Industry To Set Up Committee For Coffee Futures

The coffee industry has taken the initiative to set up a committee headed by the Coffee Board chairman to work out the modalities of a domestic coffee futures market.

This committee consists of representatives of the coffee industry and also includes potential financiers for this project such as ICICI banking corporation vice president K S Harshan.

This task force will look into issues such as the size of futures contracts, contract scheduling, exchange management and location of the clearing house. Financial institutions like ICICI and J P Morgan have already lent support to finance thiscoffee futurs exchange.

Philipose Matthai, chairman, Coffee Board today said the exchange should make the coffee industry global.

 

He opined, The coffee futures exchange when and if set up should become the hub for all coffee related activities with Indonesia, Vietnam and other countries in this region trading in this exchange, even if its a domestic futures market.

He added that theres still a big question mark on whether the government, namely the civil supplies ministry, will clear this proposal because theres a baseless feeling in India that prices will be hiked with futures trading. So the the government may take time to clear it. But the Board feels an exchange will be in the interests of the coffee industry. It will bring a lot more liquidity, better market mechanisms and price discovery three to four months in advance, he said.

At the workshop on domestic coffee futures exchange, coffee growers just freed from government controls seemed largely baffled by the working of futures trading market.

However, Anil Bhandari, a prominent grower pointed out, Just because the growers dont understand what futures trading means, we should shelve the idea of an exchange. As long as its not damaging we are for it. The growers, however, felt this exchange might favour the interests of the trader and the benefits would not percolate to them.

But it was universally agreed upon that this exchange would help in stabilising erratic price fluctuations and usher in a more transparent trading system. Right now, in the free market system, theres very little data dissemination. We dont know who the buyer is and we work on price rumours to fix prices, admitted Bhandari. We want this exchange to bring stability into the market and to take the place of the Coffee Board,he added.

Meanwhile, the additional secretary, ministry of commerce, Deepak Chatterji, addressing the workshop made a scathing attack on the coffee exporters community. The exporters have done a disservice to themselves and the country by canceling and reneging export orders last year. Indian exporters do not have a good reputation and are not considered to be trustworthy businessmen, he said.

For this reason one has to think of a more stable alternative and the forward market, options and futures was a good system, he added. The government is thinking of adding more commodities in the forward markets system, he added.

He then assured the gathering that the government had no intention of further regulating the market. And that the Coffee Board would now just purely play a development role leaving the trading and auction to others in the industry.