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  • QA 042
    Question:
    How are differentials set for the different robusta origins that are tenderable in London? And, how does a robusta origin become 'tenderable'?
    Background:
    QA 016 and 017 give details of how differentials are set for arabica coffee on the New York futures market, and the procedure to be followed for inclusion in the list of tenderable coffees. How does this work for Robusta, in London?
    Asked by:
    Trade house - Singapore
     
    Answer:

    The London robusta market,www.liffe.com ,  does not impose specific origin discounts on tenderable coffee.  Instead, when coffee is graded and found to be of tenderable quality it is assigned a 'type discount' wholly dependent on the number of defects in the graded sample.

    Currently, there are five 'types' or tenderable grades:

    Premium Class: up to a maximum of 0.5% defects by weight and up to a maximum of 0.2% foreign matter by weight and a minimum of 90% over screen 15 round and a minimum of 96% over screen 13 round per 300 g; at an Allowance of USD 30 premium per ton; or

    Class 1: up to a maximum of 3.0% defects by weight and up to a maximum of 0.5% foreign matter by weight and a minimum of 90% over screen 14 round and a minimum of 96% over screen 12 round per 300 g: at Contract price; or

    Class 2: up to a maximum of 5.0% defects by weight and up to a maximum of 1.0% foreign matter by weight and a minimum of 90% over screen 13 round and a minimum of 96% over screen 12 round per 300 g; at an Allowance of USD 30 discount per ton; or

    Class 3: up to a maximum of 7.5% defects by weight and up to a maximum of 1.0% foreign matter by weight and a minimum of 90% over screen 13 round and a minimum of 96% over screen 12 round per 300 g; an an Allowance of USD 60 discount per ton; or

    Class 4: up to a maximum of 8.0 % defects by weight and up to a maximum of 1.0% foreign matter by weight and a minimum of 90% over screen 12 round per 300 g; at an Allowance of USD 90 discount per ton.

    Coffee shall not be tenderable if in the opinion of the Graders one or more of the following applies:

    - the lot is not robusta coffee;
    - the lot is unsound for any reason other than having the defects listed     
      above; or
    - the lot contains more than 8.0% defects by weight per 300 g; or
    - the lot contains less than 90% over screen 12 round; or
    - the lot contains more than 1.0% by weight of foreign matter per 300 g; or
    - the lot has a detectable foreign odour including, but not limited to,
       mould, fermentation or smoke.

    Robusta coffee from any Country of Origin that meets the quality requirements is tenderable, provided it is freely available for exportation - see 08.05.03. However if a new origin wished to be considered for inclusion then the following should occur:

    • In the first instance the exchange should be approached and supplied with full details of the origin in question i.e. production, exportable production, importer information, grades available and testimonials from both the trade and industry highlighting the importance of said origin. Samples of coffee should also be made available to the exchange so that grading may be conducted to ensure that the quality is of an acceptable nature.
    • If the exchange considers that the existing contract and market users could benefit from the inclusion of said origin, it would forward the request to the Commodity Advisory Group - Coffee "CAG", which is a body of 12 members made up from active participants of the coffee industry i.e. roasters, traders, importers, brokers, trade associations etc.
    • If the CAG fully endorses the inclusion of said origin due to market demand, then the exchange will table it's inclusion for before the Membership, Rules and Trading Committee and then inform the market by official General Notice or Circular stating the the origin will be included in the list of tenderable origins from the next unlisted delivery month.

       

    Updated 03/2009

    Related chapter(s):
    Related Q & A:
    QA 016, QA 017