Kochi: National Multi-Commodity Exchange of India Ltd, or NMCE, will revive futures trading in coffee in a month, three years after it was stopped due to quality issues, said an official.
The robusta variety of coffee, which accounts for 60% of India’s production of 270,000 tonnes, will be traded through futures contracts, said NMCE chief executive Anil Mishra.
NMCE also plans to include the robusta cherry EP variety—where EP stands for estate-pounded, a process in which coffee beans are dried and beaten to remove the shell—so that more farmers can participate in the trading, especially from Kerala’s Wayanad district where these beans are commonly grown, he said.
The exchange is talking with growers and processors to work out trade modalities. It plans small trade lots of one tonne to enable more farmers to participate.
In addition to facilities at the Central Warehousing Corporation for delivery, NMCE would set up warehouses at Kushalnagar in Karnataka, which is a centre for coffee processors. It also plans warehouses at other coffee-growing areas such as Chikmagalur and Hassan in Karnataka, and Kalpetta in Wayanad.
NMCE is talking with coffee producers and processors for warehousing facilities to ensure quality of the material, Mishra said.
Futures trading in coffee was stopped after buyers refused to take delivery complaining that the commodity did not meet quality standards.
The exchange would insist on a delivery-based model, especially in agri-commodities, since larger participation will help contain speculation and provide a mechanism for better price discovery.
On the four-month suspension on rubber futures from 6 May, Mishra said the ban would result in a fall of about 20% in daily trading volumes, which is about Rs200 crore.
NMCE, whose officials met several rubber traders in Kochi, plans to move the Forward Markets Commission, the country’s commodities regulator, to compensate traders hit by the suspension.
Mishra said rubber traders have taken positions for more than 4,320 tonnes of the commodity and are now unable to go ahead with their trades. At the close of the May contract on Thursday, traders had taken positions up to 1,200 tonnes. While a majority could square off their positions, more than 20% may have to opt for a settlement. NMCE feels those affected will have to be compensated, said Kailash Gupta, managing director.