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Sintercafe revives the international coffee industry.

With almost 500 participants from all over the world, Sintercafe, the Sixth International Coffee Week held annually in Costa Rica, was more successful than expected. Hope for rising coffee prices circulated in the air, as exhibitors and speakers were anxious to see what the future holds.

Concerning the renowned ICA, an item haunting everyone's mind in the industry, Sintercafe's speakers voiced their opinions and concerns. Some favored the agreement, while others prefer a free market. Arguments for both sides flowed through the four days of the convention with valid points being made on each side.

Anders Nordquist, director of the coffee roasting division of Arvid Nordquist H.A.B., Solna, Sweden, supports a new ICO. "The consumer would be the loser if low coffee prices are maintained," said Nordquist.

"Swedish roasters would welcome higher international green coffee prices and they would support a new ICO agreement if this, and for the time being it seems like it, would be the only way to raise world market prices. If not, the current price levels could cause declining qualifies and probably also a decreased consumption."

Jorge Cardenas, general manager of the National Coffee Growers Federation of Colombia, is also in favor of a new ICA. "Coffee growing has a fundamental role in the Colombian economy, he said, "it generates over one million jobs."

If the economy goes out of the present recession, and the demand rises in the EC, the coffee market will change considerably, and production of the 1992/93 crop will be insufficient to supply consumption, said Cardenas.

Cardenas stressed the need to coordinate policies with other growers for stability. He described the ICA as "good for the world economy" and "favorable for both markets." Since the establishment of the free market in July 1989, coffee prices have dropped on an average of 12/1b - 60/lb, said Cardenas. "This reduction has affected Colombia, said Cardenas, "it would have been better to sell less coffee at stable prices."

Looking toward the future, Cardenas wants to redesign a new model that will stabilize the coffee market. "If the world wants high levels of quality coffee, producers need a quota system."

Off the flip side, according to Eric Nadelberg, vice president and manager of the Tropical Trader Group of Merrill Lynch Futures Inc.: "The ICA was more honored in the breach then in the promise."

"Under the old ICA, coffee prices were too high. Coffee was a very profitable item for producers and they took note, seized the moment, and increased production substantially during the term of the ICA," said Nadelberg.

"While one of the stated goals of the old ICA was to bring production in line with consumption, that goal was subverted by the quota process itself, which rewarded producers for production increases by making production part of the quota allocation equation. As a result, global coffee production increased from 86.3 million bags in 1980-81 to 100 million bags in 1991-92, all the while world demand continued to decline."

Bernard Benecke, managing director, E.D & F Man, Germany, voiced his views concerning the ICA: "I don't believe in a new Agreement. The quota system distorted and eventually destroyed the market. I feel the willingness is not there. The real interest is for the free market."

"With or without an Agreement, there will never be a return to the statue quo that existed in coffee up to 1989," said Benecke, "the past was a sellers market, the present situation is a buyers market." "Our success or failure depends on the growers and buyers of coffee."

"I would not link the prospects of a price rise solely to the negotiation of a new ICA, said Benecke, "perhaps the free market is finally achieving what is it supposed to do--lower prices, reduce supply, and lead to higher prices."

"I believe in free trade," said Tim McCormack, vice president/coffee buyer for Caravali Coffees. "The low prices have helped fuel the specialty coffee market," said McCormack. The growth of the specialty market is 15-30% per year, he said, with over 10% of all coffee sales are in the specialty category.

"There are many hurdles to overcome on a new Agreement and if one is reached, there will be too many constraints," said Dr. Peter Greenhalgh, director of the Coffee and Cocoa Research Team of Landell Mills Commodities Studies. "In the long term, prices will not go up with a new ICA," he said.

According to Greenhalgh, the crisis of the coffee industry is due to the following reasons: collapse of the ICA and the emergence of a free market; the high level of producer and consumer stocks; low real (inflation-adjusted) prices; and despite low green coffee prices, consumption growth has remained low.

Greenhalgh predicts that next year there will be a revival of the world's economy and hence coffee consumption. Current world coffee consumption is 94 million bags. Greenhalgh predicts that global coffee consumption will reach 100 million bags by the year 2000. Global demand will increase in the gourmet and specialty market, which will see the most growth in the 1990's.

Due to an overproduction of coffee, 1990/91 saw the lowest coffee prices in 60 years, according to Jose Maria Sebastiao, agronomist and coffee producer in Brazil. "Concerning the ICA, the difficulty is to bring the Agreement about and make everyone happy."

"After all, coffee means to us (Brazil) what it means to you," said Sebastiao, "blood, democracy, and hope."
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Title Annotation:Sixth International Coffee Week conference
Author:Boxman, Alyson R.
Publication:Tea & Coffee Trade Journal
Date:Jan 1, 1993
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