Reserve Bank tests FarmGate's cryptocurrency stock auction option

Small-scale online livestock marketing platform FarmGate Auctions has been at the centre of a landmark cattle transaction to trial technology using an emerging central bank digital currency.

FarmGate, which has just appointed former Nutrien and Elders executive, Richard Norton, as chairman, has already established its own digital payment structure to complement its revamped online trading platform promising to usher in faster, more transparent options for farmers to eventually sell everything from livestock to vegetables and grain straight from the paddock.

As each sale is executed, funds automatically transfer from a buyer's trust account or digital wallet to the vendor via a blockchain mechanism.

The new secure payment transaction platform, developed by digital financial markets player, Fame Capital, will also enable producers to store, and share, credentials relating to their livestock provenance and performance on the hook, marbling scores, and breeding background via DNA tests.

It has even promised to include biodiversity and carbon sequestering verifications relating to the farm where stock were grown to support physical assessments of sale animals.

Earlier this month the RBA pilot program tested the effectiveness of its so-called eAUD in a physical cattle sale run by FarmGate.

It involved 18 Angus-cross steers sold by a North West NSW vendor at Boggabri to a buyer in nearby Gunnedah, averaging $1060 a head.

Fame Capital is one of 14 participants in the RBA's central bank digital currency trials which have ranged from carbon market to foreign exchange trades.

"The cattle sale test appealed to the RBA because it involves an easily recognised, live commodity which lends a very physical reality to the digital pilot," said Frame executive chairman, Peter Kennedy.

Buyers loaded funds from their own bank accounts into a Fame digital wallet, which were then exchanged for the RBA's eAUD to take part in the sale.

Payments and the transfer of ownership title occurred instantaneously, thus cutting potential delays and costs involved in having intermediaries, or sale settlement disputes.

Although the Reserve Bank is yet to decide if Australia will go further in establishing an official central bank digital currency, FarmGate's own digital trading model is already established, using Fame's cryptocurrency token, developed for digital investment market trades.

It aims to mitigate the credit risks, often associated with producers selling livestock and the auction process, by verifying buyers, sellers and agents and allowing them to deposit funds into FarmGate accounts held in a settlement account in trust.

Fame's technology also has the potential to cascade payments such as levies and fees automatically settled at the moment of auction completion, according to FarmGate chairman Mr Norton, Meat and Livestock Australia's former managing director and now chief executive officer of the Food Agility Co-operative Research Centre.

The CRC's involvement in developing data and artificial intelligence processes to improve production and supply chain efficiency has included assisting FarmGate to establish its secure payment platform.

It has also worked with the likes of Treasury Wine Estates on vineyard fungal disease management and with Australian Agricultural Company to develop algorithms assisting remote monitoring of soil carbon.

Mr Norton said the sort of new generation background technology developed by FarmGate and Fame to sell livestock from the paddock may have even bigger potential for grain growers or in horticulture.

"In the near future farmers will use this sort of blockchain technology, in combination with moisture and protein testing gear - which already exists on their headers - to provide instant sale specifications to buyers as crops are coming off," he said.

"A miller will be able to verify the crop's quality and the farm's credentials and go ahead with an instant transaction.

"That technology still needs to be developed a bit further, but it will give farmers more control over their markets.

"I can see FarmGate providing the platform for producers to directly access supply chains, selling just about any commodity coming off a farm."

Mr Norton also felt a new era of digital connectivity in the paddock via emerging Telstra and Optus deals with Starlink's satellite should dramatically enhance real time digital interaction options on-farm.

FarmGate Auctions, established in 2019 by northern NSW selling agent, Guy Gallen and his family, has spent about $3.2m developing its trading system and support technology.

After initially conducting 66 commercial and stud sales, it paused online auctions for six months to re-emerge this month with upgraded capacity and plans for cattle, sheep and goat sales in direct competition with long established online marketer, AuctionsPlus.

The revamped business is also seeking fresh investors, hoping to raise about $4m.

"We're getting some strong private wealth and institutional capital interest because this is recognised as a modern platform which allows producers to do much more for much less cost," Mr Norton said.

A key feature of FarmGate's model has been to allow vendors who have bred their own livestock to self-assess animals for sale, after first completing a 30-question qualification test.

The self assessment option could dramatically cut the lag time associated with booking an accredited selling agent to assess and list stock for an online sale, and the commission costs involved.

Vendor assessment video training courses are provided to producers who, after the sale, receive a buyer rating based on the veracity of their assessment and livestock quality.

FarmGate general manager, Chanel Gallen, was confident self assessment would be adopted quickly, partly because many producers were already familiar with the procedure and even helped by outside assessors.

"In essence, FarmGate is a market disruptor with significantly lower selling costs than its competitors," she said.

"It offers value-adding services not available elsewhere, such as initiatives to de-commoditise commercial livestock, a secure settlement system, and it gives producers the choice to assess their own livestock."

She said selling costs for cattle via traditional saleyards averaged around $100 a head, including transport, yard fees insurance and agents' commission, while AuctionsPlus averaged $70/ head in commission and listing fees, compared with FarmGate's average charge of just $40.