Futures contract seen as a boon for coffee growers

Futures contract seen as a boon for coffee growers
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First Published: Thu, Oct 04 2007. 12 22 AM IST

Helping hand: The commerce ministry has recently said the Centre is planning to set up a fund to bring an additional 123,600 acres under coffee production and will also help growers replant estates.
Helping hand: The commerce ministry has recently said the Centre is planning to set up a fund to bring an additional 123,600 acres under coffee production and will also help growers replant estates.
Updated: Thu, Oct 04 2007. 12 22 AM IST
New Delhi: India’s coffee growers are hoping a futures contract, launched recently, would help them emerge from years of under-investment and turn around ageing plantations.
The National Commodity and Derivatives Exchange (NCDEX), a leading commodities bourse, launched coffee futures on 10 September in a market where 80% of output is exported.
“A large chunk of traders will take part in the futures, which will help them on two fronts— to hedge price risks and also discover prices,” Anil Kumar Bhandari, a leading grower, said in a telephone interview from Bangalore.
But Bhandari said traded volumes would only go up in January, when new season coffee arrives at physical markets.
Helping hand: The commerce ministry has recently said the Centre is planning to set up a fund to bring an additional 123,600 acres under coffee production and will also help growers replant estates.
“A sharp fall in global coffee prices from 1999 to early 2006 made investment in the domestic sector difficult,” said Bhandari, who also is a member of the state-run Coffee Board. “Futures are a must for a country which consumes only 20% of its annual production.”
Ramesh Rajah, president of the All India Coffee Exporters Association, said the lack of a futures market had seriously impaired local producers.
“Without coffee futures, it was like groping in the dark,” Rajah said.
Narendra Rathod, a vice-president of NCDEX, said interest will be strong in coffee futures.
“According to our survey, just before the launch of the contract, 30-40% of growers and exporters are expected to take part in it,” he said.
India’s coffee exports fell 11.5% in the year to September to 176,699 tonnes because of a strong rupee and higher freight rates.
Crop year output to September 2008 is expected to fall by around 7% from earlier estimates because of unfavourable rains just ahead of the coffee plant’s flowering season and pest attacks.
Many coffee, tea and rubber plantations in India were set up during British colonial rule before 1947, and ageing plants have become less productive over the years.
The commerce ministry has recently said the Centre is planning to set up a fund to bring an additional 123,600 acres under coffee production and will also help growers replant estates.
Bhandari said futures may help India step up exports to new emerging markets such as Russia and Germany and sell more to traditional buyers in Italy and Japan.
“Indian exporters are making deals for the robusta variety in line with London prices, which are around 80.42 cents (Rs31.93) per pound,” according to an official of the United Planters Association of Southern India.
Trade experts said small commodity exchanges in southern India had earlier launched coffee contracts but packed up about five years ago after attracting little participation.
But, this time around the interest seems to be there.
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First Published: Thu, Oct 04 2007. 12 22 AM IST
More Topics: Coffee | NCDEX | plantations | Futures | Money Matters |