MCX opens coffee futures
The Multi Commodity Exchange (MCX) has commenced futures trading in Robusta coffee on Monday. Although coffee accounts for only 3.1% of total agricultural exports, it is one of the most important agricultural exports of the country. Coffee is grown mainly in Karnataka, Tamil Nadu and Kerala.
Launching the contract, GV Krishna Rau, chairman, Coffee Board, said, "Coffee futures introduced by MCX will not only provide a mechanism for price discovery in a transparent way but will also aid coffee growers in making decisions about selling their produce."
After a series of talks with planters, traders, processors, brokers and exporters, MCX has decided to link the trade with that in Euronext-Liffe. The trading unit is one tonne and delivery unit is three tonnes (50 bags of net weight 60 kg each). The delivery centres identified are Kushalnagar, Chikmagalur and Hassan in Karnataka and Kalpetta in Kerala.
The MCX coffee contracts also provide flexibility in that they can be traded late in the evening, till 11-30 pm IST, when Euronext-Liffe trading is on. "With the permission of evening trading, traders will be able to cover their price risk exposure at the same time as others in the global coffee market," said Jignesh Shah, MD & CEO, MCX.
The basis price would link to Euronext-Liffe, giving the traders the advantage of settling at the base price. The unit of trade in Euronext-Liffe will be equivalent to 5 unit's trade of MCX. Initially, MCX Robusta coffee futures contracts will be available for the months of March, May & July 2007. The contracts shall be bi-monthly.
During the subsequent months September, November & January contracts will be launched. India is the world's sixth largest producer of coffee. The country produces 274,000 metric tonnes of coffee annually which constitutes of 94,000 tonnes and 180,000 tonnes of Arabica and Robusta coffee respectively. More than 70% of Indian coffee is exported.
As per the contract specifications, basis variety is Robusta and Basis price is Euronext-Liffe Robusta coffee price, converted into Indian rupee with RBI reference rate of the date.