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Coffee Prices to Remain High, Industry Says

October 02, 1986|From Reuters

LONDON — World coffee prices are likely to remain high, helping debt-burdened coffee exporting nations but hurting the consumer, industry officials say.

The officials, here for last week's meeting of the International Coffee Organization (ICO), said the sharp price increase, spurred by a drought in Brazil, the world's biggest coffee producer, will remain for months to come.

Brazil, which produces a third of the coffee exported around the world, recently announced that its current crop would be less than 40% of last year's, the second-worst on record.

Members of the coffee organization control 90% of the $12-billion annual coffee trade.

Effect of Declining Dollar

Coffee is now one of the few commodities that has risen in price in the past year, providing Third World producers with a badly needed boost in income. Most world commodities are selling at their lowest point in years due to sluggish demand from the major industrialized countries.

Some of this price gain has been erased, however, by the declining dollar, which has fallen more than 30% against some currencies in the past year.

Analysts said that coffee, which is priced internationally in U.S. dollars, has risen much less in real terms after taking the dollar's fall into account.

The delegates were in London to discuss renewing the output quotas designed to keep coffee off the market when prices were low. No agreement was reached, but the delegates showed little concern, partly because controls have been suspended anyway because of the current high prices.

Early this year, prices rose above $2 a pound, and ICO export quotas, which had kept prices between $1.20 and $1.40 a pound since October, 1980, were lifted.

Prices later slipped but began climbing last month to $1.80 after Brazil announced a harvest of only 11.2 million bags.

In New York futures trading, prices have again gone over the $2-a-pound level.

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