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ACTION ARA-10
INFO OCT-01 EUR-12 ISO-00 CIAE-00 DODE-00 PM-03 H-01
INR-07 L-02 NSAE-00 NSC-05 PA-01 RSC-01 PRS-01 SP-02
SS-15 USIA-06 AID-05 COME-00 EB-07 FRB-03 TRSE-00
XMB-02 OPIC-03 CIEP-01 LAB-04 SIL-01 OMB-01 AGR-05
IO-10 STR-01 /110 W
--------------------- 041752
R 051925Z FEB 75
FM AMCONSUL RIO DE JANEIRO
TO SECSTATE WASHDC 2087
INFO AMEMBASSY BRASILIA
AMEMBASSY LONDON
AMEMBASSY SAN SALVADOR
LIMITED OFFICIAL USE RIO DE JANEIRO 0400
E.O. 11652: N/A
TAGS: ETRD, BR
SUBJECT: RECENT COFFEE DEVELOPMENTS
1. RECENT PRESS ARTICLES REPORT THAT BRAZILIAN COFFEE
INSTITUTE (IBC) PROJECTS BRAZIL'S 1975 COFFEE CROP AT
ABOUT 20 MILLION BAGS, I.E., A SIGNIFICANT DROP FROM
ESTIMATED 1974 HARVEST OF 27.3 MILLION BAGS. REDUCTION
ATTRIBUTED TO NORMAL ANNUAL PATTERN OF FLUCTUATIONS IN
WHICH ABUNDANT HARVESTS ALTERNATE WITH SMALLER CROPS.
PRIVATE TRADERS EXPRESS NO SURPRISE AT IBC FORECAST,
BUT CLAIM THAT FUTURE UPWARD REVISION IS LIKELY AS CROP
YEAR PROGRESSES. A FEW TRADERS ASSERT THAT FORECASTING
IS EXTREMELY DIFFICULT THIS YEAR BECAUSE OF: 1) CON-
TRASTING SITUATIONS IN DIFFERENT GEOGRAPHICAL AREAS,
SOME BEING VERY GOOD AND SOME BEING RELATIVELY POOR; 2)
INSUFFICIENT RAIN FALL IN CERTAIN COFFEE AREAS; AND 3)
UNCERTAIN PRODUCTION CAPACITY OF YOUNG TREES THAT WERE
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PLANTED DURING 1969/1971.
2. PRESS REPORTS CLAIM IBC PRESIDENT CAMILO CALAZANS
STATED THAT COFFEE PRODUCERS WOULD BE UNREALISTIC IF
THEY ATTEMPTED TO CREATE PRODUCER CARTEL, SUCH AS THAT
ESTABLISHED BY OPEC, TO CONTROL COFFEE SUPPLIES AND
PRICES. UNLIKE PETROLEUM, HE REPORTEDLY STATED, COFFEE
IS NOT AN ESSENTIAL ITEM AND A NUMBER OF CONSUMER
COUNTRIES HAVE REDUCED THEIR COFFEE IMPORTS IN ORDER TO
HELP EQUILIBRATE THEIR BALANCE OF PAYMENTS. AS A RESULT,
PRODUCERS' ATTEMPTS IN LONDON TO ESTABLISH AN ORGANIZA-
TION SIMILAR TO OPEC ARE ABSOLUTELY UNWORKABLE. CALAZANS
ALLEGEDLY URGED THAT PRODUCERS RECOGNIZE THIS SITUATION
AND, AT THEIR MID-FEBRUARY MEETING IN EL SALVADOR, AT-
TEMPT TO ALIGN THEIR EFFORTS WITH REALITIES OF CURRENT
INTERNATIONAL MARKET. HE REPORTEDLY SAID THAT PRODUCER/
CONSUMER MEETINGS IN LONDON ARE PROCEEDING EFFECTIVELY,
ATTRIBUTING THE DELAY IN REACHING AN AGREEMENT TO
BUREAUCRATIC DIFFICULTIES IN THE INDIVIDUAL PARTICIPAT-
ING COUNTRIES.
3. COMMENT: IBC'S RELATIVELY LOW PROJECTION FOR 1975
CROP MAY SIMPLY REFLECT PATTERN ESTABLISHED IN RECENT
YEARS IN WHICH FORECASTS MADE EARLY IN YEAR ARE SUB-
SEQUENTLY INCREASED AS HARVEST APPROACHES. TRADERS,
HOWEVER, ARE NOTICEABLY LESS BULLISH IN THEIR CROP
EXPECTATIONS THAN TWO TO THREE MONTHS AGO. THIS
ATTITUDINAL CHANGE MAY REFLECT THEIR COMMERCIAL INTERESTS
AS MUCH AS, IF NOT MORE THAN, ACTUAL PRODUCTION
POSSIBILITIES. THEY MAY HAVE TAKEN ADVANTAGE OF LOW
DOMESTIC PRICES TO ACCOMULATE SIGNIFICANT COFFEE STOCKS
AND MAY HOPE THAT PROJECTIONS OF A REDUCED CROP WILL
HELP BOLSTER INTERNATIONAL MARKET PRICES, WHICH
APPARENTLY HAVE FALLEN MORE PRECIPITOUSLY THAN THEY
HAD ANTICIPATED.
4. EMBASSY BRASILIA CONCURS WITH THIS MESSAGE.
MILLER
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