SINGAPORE - A new blockchain platform is set to help farmers receive payments for their goods more quickly, enabling parties in the supply chain to look into the sources of their commodities and making it easier for them to learn more details of their trade as well.
For a start, the electronic platform connects about 4,500 farmers in Australia to global end-customers such as supermarkets and restaurants.
This means parties in the supply chain can check pricing and supply information in real-time, carry out transactions, as well as track the delivery of orders on the go. The transactions can be in any currency.
Singapore is among the top 10 importers of Australia's agricultural products. Total agricultural goods exported to Singapore in 2016 amounted to A$1.2 billion (S$1.18 billion), comprising 2.7 per cent of the nation's exports.
The platform is a collaboration between Singapore's DBS Bank, commodity trading company Agrocorp International and blockchain provider Distributed Ledger Technologies.
It is expected to expand its reach beyond Australia over the next year or so to other origin markets such as Canada, Myanmar and Ukraine.
Speaking to The Straits Times ahead of the platform's launch on Thursday (Nov 1), Agrocorp's head of business development Vishal Vijay said the practice has been for parties in the supply chain to wait for physical documents to be generated and passed from one party to another before a transfer of ownership of goods occurs.
It typically takes five to 10 days, he added, for such documents to be ready and presented to a counter-party to verify that the goods have indeed changed hands.
"There are two age-old processes that we are trying to revolutionise with this platform," he said.
"One, you will be able to see a faster, more efficient generation and transfer of documents and, as a result, we will also be able to make and receive payments more efficiently."
The time savings allow goods to be shipped out more quickly as well, reducing detention charges at storage centres, as well as the amount of interest parties pay to the banks which fund their trade flows, he noted.
"The second thing is that we are able to provide a better degree of transparency to our end-customers with regard to where a product is coming from," he said.
With the platform, farmers can access commodity prices and register a sale. These sales and purchase agreements are stored digitally on the same system.
Upon certain "trigger events", such as confirmation that goods have been shipped, the system prompts DBS Bank to take action, which includes releasing payment to a farmer.
Parties along the supply chain can upload and view related documents on the platform, and their trading partners will need to validate changes to contractual terms before any trade can be made.
DBS said in a statement on Thursday that transparency is heightened with details of each trade and the sources of commodities now stored on the platform, and buyers can easily trace such information to achieve sustainability objectives.
Mr Raof Latiff, DBS' group head of product management for global transaction services, said banks presently do not get "full visibility" of, among other things, "what happens in the farm, what is produced in a farm, and what is given to a trading company in Australia, and how that particular commodity is sold to a commodity house in Singapore".
But the knowledge is important, he said, especially with Singapore hosting major trading hubs and procuring agricultural products not just for local consumption but also for international use.
Bringing the players together "gives the bank complete transparency of where the physical supply chain is" and allows the bank "to understand what obligations are due from these transactions, such as what payments need to be made", he added.
Enterprise Singapore figures show trade in commodities, including agricultural products, contributed over $28 billion in local business spending and hired about 15,300 professionals over the past five years.
The plan is to get more users on board the platform.
"The only way this will be successful is for wider adoption... You can't have each bank and each company in our industry using their own platform," said Mr Vijay, who noted that it took over US$100,000 (S$138,000) in terms of time and resources for the company to set up the platform.
"We are committed to not keeping this as something that is strictly owned and operated by Agrocorp, but rather something that is open-source, shared, and get more of our suppliers and customers to come on board," he added.
"Banks like DBS can also start using it for its own transactions as well with more of its clients, not just Agrocorp."