COFFEE PRICES SET TO CONTINUE SLIDE - TRADERS
Coffee prices look set to continue
sliding in the near term, given the lack of progress towards a
new International Coffee Organization (ICO) export quota
accord, according to coffee traders and analysts.
    Robusta coffee futures dipped sharply to 4-1/2 year lows
yesterday at 1,220 stg per tonne, basis the May position, when
the lack of new debate on quotas at ICO talks here confirmed
expectations that efforts to restore quotas would not be
revived at this stage, they said.
    The 15-day ICO average composite price fell to 99.69 cents
a lb for April 1, the lowest for 5-1/2 years.
    Quotas will not now be renegotiated before the ICO's annual
September council session, and in the interim the Brazilian
frost season from June to August may prove the only bullish
factor to stem further price weakness, they said. Futures
bounced back from the lows today towards the previous trading
range around 1,260/1,270 stg per tonne on May as the market
recovered from yesterday's "confidence blip," one trader
commented.
    But despite today's upturn, the overall trend is for lower
prices in the near future, one trade source said.
    The market had become increasingly vulnerable to
yesterday's shakeout, having held within a 1,250/1,350 stg
second position trading range for 22 successive sessions, he
said.
    Technically the market is more likely to decline further as
it absorbs today's brief rally. Steep declines towards the
1,100/1,050 stg area could foster a "three figure mentality," and
speculators may elect to push for coffee prices below the
psychological 1,000 stg level, he added.
    Some traders said today's upturn was in part due to
Brazil's opening last night of May green coffee export
registrations.
     This had been widely anticipated by the market and came as
no surprise, but it did remove some prevailing uncertainty and
light trade buying was seen this morning as a consequence.
    However, the overall trend remains downwards and a test of
support at 1,200 stg should be expected soon, with the only
possible supportive influence on the horizon being the approach
of Brazil's frost season, they said.
    Roasters are believed to be well covered, limiting
activities to modest hand-to-mouth purchases and generally not
taking up producer offers, they added.
    Central American producers have sold the bulk of their
current crops, but robusta producers in West Africa and
Indonesia need to sell coffee for April through July shipment,
and this could pressure prices further, traders said.
    However, one dealer, although seeing no reason to be
bullish, advised caution. "Everybody's bearish now, just as they
were bullish when the market was at 3,100 stg," he said.
    Arthur Cherry, coffee analyst at E.D. and F. Man, expressed
doubts the price spiral would continue much below current
levels. "One dlr coffee is catastrophic for many producers --
there must be a minimum below which prices cannot fall."
    While prices dropped to the lowest levels since September
1982 yesterday, manufacturers have no plans to cut their retail
prices.
    "Its impossible to say, we can't predict anything like that
at this stage," a General Foods spokesman said.
    Manufacturers have lowered prices recently anyway in
response to market weakness. At the beginning of March the
price of a 100 gram jar of coffee was cut to 1.55 stg from 1.65
stg in Britain. But should coffee market prices continue to
fall, the situation would be reviewed, the spokesman added.
    Nestle also has no plans to make additional price cuts in
the near future.
    "The market seems to have established some equilibrium and
doesn't look set to go much lower," a Nestle spokesman
commented.
    Coffee's plunge this week has been mirrored by tea, which
fell to a 5-1/2 year low at today's auction at 1.18 stg per
kilo for medium quality, traders added.
 Reuter
