After a series of talks with coffee planters, traders, processors, brokers and exporters, Multi Commodity Exchange of India (MCX) has decided to link the trade with EuroNext Life which will give traders the advantage of settling at the base price.

Coffee, for example, will be traded on the MCX platform during the domestic global sessions up to 11 :55 pm to help Indian coffee stakeholders hedge in the international market.

"Traders now will be able to cover their price risk exposure at the same time as other in the global coffee market," Joseph Massey, deputy managing director, MCX, said.

Addressing a press conference after launching 'futures trading in coffee Robusta' Massey said for all future contracts the basis price would link to Eurnonext Life. The unit of trade in Euronext Life will be equivalent to live units on MCX.

Initially MCX Robusta coffee futures contracts will be available for March, May and July months and the contracts will be bimonthly. Later, the September, November and January contracts will be launched.

Delivery centres are MCX designed warehouses at Kushalnagar, Chikmangalur and Hassan in Karnataka and Kalpetta in Kerala. Indian coffee exports account for $ 338.37 million annually and has been an active member in the international market since 150 years.

Speaking on the occasion Coffee Board Chariman G.Y. Krishna Rao said, " The tie up MCX has with Euronext Life will certainly add more value. An important link, which is required for the successful trade in a commodity like coffee, is the maintenance of certified warehouses and quality certifications".

"The Coffee Board is also willing to extend its support to strengthen the quality certification mechanism in a cost effective manner. Coffee futures introduced by MCX will provide an effective prices discovery mechanism and will help coffee growers make right decisions on selling their produce. The certified warehouse facility will empower producers to borrow from the banks against the warehouse receipts," he added.

Giving details, Massey said as per the contract specifications, basis variety is Robusta and the basis price is Euronext Life Robusta coffee price, converted into Indian rupees with the Reserve Bank of India reference rate of the day.

The daily price limit is 4 percent and the initial margin is 5% and tick size is Re 1. The trading unit 1 metric tonne and the delivery unit is 3 tonne ( 50 bags with net weight 60 kg. each)

"India being a coffee exporting country needed a hedging instrument which is linked to international price settlement mechanism. MCX Robusta coffee is the first agricultural commodity to offer an international price settlement linkage," said Lamon Rutten, Joint Managing Director, MCX.

India is the world's sixth largest producer of coffee. Grown in over 3,500 hectares and distributed among over 1. 7 5 lakh producers. The country produces 2.74 lakh tonne coffee annually which constitutes 94,000 tonne arabica and 1.80 Lakh tonne Robusta.

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