Fears of another hard winter drive coffee prices up

Press, 26 May 1977, Page 9

Fears of another hard winter drive coffee prices up

By JANE BRAGA, NZPAReuter correspondent Rio de Janeirc “There’s an awful lot oi coffee in Brazil,” says the song — but not so much as there used to be. By the end of June, according to a senior coffee industry official, existing stocks will have virtually run out. And the new crop, beginning July 1, is estimated at 15 million bags compared with a combined export and domestic supply target of 18 million bags. Recent cold winds increased pessimism. They damaged the crop in the large Brazilian coffee-grow-ing state of Parana, causing coffee prices to rise sharply on overseas markets. The president of the Brazilian Coffee-growing Institute (Mr Camillo Calazans) said that damage was minimal, but other coffee in-

idustry sources said that 20 I per cent of the expected output for next year had been lost. Whatever the damage, its extent does not compare with the losses which fol- ! lowed severe frosts in July, 1975. The crop then was only one-quarter of the level of i forecasts. Subsequently : world prices rose more than iseven times. By early May prices had begun to fall back. Mr Calazans attributed this to the j slackening of purchases with the end of the northern hemisphere winter. But the most recent crop damage caused new rises. In one day on the London market prices rose by £4lB a tonne, but did not reach previous peaks of more than £4200 a tone. The 1975 damage coincided with a general world shortage. Political turmoil in Africa, especially Angola, and earthquakes, drought, and floods in other Latin American countries further cut into production.

I In good years Brazil commands about 30 per cent of [the world’s export market. Though the May cold spell in Parana was not a disaster, it is expected to have a psychological effect. Many planters consider an early cold snap a warning of a hard winter ahead and trade sources said that they, along with middlemen and exporters, could be expected to hang on to their remaining coffee stocks. This could be reflected in continued high prices. The stocks in private hands are estimated at five million 60kg (1321 b bags, far below the stock level normally carried over from , one planting season to the inext. Mr Calazans said that by the end of June the Brazilian Government would have in its stocks less than one million bags of uncommitted; coffee. This compares with a normal Government carry over of 60 million bags and a minimum of 20 million bags traditionally considered

necessary to protect the industry. The 1975 frost has led to a reduction of coffee supplies to the home market. To ensure that domestic demand was met in 1977, Brazil intended limiting exports for the year to 12 million bags. But, according to official statistics, the monthly average of one million bags has been far surpassed and sales for shipment to the end of June already total 8.5 million bags. No more forward sales are as yet permitted by the coff e e-growing institute, which now faces the problem of ensuring adequate supplies for the home market. Brazil is the world’s second largest coffee consumer after the United States, so efforts are being made to 'guarantee not only supplies but to hold prices within the housewife’s budget. This is being done by banning exports of poorer quality coffees and pegging domestic prices,