Coffee volumes nosedive at NMCE

Traders not being able to follow Euronext prices since evening trading has been halted

Trading in coffee futures on National Multi-Commodity Exchange (NMCE) has almost dried out since the Forward Markets Commission (FMC) stopped evening session in agri commodity futures from April 25, 2005. The sharp decline in volumes is due to domestic traders not being able to maintain the correlation with international prices.

At present, agri commodity futures are traded on domestic bourses between 10 am and 5 pm as against the earlier 10 am to 11:30 pm. Coffee futures were allowed to be traded till 8 pm earlier.

Robusta and arabica are the two coffee varieties being traded in India and traders have been following the New York Board of Trade (NYBOT) and Euronext.liffe prices for hedging in these varieties, respectively.

Euronext.liffe is the derivatives arm of the pan-European stock exchange Euronext.

An NMCE official said that traders here closely follow robusta prices on Euronext.liffe and domestic tags move in tandem with them. On Euronext, the main variation in robusta takes place between 6 pm and 7:30 pm (IST). The halting of the evening trading has blocked this crucial time for domestic traders. The Euronext.liffe is open from 2.40 pm to 10.45 pm (IST).

"Many international players who were hedging in India have stepped back. Earlier 1,200 tonne was hedged at NMCE per day which has nose-dived to about 10 tonne," a leading coffee trader said.

From February 2005, when coffee futures were launched in India, to April-end 2005, the turnover of robusta coffee stood at Rs 1,275 crore. After the FMC diktat till date, the volume stands at Rs 256.73 crore.

"There is hardly any liquidity in coffee futures. The correlation between Euronext.liffe and NMCE prices has turned almost negligible. On NMCE, the trading has been almost nil for the past three months," said Poonam Gupta, assistant vice-president, business development, NMCE.

As per the data available, the corelation between Euronext.liffe and NMCE in 2005, when the evening session was open for coffee traders in India, was as high as 97 per cent.