COMMODITIES-COFFEE: Price Hits Floor Before Reversing Slide

• by IPS Correspondents (london)
• Friday, December 16, 1994
• Inter Press Service

LONDON, Dic 16 (IPS) - Coffee continued its nose dive until mid- week when talk that Brazil is to recommend that export retention be re-introduced and a feeling that the commodity had hit its floor reversed the slide.

Brazilian officials from the National Coffee Council, which represents growers, have called a meeting of the Brazilian Coffee Committee to recommend that retention be started again.

Brazil along with other Association of Coffee Producing Countries (ACPC) started to retain 20 percent of its coffee exports in an effort to raise prices from the then uneconomic levels.

Since then prices have more than tripled, more because of two severe frosts and a long drought wiping out a large slice of Brazil's 1994-95 and 1995-96 crops. When prices exceeded targets set by the ACPC retention ceased.

A combination of factors have brought coffee prices down from their peak in mid-September. Much of the price rises before mid- September were reactions to high predictions of crop loss in Brazil.

Brazil is the world's largest coffee producer and exporter. Any changes in its production greatly affects world prices.

The situation of how much of the crop has been lost is still very unclear. Estimates by the Brazilian government and the United States Department of Agriculture (USDA) seem to show that predictions have been overly pessimistic and that losses are less than thought.

The current price of coffee is as close to pre-frost levels as possible and is now a bargain, said London futures brokers GNI its daily commodity report on Thursday.

Robusta coffee futures on the London Commodity Exchange (LCE) closed this Friday evening at 2,670 dollars a tonne for January delivery, 2,635 dollars a tonne for March.

A week ago they ended at 2,835 dollars a tonne for January, 2,805 dollars a tonne for March. Mid-week they closed on Wednesday at 2,475 dollars a tonne for January, 2,455 dollars a tonne for March.

GNI argued that the idea of reintroducing retention would "go against the ethos of the ACPC as a body interested in achieving a long-term price fair price for coffee producers".

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