EUROPEAN COFFEE TRADE PROPOSES NEW QUOTA FORMULA European coffee roasters and traders have agreed to propose a new formula for calculating International Coffee Organization, ICO, quotas, Dutch Coffee Trade Association chairman chairman Frits van Horick said. Van Horick, who is a council member of the European Coffee Federation, was speaking at the end of the ECF annual meeting. The new formula is based on six-year moving averages and would give Brazil, the world's biggest coffee producer, an unchanged quota for the remaining two years of the current coffee agreement, van Horick said. If accepted by the consumer and producer members of the ICO, the formula could also be a basis for negotiating a new agreement, van Horick said. Coffee quotas were suspended in February last year when prices shot up on fears of a drought-induced crop disaster in Brazil. Although prices are now considerably lower, consumers and producers have been unable to agree on re-introduction. "Brazil has been the most strongly against any change in the formula because it feared a lower quota. But our proposal leaves it very little to object to," van Horick said. "The existing quota system is far too rigid and does not reflect supply and demand reality," he said. "Our formula builds flexibility into the system and will benefit almost everyone." Although full implications of the new formula have still to be worked out, initial estimates suggest countries such as Colombia, Kenya, Indonesia and Costa Rica would get slightly higher quotas, while others such as the Ivory Coast, El Salvador and Nicaragua would lose quota share, van Horick said. Because the proposal provides that future quota distribution must reflect current demand and actual supply, it should also prevent under-shipment of quota as countries doing so would automatically prejudice their following year's quota. "If the ICO consumers accept our proposal it stands at least a fair chance of being accepted by the producers at the September meeting, most of whom are generally in favour of a new quota formula, " van Horick said. At the same time much will depend on Brazil's attitude. "Brazil is increasingly isolated on the producer side. If there is no frost damage to its coffee crop over the next two months and most other producers favour our proposal, we might just get an agreement," van Horick added.