The country's first coffee futures exchange has been facing liquidity problems since many major players are reluctant to participate in a big way. "Once financial institutions become active in the trading, the volumes may pick up slowly," said MC Appaiah, Allanasons Ltd.

Last Friday, the bourse had recorded a trade of 22 lots of plantation A for November 98 and January and March 99 contracts and 23 lots of robusta cherry AB. The average settlement price for plantation A was Rs 99.5 per lot and Rs 75.9 for robusta cherry AB.

The low volume of coffee at the exchange is also a reflection of the falling prices at international markets. This is mainly due to an anticipated heavy Brazilian crop and increase in production in Columbia. The currency devaluation in Brazil would clearly be bad news forcoffee since the world's largest coffee grower may opt for more exports, said an industry analyst in Bangalore.

"Production of Brazilian coffee this fiscal will have a negative impact on Asian coffee prices. Brazilian 1998-99 coffee output has been pegged at 35.8 million bags (of 60 kg each), up from a revised 23.5 million bags in the previous year," said sources in Karnataka Coffee Brokers Pvt Ltd.

According to Cofei director Cothas Prakash since exporters are not entering into new contracts for robusta exports the volume at the futures exchange may come down further. The Coffee Exporters Association had taken a decision to stall fresh robusta exports due to high domestic prices and lack of availability of that variety.

"By January next year we expect to have more buyers and sellers with active participation. The present picture of tightness will begin to reverse with the begin of new season," he added.

Cofei will go slow with its expansion plans including increasing trading time with more futurescontracts and setting up of regional centres in main coffee growing areas. Cofei had planned to set up such centres in Coorg, Hassan, Salem, and Chickmagalur this fiscal.

It had planned to trade around 2,000 lots per day in coming months for nine futures contracts. Contrary to its earlier expectations, it currently trades around 40 to 60 lots of coffee daily for three futures contracts.

Cofei has not able to start full fledged trading as the Reserve Bank of India is yet to clear banks that have applied for institutional-cum-cleading memberships of the exchange. Once RBI approves the application of Vysya Bank it will be able to trade at full steam.

The number of participants is also coming down to 20 from the earlier 100. It will take some more time to propel volumes at the coffee exchange as growers have been adopting a wait and watch approach in this regard. Market awareness will help small growers and buyers to enter the business, said S Ravichandran, Coffico Agencies.