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.
  

