Coffee curbs aim to lock in 30 percent price rise
Coffee curbs aim to lock in 30 percent price rise
LONDON (Reuter): World coffee prices are up by 30 percent from the start of 1997 and traders say they may be expected to stay firm if producing nations can implement a new accord to cut exports.
The rally on the price of beans hasn't yet led to many increases on retail coffee on the supermarket shelf but leading roasters are keeping a close eye on a market where stocks are low and short-term supply may be tight.
Thursday brought confirmation that the Association of Coffee Producing Countries, meeting in Brazil, had agreed to cut exports by 1.3 million 60-kg bags between January and June in action to try to lock in firmer prices.
Traders said the new ACPC cut, which was less than one of 2.5 million bags that had been sought by some African sellers of Robusta type coffees, was constructive for coffee.
"It will help the Robusta producers get better prices," said a trader with a U.S. firm.
The accord is seen as likely to help narrow a wide price differential between Robusta, grown mainly in Asia and Africa, and the higher-value Arabicas that are produced chiefly in central and south America.
Altogether 1.0 million of the bags that the ACPC intends to take off the market will be Robusta coffee.
"The splits have yet to be agreed, but importantly Indonesia said that they will contribute," brokerage GNI Ltd said. Indonesia has until now found it difficult to join in ACPC export curbs.
But traders said that the pact could be undermined by indiscipline within the group and by nations like Vietnam that do not belong.
GNI disagreed. "While there will the usual derogatory comments from Europe about whether they will stick to the accord, in our opinion they will."
The ACPC cut followed an emergency meeting of the 15-member group which is led by Brazil that was called to discuss the African plan for a cut of 2.5 million bags.
The Africans were alarmed by a slump in prices which ended 1996 below $1,250 per ton for London Robusta futures, compared with around $4,000 at a 1994 cyclical peak that followed frosts and drought in Brazil.
The new reduction comes on top of an ACPC accord in May designed to limit members' exports in the first half of 1997 to no more than 26.28 million bags.
"We are delighted with the cut," Ivory Coast Commodities Minister Guy-Alain Gauze told reporters.
Futures prices in both London and New York, two key markets, rose sharply ahead of the ACPC session.
Besides the prospect of action by the producers, a cocktail of factors helped the recovery in coffee. These included low stocks and a dockworkers strike in Colombia as well as talk about a lower-than-expected Brazilian crop.
Prices eased from the new highs on Friday after news of a settlement in the Colombia strike, and the London March Robusta contract was trading just below $1,600 per ton compared with $1,630 on Thursday.