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 1.00 dlr or even 80
  cents a lb this year from around 1.25 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 U.S. And Brazil, the largest coffee importer and
  exporter respectively, each laid the blame on the other for the
  breakdown of the talks.
      Jon Rosenbaum, U.S. 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 60-kilo 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 Brazil's
  share to 28.8 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 last-minute 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 Brazil's 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 coffee-producing countries that depend heavily
  on coffee earnings, particularly some African nations and
  Colombia, are likely to be hurt the most by the ICO's 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.
  

