Coffee price set to rise

A pound of coffee costs on average 69 cents on world markets

The world's leading coffee producers have agreed to reduce their exports in an attempt to boost depressed prices.

At a meeting in London, the 14-member Association of Coffee Producing Countries (ACPC), backed by five non-member producers and a number of associate countries, agreed to retain 20% of coffee exports until the average coffee price set by the International Coffee Organisation rises above $0.95 a pound.

Coffee employs 25 million people throughout the world and the aim is to establish better prices for coffee farmers

Marcus Vinicius Pratini de Moraes, Brazil's Agriculture Minister

Coffee prices are currently at a seven-year low of 69 cents and trading is very volatile.

The two-year pact is designed to stabilise prices at a higher level by setting price targets that trigger export quotas.

The exports quotas will be in place "by the end of June or July", participants said.

The members of the newly agreed coffee cartel produce about 90% of the world's coffee.

Brazil's agriculture minister Marcus Vinicius Pratini de Moraes said: "There was complete agreement, not only from member countries of the ACPC, but also from observer countries Mexico, Guatemala, Nicaragua, Vietnam and Honduras."

On the news of the agreement, coffee prices shot up sharply, but traders wonder whether this will last.

The markets have tested the resolve of coffee producing countries before and earlier attempts to introduce quotas have always fallen apart quickly as some members tried to cash in.

Many experts are sceptical whether producer countries have the funds to hold stocks off the market.

Other analysts were more impressed.

"Any agreement that has [non-ACPC members] Indonesia, Vietnam, Mexico and Guatemala has to be taken seriously. But the market has to be patient to see how it's implemented," said Caroline Eagles of internet news service Commodityexpert.

Two-step quota

Brazil, the world's largest producer of coffee, says it will hold back up to 20% of its exports until the price recovers to an average of 95 US cents per pound.

Normal exports are set to resume only once a level of 105 cents per pound has been reached.

However, coffee producing countries said a full liberalisation of export would have to be agreed at another meeting of ACPC countries.