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

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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%)

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5

Contracts

Do

cum

ents

&

Agr

eem

ents

Flo

wFi

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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

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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

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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

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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

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SIP Process

Blockchain impact

Manual processes;

130 Steps30

Steps

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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

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Screenshot – AgriDigital Platform

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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

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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

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Q&A