Coffee sector seeks the right brew

Could you brief us about the futures coffee transaction model?

Vo Thanh Chau

Futures coffee transactions allow coffee growers pre-plan their production activities. For example, they can offer products for sale to enjoy favourable pricing terms even when they do not have the product beforehand and maintain these price levels until the harvest season.

Besides, coffee export and processing firms would work out suitable business plans as they can place orders for a certain amount of coffee at the present time and receive the product in a specified future date. All the involved parties will become more active in their operations.

Futures transactions also offer a sort of ‘price insurance’. Businesses may resort to futures contracts as a price insurance tool for their commodities. Besides, the service is a fresh investment channel to financial investors as it allows them to catch profits in the coffee market.

What are the similarities and differences between futures transactions and current transactions at BCEC?

The similarity is that both transactions are BCEC functions. BCEC is a trading and services entity involving with coffee transactions through instant-delivery and futures contracts. The centre handles instant-delivery transactions since 2008 and in the near term it will embrace on futures transactions which are a more intricate process that requires strict control and supervision procedures. This is quite a fresh option in Vietnam’s trading practices ever since.

Could you elaborate on preparations for the new service?

BCEC joined hands with several partners to work on order-matching procedures for futures transactions right from late 2009. Undergoing several rounds of simulated and trial transactions the order-matching process was basically completed and intensive preparations are underway to be able to launch the new service on the occasion of the Buon Ma Thuot Coffee Festival which is slated to take place on March 10-13, 2011 in Dak Lak province’s Buon Ma Thuot city.

BCEC handles instant transactions from 9am to 11am while futures transactions will be held from 2pm to 5pm which is close to opening hours in big Robusta coffee exchanges in London and New York.

The new service will be trial for one year. What will be BCEC’s major activities in this period?

We will intensify efforts to grow BCEC’s popularity among coffee growers, traders,  exporters and financial investors. Doing business in commodities exchanges is safe, transparent, and swift with ensured benefits as transactions are handled through a well-organised business entity. Exchange-based transactions are an indispensable development step of the market.

How do you expect businesses’ sentiment for the new service and your comment on its future prospect?

BCEC currently consists of 21 trading members, three broker members and 61 registered sellers [mainly coffee growers]. Hence, instant coffee trading at BCEC remains modest.

Futures transactions are now under preparations. Reality shows that fresh services need time to become stable and start generating profits.