Poducers to withhold coffee to boost prices

Poducers to withhold coffee to boost prices

SALVADOR, Brazil (AP): The world's two largest coffee producers plan to withhold about six million bags of their upcoming harvests in efforts to bolster frazzled coffee prices, a top Brazilian official said Wednesday.

Brazil and Colombia are among a handful of key producers that have been working to form a global consensus to reverse the trend of falling coffee prices by limiting supply.

"Details of how the plan will work will require agreement from the principal producing countries," said Paulo Cesar Samico, of Brazil's Agriculture Ministry's Food Supply Department. "The important thing is we need to support coffee prices in order to remunerate producers' investments and guarantee future supply."

Samico spoke at a conference on coffee in Salvador, about 740 miles (1,200 kms) northeast of Rio.

Despite an expected reduction in Brazil's and Colombia's 2000- 2001 production, Samico said prices have fallen an average of 10 to 15 percent since January, "mainly because of pressure from Mexican supply."

Coffee future prices on the New York Board of Trade on Wednesday stood at US$1.03 a pound.

Samico said the retention plan should go into operation at the end of April or beginning of May with the start of Brazil's robusta coffee harvest, which could reach a record 7 million 60- kilogram bags, considerably higher than the previous season's 4.4 million bags.

Samico said representatives from Brazil,Colombia, Vietnam, Indonesia, Mexico and the Ivory Coast will meet over the next few weeks to discuss details of the retention plan.

"The immediate effect (of the retention plan) is to boost prices," said one exporter, who asked not to be identified. "But in the long term it is self-defeating as higher prices encourage higher production which will eventually push prices down."

Brazil is the world's largest exporter and producer, harvesting an estimated 27.2 million bags for the 1999-2000 period, down from 34.6 million in the previous year. The 2000- 2001 harvest has been estimated at nearly 29 million bags.