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Coffee-Trading Nations Trying to Spread the Wake-Up Call

September 21, 1990

LONDON (AP) _ If only the world ran on coffee instead of oil, bean exporters are saying to themselves.

Seeking to stabilize depressed world prices, coffee-trading nations are in the midst of talks aimed at renewing international cooperation.

″The real debate will be about what member governments’ intentions are for the coffee agreement,″ Nestor Osorio, Colombia’s permanent delegate to the 72-nation International Coffee Organization, said about the talks, which began earlier this week and will last through Sept. 28.

The agreement, which is administered by the organization, expires Sept. 30 next year.

Its powers to regulate supplies and prices through a system of export quotas were suspended July 4, 1990, triggering one of the sharpest falls ever in the price of coffee and cutting dramatically the income of exporting countries.

While oil-exporting nations are benefiting from the dramatic jump in crude prices stemming from supply fears generated by the Persian Gulf crisis, the coffee exporters are hurting badly because there’s too much coffee on the market and not enough drinkers.

Annual export earnings from coffee have slumped to between $6 billion and $7 billion a year from $10.5 billion when quotas were in effect, according to latest coffee organization figures.

The choices for member governments during the talks are whether they should attempt to negotiate a new accord with regulatory powers to take over on Oct. 1 next year, or extend the present accord for another year with these powers still suspended, said Alexandre Beltrao, the coffee organization’s executive director.

″If they do neither then the agreement ceases and the organization faces liquidation,″ he said.

Delegates, which include the key coffee policy-makers of the leading exporting and importing countries - said quick action is vital. But some say negotiating a new accord could take at least a year.

Exporting and importing countries have consulted about the pact’s future over the past year. But no consensus emerged, despite attempts by Colombia, the world’s second-biggest coffee producer, to mediate between the opposing factions, delegates said.

There is ″no chance″ of a consensus emerging at the talks, said London- based traders E. D. & F. Man International in their latest market review.

The main reason for the lack of progress has been persistent uncertainty about the position of Brazil, the world’s biggest producer and an essential participant for any successful new price-stabilization agreement. Brazil isn’t expected to make its position known until next week.

The present pact’s quota system collapsed in 1989 because of irreconcilable differences among exporting countries over quota shares.

Brazil refused to concede a cut in its historical 30 percent slice to accommodate demands from Mexico and Central American producers - backed by the United States - for a bigger slice.

Joao Cunha, a Brazilian Economics Ministry official who heads his country’s delegation to the talks, has said Brazil would refuse to cede market share.

The producers who called for a bigger share of the market are also not prepared to drop their demands, say their delegates. All export the mild arabica bean.

The coffee organization’s 11 mild arabica-producing countries have seized a 32 percent share of the market since exports were decontrolled, compared with the fixed 23.51 percent slice they held under the abandoned quota regime.

The increase has been at the expense of lost market share for Brazil and African producers, which mostly produce a poorer type of bean.

Prices collapsed last year under the the surge of exports that followed the lifting of quotas, which had been keeping years of excess production off the market.

The price, currently about 74 cents a pound, is still about 40 percent below what it was at the start of 1989.

End adv PMs Friday Sept. 21

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