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Coffee Producers to Limit Supplies to Prop Up Prices

From Reuters

Alarmed by a slide in prices that has battered growers and hurt smaller economies, the world’s leading coffee producers plan to keep some supplies from the market to force prices higher.

Inspired by Colombia, the world’s biggest coffee exporter last year, the retention plan has won the support of Brazil and four Central American nations, setting coffee markets on edge.

After a touching two-year low of 82 cents a pound last Wednesday, the price of the most active arabica coffee futures on the New York Coffee Sugar and Cocoa Exchange rallied 5 cents a pound on talk of the plan. On Tuesday, arabica coffee for December, the benchmark month, closed at 87.40 cents a pound, a gain of 0.45 cent.

Organizers say each participating country will hold back a fixed amount--probably 10%--of the beans that it expects to export until world prices strengthen.

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But some traders are skeptical. They want to know who will finance the costs of retaining 7 million bags of coffee for at least a year and who will police the plan.


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