Intl. trader)
ExportCustoms
ImportCustoms
Customs clearing
Customs clearing
Farmer/ inputs
Farmer / storer
Farmer / transpor
t
Farmer/ Rabobank
Insurance policy
Trader / transport
Trader / storer
Trader /Rabobank
Invoice trader
Invoice shipping co
MillerTransport
Miller storage
Insurance policy
Storage receipt
Inspection report
Invoice Flour Mill
Insurance policy
OwnershipTransfer
To Trader from Flour Mill [x] days after deliveryTo Farmers [x] days after delivery
Farmer/ tradersales contract
Trader / Shipping Co
Trader /Flour Mill Miller / bakery or
distributor
InspectionCertificate Shipping
DocumentsStorage
confirmationincludes Q&Q
Invoice trucking co
Farm Inputs provider
Documents
Grain Trader Shipping Company
Bakery / Consumer to Flour Mill
DOCUMENTARY COLLECTION
RECEIVABLES
STANDBY LC GUARANTEE
LETYTER OF CREDIT
Flour Mill
OwnershipTransfer
OwnershipTransfer
OwnershipTransfer
Insurer( storer)
Structured Inventory Product
Pre-PaymentLending
FX HEDGING
Insurer
TransportationMill
Inspection
Grain FlourConsumption /
ProcessingGrain Grain
Port (Import)Storage
Port (Import)Storage
Flour Mill
Insurer
TransportationMill
Inspection
Port (Import)Storage
Insurer
TransportationRetailer
Growers Bakery
6
F&A Value Chain Optimisation Financing across the Digital Value Chain
Farm Inputs Farming Trade Processing Retail
Partnerships
Blockchain
BlockchainBlockchainBlockchainBlockchain
Blockchain
Blockchain
Blockchain
BlockchainBlockchain
Partnerships Partnerships
Inclusion ProvenanceRisk ManagementExample value chain
Smart Farming Smart LogisticsSmart Trading Smart Processing Smart Consuming
7
Ag Tech
FoodTech
Fin Tech
Artificial
IntelligenceRobotics
Data
Capital
F&A Know How
Community/Network
Blockchain bring together Fin/Ag/Food and as a result of it enables based on data availability new business opportunities.
Internet of thingsOther
Blockchain
Blockchain
Blockchain
Data drivenDevelopment of new business models
8
PoC Use Case: TCF Structured Inventory Product
Rabobank ownership of InventoriesRabobank and
Client enter into a
Master Agreement
and Agency
Agreement
T = [weekly]
Rabobank purchase inventories from
Client or its’ suppliers
Storer provides acknowledgement of
keeping stock on behalf of Rabo
Weekly MTM based on a third
party Reference Price
Client purchase
inventories from
Rabobank
Rabobank sells
‘equivalent’ inventories to
Client transferring legal
title
Rabobank invoices Client for the
forward sales price
The forward sales price is
calculated as:
Purchase price + Cost of carry
(incl. Agency Fee) + Holding
charges (ie funding costs) + GST
T = 0
Legal title to inventories
transfers to Rabo free of any
encumbrances
Payment to Client or
Client’s suppliers based on
Reference Price or Supplier
invoice
T = [180]T = [0-30]
Client Benefits:
- Liquidity against inventory- Cost effective as Rabo owns inventories- Potential true sale or deferred recognition of inventories- Reduction of initial and variation margin- High advance rates due to liquid nature of underlying
commodities and ownership
9
SIP Process
Blockchain impact
Manual processes;
130 Steps30
Steps
10
SIP PoC - Objectives
Explore the possibilities to start connecting the entire F&A value chain digitally on the blockchainby starting with the growers, agents, store facilities and traders
Explore real efficiencies to be gained in implementing blockchain technology particularly in Trade Finance and SIP solutions
Incorporate real time, supply chain finance to the exchange of digital title to commodities on a blockchain
PARTNERSHIP
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Purchase Contract
SIP Just in Time
Sale Contract
Trader as Agent for Rabobank
TraderGrower
Rabobank purchase inventories from
Grower or its’ suppliers; Storer provides acknowledgement of keeping
stock on behalf of Rabo
Rabobank and Client enter into a Master
Agreement and Agency Agreement
Trader purchase inventories from
RabobankRabobank sells ‘equivalent’ inventories to Client
transferring legal title
*Trader is acting as the site operator, agent for Rabobank in the Purchase Contract and the final buyer of the grain.
A
B
C
SIP PoC - High level solution- Contractual Agreements
© Full Profile Pty Ltd and Coöperatieve Rabobank U.A.
A B C
Screenshot – Facility setup
13
Screenshot – AgriDigital Platform
14
Digital Transactions
Physical Trade Flow
Trader*Grower Grain
Grower Digital Wallet
Grain
Trader’s Rabobank
Facility WalletTrader’s
Digital Wallet
D1
D2
B
C
E1
E2
A
Rabobank issues AUD token
to the Agent’s Rabobank
Facility under Master
Agreement
Grain delivered and registered
in warehouse
Digital title to the grain is
issued to Grower by Site
Operator of warehouse, in this
case the Trader acting as site
operator
Grower allocates the grain to
Purchase Contract with Trader
as Agent for Rabobank
Smart contracts execute
payment from Rabobank to the
Grower in AUD token,
ownership of digital title grain
token transfers from the
Grower to Rabobank
Trader requests to purchase
the grain which is the subject
of the Sale Contract
Smart contracts execute
payment from Trader to
Rabobank and beneficiaries in
AUD token, digital title
transfers from Rabobank to
Trader
*Trader is acting as the site operator, agent for Rabobank in the Purchase Contract and the final buyer of the grain.
Rabobank Digital Wallet
Warehouse
A
B
C
D1
D2
E1
E2
© Full Profile Pty Ltd and Coöperatieve Rabobank U.A.
SIP PoC High level solution- Process depicted on Blockchain
15
SIP PoC -Benefits
Immediate payment on delivery for the grower
Supply Chain Optimisation &Increased efficiencies and reduced costs of operation
Single version of truth Improved liquidity enabling better decision making
16
Q&A
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