The Coffee Futures Exchange India Ltd (COFEI) is in talks with the Bombay Commodities Exchange (BCE) for using their online portal for conducting futures trading in coffee. The move would help the former in broadening its market reach and increasing its volumes.
Speaking to Business Standard, Ashwin J Shah, COFEI chairman said, "We are evaluating various options and a tie-up with BCE is one of them. Since, BCE is completely online, the move would facilitate traders to buy coffee from anywhere in the country."
COFEI exchange is located in Bangalore and trading services in other coffee producing areas such as Chikmagaloor, Hasan and Kusalnagar districts in Karnataka. This move would also provide an arranged market for the traders and the buyers and make access for different varieties of the commodity easier in the coffee growing season. However, the trading is still very localised, leading to lower volumes. Daily volumes at the exchange are around 75-100 lots. Shah said COFEI would only use BCE's web-enabled platform. "We will not use their institutional clearing mechanism since we have our own clearing agency," he said.
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Canara Bank would act as the Institutional Clearing Mechanism (ICM) for the exchange. The bank would invest Rs 20 lakh in COFEI. The clearing mechanism of Corporation Bank is also in the pipeline and should be through in the next few months. On the current coffee prices, Shah said, "Prices since the past one month are steady at 4-5 cents per pound and we hope that it stays at that. If the prices go above or fall below this range, it might be drastic for the coffee market."
"At this stage, no one is losing money and therefore, traders hope that the prices are stable here for some time," he said adding there might be short-term gains, but coffee prices will only start improving in 2003-04.
Farmers in some countries are ignoring their coffee crop which would lead to a fall in production. "Fall in production would lead to a rise in prices," Shah stated.