Coffee price leaps as Brazil's problems multiply

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COFFEE prices surged yesterday after a US report that predicted a steep drop in the Brazilian coffee harvest next year following recent heavy frosts. Some coffee retailers forecast that higher consumer prices might be unavoidable.

Nestle, which has already raised prices by 17 per cent as a result of earlier rises in coffee prices, said that 'a further increase in prices cannot be ruled out'. Tesco, which has so far resisted higher prices for its own- label coffee products, said prices would have to rise eventually. Sainsbury said it would hold down prices for its own-label coffee for as long as possible.

On the commodity markets, the price of coffee at one stage jumped by dollars 202 to dollars 3,475 per tonne for November delivery. Later it settled down to show a gain of dollars 162 on the day.

The climb in prices came after publication of a report by the US Department of Agriculture after the markets closed on Friday. The survey, covering 3,800 miles of coffee-growing areas, predicted that under the best conditions Brazil could expect a 1995/96 harvest of between 17 and 20 million 60-kilogram bags - or a drop of 30 per cent from the 26 million bags estimated for this season's crop.

Coffee is usually harvested from April onwards and the frost has had little impact on the current harvest, though quality will have suffered. Extensive pruning or felling of coffee trees badly damaged by frost has led to the predictions of decline next year.

Lawrence Eagles, of commodity brokers GNI Ltd, said: 'We're going to get another rally in the short-term and the price could go as high as dollars 3,700 per tonne.' That would still fall short of the record dollars 4,085 hit last month when the news of heavy frosts afflicting Brazilian crops first broke. Before the frosts, coffee prices had already soared when it became clear supplies were much tighter than realised, owing to shrinking crops in the past few years.

Brazil is the world's leading coffee exporter and accounts for one-quarter of world output. Its government has forecast a harvest as low as 15 million bags and expects the current 1994/95 harvest to be at most 22 million bags.