“Our industry has not significantly changed the way we operate in the past 200 years. Most processes are manual, paper and labor-reliant and prone to a lot of errors, inefficiencies and duplications. We are building a secure digital platform that will minimize the operating risks while increasing market efficiency for the entire commodities trading and shipping industry. The case for blockchain is even stronger as the COVID-19 pandemic underscores the need for more resilient global supply chains, trusted data and an economic recovery enabled through trade digitization.”
Digitalization has a vast impact on world economies. Digital trade and technology have triggered a profound transformation of economic and trade structures. Technologies, smart applications and other innovations in the digital economy can improve services and help address policy challenges in a wide range of areas, including agriculture, transport and commodity trading. There is no doubt that the coronavirus outbreak will accelerate the digital transformation in the world. Technology and digitalization will be more on the agenda. The importance of e-commerce will increase for food and agricultural industry.
The world's biggest agribusiness companies have launched an important blockchain initiative to modernize global trade operations. Archer Daniels Midland (ADM), Bunge, Cargill, COFCO, Louis Dreyfus Company, and Glencore Agriculture created Covantis initiative to replace outdated, inefficient post-trade processes with modern solutions. The initiative aims to bring efficiencies and cost savings to companies throughout the international supply chain.
Covantis CEO Petya Sechanova, a veteran in major global supply chain and agricultural companies, gave an exclusive interview to Miller Magazine on the mission of the initiative. Sechanova has more than 20 years of experience in multinational companies, including 11 years with Cargill, during which she has served in a series of leadership positions. “We are building a secure digital platform that will minimize the operating risks while increasing market efficiency for the entire commodities trading and shipping industry,” Sechanova said. “The case for blockchain is even stronger as the COVID-19 pandemic underscores the need for more resilient global supply chains, trusted data and an economic recovery enabled through trade digitization.”
Could you please provide us with some brief background information on Covantis? How do you define Covantis?
Covantis is an initiative by the commodities trading and shipping industry for the commodities trading and shipping industry. ADM, Bunge, Cargill, Cofco, Louis Dreyfus Company and Glencore Agriculture came together to create more efficiency and value for everyone in the industry.
We are doing that by using forward-thinking technology to replace manual and redundant processes. Neutral yet robust technology means all of us can leverage digitalization to improve information flows—with total security. The platform aims to help people work in a more efficient and accurate way, to reduce the time spent in exchanging e-mails, repeating information, filing, … and allow people to focus on solving complex logistics issues thus adding value to our customers.
Covantis was founded by global agribusiness firms ADM, Bunge, Cargill, Glencore, LDC and COFCO. How did these competing companies come together? What is the motivation?
The motivation is really to modernize our business, we all thought the new technology could enable us to leverage digitalization and bring huge improvements to the way we all work. In order to achieve our goal, we realized that we had to work together and build this platform together for the whole industry.
Covantis will replace outdated, inefficient post-trade processes for agricultural commodities execution with modern solutions. We are building a secure digital platform that will minimize the operating risks while increasing market efficiency for the entire commodities trading and shipping industry.
What are the benefits and advantages of using a blockchain platform for all supply chain actors? What are the opportunities the blockchain can bring? How does the blockchain technology work? Can you tell us it in a simple way?
Covantis platform is based on Quorum blockchain. Quorum is an open-source blockchain platform based on Ethereum, that combines the innovation of the public Ethereum community with enhancements to support enterprise needs. Quorum has been developed by J.P.Morgan bank for fintech operations. Using this technology will enable us to provide privacy, strong permissions and high performance and is one of the more mature technologies for enterprise implementation.
A distributed ledger carries some notable advantages, including decentralization, greater flexibility, greater transparency, audit trail, independence, and more. But Blockchain is just one of the many components of the platform. The platform is built leveraging the modern cloud-native software architecture with the best of breed components to ensure platform reliability, security and scalability.
We have also entrusted the platform development and operations to ConsenSys – a market-leading Etherium blockchain technology company that has a proven track of delivering various Blockchain application and applies the highest standards and tools to enable information security, data immutability and protection.
Where and when will Covantis launch its first operation?
We plan to launch a pilot release in July 2020 to a smaller number of companies and users to ensure smooth operations, final platform validation and testing. Our first release will take place in September 2020 provided no impediments related to the current pandemic crisis. Our first operation will be the bulk export of soybeans and corn out of the port of Santos in Brazil.
We then plan to roll-out and enable the launch of additional ports and further grains & oilseeds commodities exported from Brazil before moving to other origins. Our next steps of development in 2021 will focus on shipments from the US Gulf. We will at the same time develop new functionalities and plan our next expansion roadmap in terms of commodities and origins.
How would you define the blockchain-based transaction? Would you call it a ‘digital revolution in commodity trading’? Will blockchain change the world of commodity trade?
Any digital platform will be transformational for our industry. Our industry has not significantly changed the way we operate in the past 200 years. If you look at a Bill of Lading back in 1800, you would find that in essence, it is very similar to the paper Bills of Lading we use today. Most processes are manual, paper and labor-reliant and prone to a lot of errors, inefficiencies and duplications.
The case for blockchain is even stronger as the COVID-19 pandemic underscores the need for more resilient global supply chains, trusted data and an economic recovery enabled through trade digitization.
How will this new technology affect global trade flows? What are the potential impacts on commodity trading? Do you think this new legacy would influence commodity prices?
The purpose of the platform is to improve the operations processes by reducing the cost of execution and avoiding operational costs and risks. It is not meant to influence commodity prices in any direction.
Is the new platform open to new entrants and smaller players?
The platform will be open to everyone who is involved in our industry, smaller players and new entrants can use Covantis just like anyone else. In the first release of the platform, we plan to onboard exporters and importers of agricultural commodities in bulk. Those would initially be shippers, fob/fob sellers and charterers. In the later releases, we plan to onboard the Cif/Cfr buyers as well as the services providers such as supervision/inspection, fumigation, agents.
Do you think the system has any risks or handicaps? Are there any risks of abuse? What are some potential challenges?
We believe our platform will reduce the risks associated with the operations, will facilitate the digitalization and streamline the process. Ultimately, our platform will drive and promote the use of more digital tools and digital documents which will transform the way the industry works today. Today many of those documents are requested for and issued as hard paper which is then couriered to its recipients – the exporters, the banks, the importers, the ports, the agents. Often documents need to be sent from one office to another multiple times before they reach their final destination. This takes time, money and there is a risk of documents being lost.
Blockchain and digital technologies in general are great tools to offer increased security and data protection – far beyond what we have today when most of the information is transferred in Outlook, is stored on the computers of the operations employees handling the shipments. Of course risks of handicaps, abuse, violations always exist and they are relevant today for any organization regardless of the use of Blockchain or not. We will be taking rigorous measures to ensure proper testing, risk assessment, audit processes and procedure are in place to avoid such situations.
In terms of challenges probably the biggest challenge yet opportunity we face right now is the current pandemic situation due to the uncertainty and disruption to the normal operating processes. Onboarding platform participants in such an environment will require resilience, increased focus on change management, empathy and humbleness to the challenges all users are facing in adopting and using any new digital tool or platform in such a challenging environment.
Is there anything else you would like to add?
There is a great overview provided by the World Economic Forum focusing on explaining in a simple way what Blockchain is all about and its advantages. It is accessible on the following link: