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Coffee bourse pins hopes on corporate participation

M.R. Subramani

CHENNAI, Oct. 20

THE Coffee Futures Exchange is pinning hopes on the participation of corporate houses to tide over its current crisis, caused by zero volume turnover since July this year, according to a top exchange official.

"We are trying to entice corporate houses to take part in our futures trading. For example, if companies such as Nestle can source 5 per cent of their export needs, then the exchange will do well," Mr Arun Bidappa, President, Coffee Futures Exchange of India Ltd (Cofei), which runs the bourse, said.

No transactions have taken place in coffee futures since traders are "scared to take positions" in view of low prices in the global market. Coffee prices are ruling low on bulging stocks and excess production. The situation is seen continuing through the next season starting October, though a ray of hope has emerged due to dry weather in Brazil.

Mr Bidappa told Business Line that big corporate houses such as ITC, Tata Coffee, Nestle and Hindustan Lever export coffee from the country and Cofei was in talks with them to take part in the futures trade. "The initial response from them has been encouraging," he said.

"These large corporate houses feel that they are taking a big risk if they take part in futures but we are trying to convince them that their requirements can be met," the Cofei official said. "Once these corporates involve themselves, the exchange will get going."

On the other hand, Cofei is trying to make trading simple for the growers. "We want the growers to fix a price for their produce, come to the exchange, deliver and take their money. We don't want the growers to bother about margins. This, we hope, will encourage better grower participation," Mr Bidappa said.

"The growers will deliver in certified warehouses of the exchanges. We are in talks with a couple of large warehouses to be part of the exchange," he said.

Tata Coffee, Aspinwall besides Karnataka Coffee Brokers are a few with whom Cofei is in touch for the warehouse facility. "If we have the stocks in these warehouses, then the banks will have no hesitation to provide funds," Mr Bidappa said.

As a first step to revamp trading at the coffee bourse, Cofei was trying to bring the open positions to zero. "We are trying to convince the traders to square off and close their open positions. The November futures will close on November 15 and hopefully, we will have zero open positions," he said.

Though there are a couple of open positions for January, Cofei officials are hopeful of getting it closed.

"After this, we plan to shut down and make a new start from November-end. This is because it will be closer to the arrival of new crop during December-January and people can take positions," Mr Bidappa said.

"We are also trying to bring into the exchange the transactions that are currently carried outside. Besides, we plan to cut the trading time to two hours and shift the premises," he said.

The new premises would be a smaller one and "at a central place where all can come and go," he said.

Cofei was also in touch with the Coffee Board to introduce an option scheme.

To a question if futures had seen any movement in view of rise in global prices last week, Mr Bidappa said the bull phase was short-lived. "The funds are restive and that's why we have the shocker movement. Any clear picture on the impact of dry weather in Brazil will emerge only at the end of the month," he added.

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