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Time to wake up and smell the coffee
More changes are needed to promote forward coffee transactions at Vietnam’s first coffee exchange centre.
Buon Ma Thuot Coffee Exchange Centre (BCEC) statistics showed that in the first three months of a forward coffee transaction trial at the centre the transacted value totalled around VND250 billion ($12.07 million) averaging VND5 billion ($24,000) per session. Besides, an average 56.5 tonnes of coffee were traded in each section in the first 45 sections against BCEC’s minimal trading volume requirement of 18 tonnes per section.
Alongside some positive signs such as producers gradually getting accustomed to trading via an exchange centre and BCEC staff becoming more professional, some limitations arose.
According to BCEC’s deputy general director Vo Thanh Chau, mechanism woes and poor finance were major hindrances to the centre’s development.
Since BCEC’s operation totally depends on budget allocations, it is not in a position to develop a complete infrastructure system to satisfy customer requirements.
Besides, a ‘market maker’ was urgently needed to boost market liquidity, Chau said.
Therefore, in its 2011’s first-half report, the BCEC sets forth a group of proposals to help revive coffee transactions.
The BCEC has asked the Ministry of Industry and Trade (MoIT) to soon enact regulations on the tasks, functions and operational rules of ‘a market maker’ and the relationships between the market maker and the commodities exchange centres.
Besides, it proposes the government allowing securities firms to do business at commodities exchange centres to diversify capital flows and ameliorating market liquidation.
The report also said the MoIT should propose the State Bank make public regulations relevant to the operation of clearing houses at commodities exchange centres. The MoIT might work with competent government agencies to offer policy incentives encouraging coffee trading firms to get involved in market operations.
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