NCDEX urges FPOs to benefit from coffee futures | The Financial Express

NCDEX urges FPOs to benefit from coffee futures

The commodity bourse had stopped futures trading in Robusta coffee in January 2007 because of lukewarm response from market participants.

NCDEX urges FPOs to benefit from coffee futures

As deliveries from futures contract of robusta cherry AB coffee variety will restart from February next year, the National Commodity and Derivative Exchanges (NCDEX) has asked farmer producer organisations (FPOs) to use the platform in order to hedge price risks.

“Thanks to price recovery via futures trade, farmers in south India via FPOs can even venture into exporting their commodities directly to foreign buyers,” Kapil Dev, chief business officer, NCDEX, told FE. Karnataka, Kerala and Tamil Nadu account for more than 95% of the country’s coffee production.

Stating that the farmers through futures trade would get prices for their crop in advance, Dev said ‘the coffee growers in India have so far been solely dependent on the US-based exchange ICE for getting the price benchmark for their robusta coffee prices”. Such dependence on global benchmark prices is not conducive for domestic growers given the dollar-rupee exchange rate fluctuations and other international factors, he said.

“We have received promising feedback from the stakeholders as coffee, being a commodity largely linked to the global supply chain, has shown volatility in prices in the past,” Dev said.

The leading commodity bourse has launched futures contracts from February-April, 2023 as harvesting for the new crop will commence from January next year.

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The bourse has set up delivery points at Kushal Nagar, Hassan, Chikmangalur in Karnataka and Kalpetta in Kerala.

“This will help the value chain participants to gain knowledge about futures trade in the commodity and understand the processes,” the NCDEX official said.

The commodity bourse had stopped futures trading in Robusta coffee in January 2007 because of lukewarm response from market participants.

“With growers and exporters currently having access to real time global prices of coffee, futures trade would help all the stakeholders in hedging their risks,” Ravi Poovaiah, manager (exports), Western Coffee Curers and Exports Pvt ltd, said. The company is in the process of registering with the bourse.

After relaunching the coffee contract on September 30, Arun Raste, MD & CEO, NCDEX had said that it would enable growers to hedge their price risks, individually and collectively.

With the annual production in the range of 0.34 – 0.35 million tonne (mt) of coffee, India accounts for around 3.5-4% of the global production of around 10 mt. Robusta and Arabica coffee varieties have a share of around 70% and 30% respectively in the domestic production.

Close to 65% of coffee production is exported. In 2021-22, India exported coffee worth of $ 1.02 billion which was 42% more than the previous fiscal.

According to the coffee board, Karnataka has a share of 71%, followed by Kerala (21%) and Tamil Nadu (5%) in the coffee production. There is growth in coffee plantations in non-traditional areas such as Andhra Pradesh, Odisha and north-eastern states.

Currently, NCDEX is providing futures trading options for around 11 commodities such as guar gum and spices such as coriander, jeera, turmeric etc. It also introduced steel futures trade in the non-agri category.

In December last year, the government had banned seven agricultural commodities – wheat, non-basmati paddy, chana, mustard seeds, soybean, crude palm oil and moong, for one year to combat the rising inflation.

Meanwhile, according to a study conducted by three researchers, including one from the Indian Institute of Management (IIM), Udaipur, the suspension of futures trade in several agricultural items on the commodity exchanges last year have had no impact on the retail price volatility.

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First published on: 10-10-2022 at 02:30 IST