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Coffee Prices To Stay High?

Wed., Sept. 24, 1997

The world’s major coffee producers extended their export quota for an another year in an attempt to maintain prices that reached a 20-year high in May.

At a meeting in London, the Association of Coffee Producing Countries, whose members grow about 80 percent of the world’s coffee, voted to impose a worldwide export quota of 52.75 million 132-pound bags for the marketing year beginning July 1, 1998. The quota is identical to the current export limit.

The association also voted to extend annual export limits for individual countries imposed for the marketing year ended June 30 for the following two years.

The action was viewed by analysts as an attempt to maintain high prices. In May, prices soared to 20-year highs of more than $3 a pound amid concern that frost could reduce the size of next year’s crop in Brazil at a time of lean stockpiles. While prices have since fallen, arabica coffee futures have risen 44 percent this year on the Coffee, Sugar & Cocoa Exchange in New York.

“Why give up these nice profits?” said Charles Cronly, a trader at Harry J. Acer Corp. in Palisades Park, New Jersey. “If you were in their shoes and you had these prices, you wouldn’t change anything.”

Coffee for December delivery fell 1.5 cents, or 0.9 percent, to $1.6885 a pound on the CSCE.

Some analysts said speculation that recent rains could lead to a bumper Brazilian crop next year by aiding the flowering process may also have prompted the ACPC to extend its quotas to 1998-99.

Should the wet weather continue, a Brazilian crop of between 30 million and 35 million bags is possible next year. Brazilian growers estimate this year’s crop at 22 million to 24 million bags.

Still, crops in some major coffee-growing countries may be smaller this year.

Indonesia, the world’s largest producer of lower-grade robusta coffee, expressed concern that it may not be able to meet its individual export target.

“Indonesia anticipates its supply availability may be less than its export allocation,” said ACPC President Rubens Barbosa.

Indonesia expects potential crop damage from the El Nino weather pattern could limit its exports to 5 million bags, less than its export allocation of 5.85 million.


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