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ICO hopes for action - in 1992!

ICO hopes for action - in 1992!

All in all, it would have been a lot easier, as well as a whole lot cheaper, to have conducted the entire affair by telephone. A few quick calls, and the same inevitable result could have been achieved without anyone setting foot outside of their own offices.

It's probably fair to say that, as usual, Colombia made the greatest effort to salvage something from the haunted ruins of what was once one of the most effective initiatives ever launched by the United Nations. Right at the beginning, Jorge Cardenas pointed out that the past 15 months of quota-free operation had cost the producers an estimated $3.15 billion, with a predictably grim effect on the already frail economies of the most coffee-dependent countries.

"We cannot maintain an expensive and inoperative structure with the sole purpose of collecting often untrustworthy statistics, or as a place to meet and exchange information," he warned. But two weeks later, it was the vacillating Brazilians who finally proposed extending the present ineffectual Agreement to September 1992, keeping the ICO itself as a forum for discussions which may - or may not - lead eventually to a new ICA with the power to regulate the world trade in coffee.

But any hopes that the Colombians might have had of winning the necessary backing for their earnest bid to breathe life back into the negotiations were swiftly black-jacked by Brazil's Joao Rodrigues Cunha, who told his fellow delegates that what Brazil wanted was an extension. . .and as we have noted in these pages before, what Brazil wants, Brazil (usually) gets. It did little or nothing to lighten the mood of the gathering when Cunha explained that a year's extension would give everyone time "to study the market and consult our producers and exporters about the future of the agreement."

Since everyone in the business has had plenty of time to mull over the situation ever since the quota system fell apart, this call for still more pondering time struck some who heard it as a little disingenuous - to put it mildly.

Of course, it has to be acknowledged that Brazil has problems on an heroic scale, and the government's attempts to erase all the errors of past administrations would have made Hercules blanch and ask for his severance pay. On the day Sr. Cunha made his announcement, the International Monetary Fund's plans to lend Brazil $2 billion to tide it over the immediate future had been soundly denounced by the Institute of International Finance's Horst Schulmann.

The loan, he said, served to undermine the Western world's whole strategy on Third World debt. The IMF and the World Bank should make it clear that they would not lend money until the client country had stopped piling up still more debt and had drawn up a workable program to pay back what they already owed.

In fact, it had never seemed likely that this year's talks would produce anything like a practicable replacement for the old Agreement. The ICO's problems were overshadowed by events of incomparably greater significance elsewhere, and the diminished status of the Berners Street meetings as reflected in the fact that the two principal players, Brazil and the US, gave them a very low position in the order of priorities.

Anyway, a lot can happen between now and 1992 and there's no knowing what Fortune's wheel will bring the coffee trade and industry by the time the great European unification scheme comes to pass. Certainly nobody seems totally happy with the situation as it is right now. "The prices today are wrong for everybody," said a European delegate. "Wrong for producers, wrong for the trade and even wrong for the roasters." But then he added: "It could well be, though, that in three years' time the whole situation could simply have sorted itself out."

But how? "Look at it this way. At present prices the farmers can't afford the usual input of fertilizers and pesticides, and that in itself is going to have a profound effect on supplies. Next, the new East European consumers are going to be in the market for the cheaper coffees. Then, once the hold-over stocks have been exhausted we can start again with a clear counter."

Others who joined the conversation tended to agree, although several voiced fears about the maintenance of decent quality if roasters found themselves being offered exceptionally cheap Robustas, for instance. "You know how difficult it is these days, to get hold of premium quality Arabicas," said one. "At current prices, there's very little encouragement to the ordinary farmer to go on producing high-grade beans if what he finally earns doesn't pay his bills. Many of the African producers are already becoming increasingly marginalized."

"The sad thing is that the combination of low prices and increased roaster consciousness of the importance of quality has really been having a positive effect on consumption all over the world," said another. "All that could be jeopardized if standards are allowed to drop."

High standards are not what mainly concern the newly-liberated consumers in the former Eastern Bloc, however. What they seem to want, apparently, is simply the most coffees for whatever hard currency they have available; the pedigree of each individual bean doesn't enter into it. But this new demand has had an interesting side-effect. The supply of small to medium-size, reconditioned second-hand roasters has dried up entirely in many parts of Europe.

There are, according to Dr. Alberto Hesse of Trieste, simply no second-hand roasters left in Italy, for instance. All of them have crossed the border into Yugoslavia, where they are usually operated by small family units. "The son roasts, the mother packs and the father runs the shop," he said. This repeats the pattern in Italy itself, which still has some 1400 individual roasters.

However, trade with the new markets carries its own problems. Often, the buyers want the coffee but can't pay for it; others have the currency, but nowhere to store the beans. One big German roaster tried to solve this by creating Instant Warehouses from low-pressure inflatable "bubbles" - then found there wasn't the power available to keep the domes inflated.

Worse still, East European bureaucrats are defending their old powers with desperate intensity, and being as obstructive as possible in the process.

"But in the long term they can't hold up the trend forever," said a very experienced trader. "In the new situation that's developing, it's the small and medium-scale roasters who are going to power the upturn in global coffee sales, so it's a good idea to look after them well, right from the start."
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Title Annotation:International Coffee Organization
Author:Clark, Richard
Publication:Tea & Coffee Trade Journal
Date:Nov 1, 1990
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