COFFEE MAY FALL MORE BEFORE NEW QUOTA TALKS Coffee prices may have to fall even lower to bring exporting and importing countries once more round the negotiating table to discuss export quotas, ICO delegates and traders said. The failure last night of International Coffee Organization, ICO, producing and consuming countries to agree export quotas brought a sharp fall on international coffee futures markets today with the London May price reaching a 4-1/2 year low at one stage of 1,270 stg per tonne before ending the day at 1,314 stg, down 184 stg from the previous close. The New York May price was down 15.59 at 108.00 cents a lb. Pressure will now build up on producers returning from the ICO talks to sell coffee which had been held back in the hope the negotiations would establish quotas which would put a floor under prices, some senior traders said. The ICO 15 day average price stood at 114.66 cents a lb for March 2. This compares with a target range of 120 to 140 cents a lb under the system operating before quotas were suspended in February last year following a sharp rise in international prices caused by drought damage to the Brazilian crop. In a Reuter interview, Brazilian Coffee Institute, IBC, President Jorio Dauster urged producers not to panic and said they need to make hard commercial decisions. "If we have failed at the ICO, at least we have tried," Dauster said, adding "now it is time to go and sell coffee." But Brazil is keeping its marketing options open. It plans to make an official estimate of the forthcoming crop next month, Dauster said. It is too difficult to forecast now. Trade sources have put the crop at over 26 mln bags compared with a previous crop of 11.2 mln. Brazil is defining details of public selling tenders for coffee bought on London's futures market last year. A basic condition will be that it does not go back to the market "in one go" but is sold over a minimum of six months. The breakdown of the ICO negotiations reflected a split between producers and consumers on how to set the yardstick for future quotas. Consumers said "objective criteria" like average exports and stocks should determine producer quota shares, Dauster said. All elements of this proposal were open to negotiation but consumers insisted they did not want a return to the "ad hoc" way of settling export quotas by virtual horse trading amongst producers whilst consumers waited in the corridors of the ICO. Dauster said stocks and exports to ICO members and non-members all need to be considered when setting quotas and that Brazil would like to apply the coffee pact with a set ratio of overall quota reflecting stock holdings. It is a "simplistic misconception that Brazil can dictate" policy to other producers. While consumer countries are welcome to participate they cannot dictate quotas which are very difficult to allocate as different "objective criteria" achieve different share-outs of quota, Dauster said. Other delegates said there was more open talking at the ICO and at least differences were not hidden by a bad compromise. Consumer delegates said they had not been prepared to accept the producers' offer to abandon quotas if it proves impossible to find an acceptable basis for them. "We want the basis of quotas to reflect availability and to encourage stock holding as an alternative to a buffer stock if supplies are needed at a later stage," one delegate said. Some consumers claimed producer support for the consumer argument was gaining momentum towards the end of the ICO session but said it is uncertain whether this will now collapse and how much producers will sink their differences should prices fall further and remain depressed. The ICO executive board meets here March 30 to April 1 but both producer and consumer delegates said they doubt if real negotiations will begin then. The board is due to meet in Indonesia in June with a full council scheduled for September. More cynical traders said the pressure of market forces and politics in debt heavy Latin American producer countries could bring ICO members back around the negotiating table sooner than many imagine. In that case quotas could come into force during the summer. But most delegates and traders said quotas before October are unlikely, while Brazil's Dauster noted the ICO has continued although there were no quotas from 1972 to 1980. A clear difference between the pressures already being felt by importers and exporters was that consumers would have been happy to agree on a formula for future quotas even if it could not be imposed now. At least in that way they said they could show a direct relationship between quotas and availability. In contrast producers wanted stop-gap quotas to plug the seemingly bottomless market and were prepared to allow these to lapse should lasting agreement not be found. "Producers were offering us jam tomorrow but after their failure to discuss them last year promises were insufficient and we wanted a cast iron commitment now," one consumer said.