• by IPS Correspondents (london)
• Friday, December 23, 1994
• Inter Press Service

LONDON, Dic 23 (IPS) - Coffee futures hit turbulent trading this week after Latin American coffee producers announced that they are to restart withholding exports in order to raise prices.

Coffee prices have been falling dramatically in recent weeks as the market lost faith that estimates of the losses to Brazil's coffee crop have been overstated.

Values have more than tripled since last year after the Association of Coffee Producing Countries (ACPC) started a retention scheme in October 1993, only to abandon it after prices smashed through targets early in 1994.

The price hikes were more to do with supply shortages and two unexpected severe frosts in Brazil and a prolonged drought that cut massively into the country's 1994-95 and 1995-96 crops.

But a series of more positive estimates on the crop losses in recent weeks have undermined prices and led to coffee plummeting on international markets.

This prompted producers to act quickly in order to stem the losses and maintain the profitable levels of this year into next year.

Central American producers meeting in Guatemala said on Wednesday that they will begin retention early January and will withhold 20 per cent of their exports. Brazil and Colombia, the two largest coffee producers in the world indicated that they will join the pact.

By the end of the month we should see a complete Latin American retention block," said Rio-based commodity analyst, Lawrence Eagles.

Producers said that they will hold back 20 per cent of their exports until prices reach 1.90 dollars a pound, starting in January. When prices move across this barrier, the scheme will be reconsidered, said sources.

But even if values fail to rise above this point producers said they will reconsider the effects of the plan on February 28.

The scheme was proposed by Central American producers who have felt the price falls most acutely. They sold a large proportion of their coffee early, before the initial price hike and thus lost out on the full benefits of the last retention scheme.

© Inter Press Service (2014) — All Rights Reserved. Original source: Inter Press Service

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