“Coffee production is dominated by small producers
States, which are vulnerable to price volatility in the domestic market due to its global nexus. The contract currently being launched would enable these producers to hedge their price risks, individually and collectively. Additionally, as the product has a strong global footprint, this would be an important step in achieving Atma Nirbharta (self-sufficiency) with regards to providing our coffee value chain participants with a local source of price reference. Also, with this contract, we hope to reduce the complexity of trading and make it easier,” said Arun Raste, Managing Director and CEO of NCDEX.
He said this launch has special significance from NCDEX perspective as it marks the Exchange’s venture into South India for the first time as Indian coffee is almost entirely produced in Karnataka, Kerala. and Tamil Nadu.
The contract will have a daily price limit of 6% (4% + 2%), which means that once the price reaches the cap of 4% on either side, trading will be halted for a 15 minutes, after which another 2% movement may be allowed on the same side until the end of the session. The contract lot size was set at 1 metric ton in accordance with the physical trading of the commodity.
“Globally, coffee has been one of the most traded commodity contracts. But in the absence of any hedging tool at the national level, Indian producers had few options available to profit from these activities. Even for price discovery, they had to rely entirely on international trade. As India exports more than 60% of production, the indigenous coffee futures contract will prove to be a boon for exporters in exercising price risk management domestically,” Mr. Kapil Dev, Commercial Director at NCDEX.
With around 350,000 tonnes per year, India accounts for 3.5 to 4.0% of world coffee production, which is set at around 10 million tonnes. Karnataka accounts for almost 71% of the country’s total production, followed by Kerala at 21% and Tamil Nadu at 5%. Nearly 65% of the production is exported and the rest is consumed in the country. The demand for coffee has also increased in the domestic market, as has the expansion of plantations in non-traditional areas of Andhra Pradesh, Odisha and the northeastern states.
“Coffee production is dominated by small producers
States, which are vulnerable to price volatility in the domestic market due to its global nexus. The contract currently being launched would enable these producers to hedge their price risks, individually and collectively. Additionally, as the product has a strong global footprint, this would be an important step in achieving Atma Nirbharta (self-sufficiency) with regards to providing our coffee value chain participants with a local source of price reference. Also, with this contract, we hope to reduce the complexity of trading and make it easier,” said Arun Raste, Managing Director and CEO of NCDEX.
He said this launch has special significance from NCDEX perspective as it marks the Exchange’s venture into South India for the first time as Indian coffee is almost entirely produced in Karnataka, Kerala. and Tamil Nadu.
The contract will have a daily price limit of 6% (4% + 2%), which means that once the price reaches the cap of 4% on either side, trading will be halted for a 15 minutes, after which another 2% movement may be allowed on the same side until the end of the session. The contract lot size was set at 1 metric ton in accordance with the physical trading of the commodity.
“Globally, coffee has been one of the most traded commodity contracts. But in the absence of any hedging tool at the national level, Indian producers had few options available to profit from these activities. Even for price discovery, they had to rely entirely on international trade. As India exports more than 60% of production, the indigenous coffee futures contract will prove to be a boon for exporters in exercising price risk management domestically,” Mr. Kapil Dev, Commercial Director at NCDEX.
With around 350,000 tonnes per year, India accounts for 3.5 to 4.0% of world coffee production, which is set at around 10 million tonnes. Karnataka accounts for almost 71% of the country’s total production, followed by Kerala at 21% and Tamil Nadu at 5%. Nearly 65% of the production is exported and the rest is consumed in the country. The demand for coffee has also increased in the domestic market, as has the expansion of plantations in non-traditional areas of Andhra Pradesh, Odisha and the northeastern states.