Coffee futures need to have the right blend if there is to be greater market participation. As of now, though key exchanges in the Indian commodities market provide coffee contracts for the Robusta variety, trading has not been very encouraging.

Even the recently-(re)launched National Multi Commodity Exch-ange coffee REP (Robusta Cherry EP) Bulk Coffee contracts have seen speculative trading, but not growers and exporters partake in it. NMCE changed its earlier specification of Robusta Cherry AB to the REP contracts. The REP coffee contracts are expected to help small growers and producers hedge their entire produce on the futures platform fetching better prices.

“The new NMCE contracts have ensured that there is plenty of liquidity, but we will have to see how it moves forward,” says a coffee grower. India is the world’s fifth largest coffee exporter with nearly 70 per cent and more of the produce shipped out to international markets. Karnakata, Kerala and Tamil Nadu are the key growing regions, and the varieties from the Indian markets are Arabica plantation, Arabica cherry; Robusta parchment and Robusta cherry.

“The country is very strong in the Robusta coffee beans variety, and this is the reason for commencing the REP bulk contracts,” says Padmanabhan, head-coffee futures, NMCE.

This year, rainfall in the interior coffee growing regi-ons is having Coffee Board officials, exporters and processors conduct surveys to assess crop damage.

While India Coffee Board estimates yield for 2008-09 to be 293,000 tonnes saying rainfall has actually helped primary coffee growing regions such as Chikmangalur, Coorg and Hassan, coffee growers differ on the projections.

According to the India Coffee Board, yield will see a 12.3 per cent growth projecting Robusta coffee produce around 193,000 tonnes and 100,000 tonnes of Arabica.

Exporters and plantation owners are keen to participate in the new REP contracts once the new season (end-January 2009) starts.

The NMCE offers coffee REP bulk contract with a minimum size of 1.5 tonnes (25 bags with net weight of 60 kg each) specific to Kerala and Karnataka. To address issue of delivery, NMCE has opened centres in Hassan, Chikmangalur, Kushalnagar in Coorg and Kadalpetta in Wyanad district, Kerala.

“We have received approval for Arabica contracts also but this is not active now. We shall look at it once REP has good trading volumes,” says Padmanabhan. Coffee board officials believe there is a huge potential for coffee futures given that 150,000 tonnes are available for physical delivery as of now.

Venkatesh of Ecom Gill Coffee Trading, a leading exporter, says his company has handled 22,000 tonnes of the beans this year, and surprisingly almost 30 per cent of this was for the domestic markets. With volatile prices thanks to tight supplies, Venkatesh says there has been very good price realisation on the domestic market, a new trend. “In the Arabica variety, for instance, our price realisation has been very good. Sales (price) have exceeded procurement costs. We will be looking to procure in the futures market in the new crop season,” he says. Coffee Board, which has been disseminating information on coffee futures among planters, exporters and processors, is also concerned about quality. “Only when the delivery mechanism and quality are right can they expect to have more trading. We also need to get intermediaries and curers into the markets as this will make it easier for the (small/medium-sized) growers to take part just like in the international coffee contracts on the Liffe. The exchange must also guard against manipulation during delivery,” says the coffee board official.

In India, Arabica harvesting for the new crop will start in December, while Robusta will be in February. The country produces only 4 per cent of the world’s coffee, but exports 70-80 per cent of its produce, perhaps explaining the heady interest in coffee futures.