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Export Quota Cut Triggered by Slump in Coffee Prices

June 13, 1989

LONDON (AP) _ The International Coffee Organization cut export quotas for some producers Tuesday after talks aimed at extending the present price-support pact collapsed and prices crashed.

The reduction was automatically triggered by a fall in the organization’s indicator price of coffee below $1.15 a pound.

The price is the absolute floor the 74-nation body seeks to defend by its price-support regime of export quotas, which expires Sept. 30. The coffee organization indicator price Tuesday was $1.1463.

The organization cut the quota by 350,700 bags, which reduces the global quota allocation for the year October 1988 to September 1989 to 56.87 million bags. One bag equals 132 pounds.

It was the third cut in quotas this year and, like the others, affects only producers of the poorer robusta bean. The main burden falls on the Ivory Coast, Uganda and Indonesia.

The selective application of quota cuts reflects the coffee organization’s aim in the 1988-89 year to boost supplies of top-quality arabica produced throughout Latin America.

But quotas of producers of this type will be cut if the price of the grade drops below $1.30 a pound from its present level of $1.39, the organization said.

Negotiations between producing and consuming nations on a one-year extension of the pact allowing prices to be stabilized by supply controls collapsed in confusion early Tuesday.

Brazil, Colombia, all African producers, the Philippines and the European Economic Community backed a proposal at the nine-day talks to extend the pact from Oct. 1, leaving details, such as shares of the global export quota, to be worked out before then.

The move was opposed by the 11-nation group of producers of the top-quality and increasingly popular mild arabica coffee, including Mexico, Costa Rica, Honduras, El Salvador, Guatemala, Peru, Ecuador and India.

They proposed that an extension should be conditional on an agreement now that they would receive a bigger slice of the export quota market than at present. The United States, the biggest coffee consuming nation, supported the proposal.

The nations agreed to hold a one-day session here July 3 to vote on the two proposals, delegates said. Unless many nations change position, both proposals are expected to be rejected, they said.

In that event, the coffee organization is expected to extend the present pact without its powers to regulate supplies and prices, said the head of the West German delegation, Hugo Roerig.

Traders fear that producing countries will ignore coffee organization sales limits before Oct. 1 if no export quotas are adopted.

Analysts said there are ample world supplies of coffee beans despite two consecutive poor Brazilian crops. Huge stocks of coffee are also believed to be held in European warehouses.

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