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India’s National Commodity and Derivatives Exchange (NCDEX) will launch limited futures contracts for Robusta coffee, according to a report by financial news source Reuters.

India, which is the world’s sixth largest producer of coffee, will start with 3 contracts expiring in February, March and April 2023.

The purpose of a futures contract is to allow farmers to sell their coffee at an agreed price in the present but which will be delivered at a future date. The buyer of the contracts bets that the price will be higher in the future, and they secure the coffee at a cheaper price by paying today.

The farmer benefits from futures contracts by having a guaranteed level of income, and they accept the potential to earn less profit if the price of the commodity rises when the contract is due to be delivered.

The contract will enable growers to hedge their price risks, individually and collectively.

Arun Raste, NCDEX Chief Executive

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