Amadeusz Juskowiak

Coffee traders expect selloff after ico talks fail

The failure of the International Coffee Organization ICO to reach agreement on coffee export quotas could trigger a massive selloff in London coffee futures of at least 100 stg per tonne today coffee trade sources said

Prices could easily drop to as low as 100 dlr or even 80 cents a lb this year from around 125 dlrs now they said

A special meeting between importing and exporting countries ended in a deadlock late yesterday after eight days of talks over how to set the quotas No further meeting to discuss quotas was set delegates said

Quotas the major device used to stabilize prices under the International Coffee Agreement were suspended a year ago after prices soared following a damaging drought in Brazil

With no propects for quotas in sight heavy producer selling initially and a price war among commercial coffee roasting companies will ensue the trade sources predicted

Lower prices are sure to trickle down to the supermarket shelf this spring coffee dealers said

The US And Brazil the largest coffee importer and exporter respectively each laid the blame on the other for the breakdown of the talks

Jon Rosenbaum US Assistant trade representative and delegate to the talks said in a statement after the council adjourned A majority of producers led by Brazil were not prepared to negotiate a new distribution based on objective criteria

We want to insure that countries receive export quotas based on their ability to supply the market instead of their political influence in the ICO

Brazilian Coffee Institute IBC President Jorio Dauster countered Negotiations failed because consumers tried to dictate quotas not negotiate them

Previously quotas were determined by historical amounts exported which gave Brazil a 30 pct share of a global market of about 58 mln 60kilo bags A majority of producers wanted quotas to continue under this basic scheme

But most consumers and a maverick group of eight producers proposed carving up the export market on the basis of exportable production and stocks which would reduce Brazils share to 288 pct

Consumer delegates said this method would reflect changes in many countries export capabilities and make coffee more readily available to consumers when they need it

A lastminute attempt by Colombia the second largest exporter to rescue the talks with a compromise interim proposal could not bring the two sides together

Delegates speculated Brazils financial problems illustrated by its recent suspension of interest payments on bank debt have increased political pressure on the country to protect its coffee export earnings

Developing coffeeproducing countries that depend heavily on coffee earnings particularly some African nations and Colombia are likely to be hurt the most by the ICOs failure to agree quotas analysts said

The expected drop in prices could result in losses of as much as three billion dlrs in a year producer delegates forecast

The ICO executive board will meet March 31 but the full council is not due to meet again until September delegates said