The world's largest coffee growers have hammered out a deal to cut coffee exports in a bid to engineer a recovery in the price, which has fallen to a seven-year low.
Coffee prices rose 5 per cent on the main commodities exchanges after news of an agreement emerged.
The Association of Coffee Producing Countries (ACPC), whose 14 members speak for 75 per cent of world supply, met in London on Friday.
The Brazilian Agriculture Minister, Marcus Pratini de Moraes, said the ACPC had agreed to cut coffee exports by 20 per cent. The deal had been signed by all ACPC members and by key non-members Mexico, Guatemala and Vietnam.
Under the terms of the deal, the export retention will stay in force until the price of coffee, as measured on a composite index, hits 95USc a pound.
Growers will be allowed to export the retained stocks when the price reaches 110USc. Friday's price was 69c and 110c has not been seen since June 1998. Prices have fallen about 70 per cent over the past three years.
Caroline Eagles, an analyst at commodityexpert.com, said it was the most comprehensive deal in recent years.
"There was a big concern among traders that Indonesia and Mexico would not adhere, and the fact that they have brought them into the fold is a very strong positive."
The deal would boost the price but it would not be an "overnight affair." Coffee for June delivery rose 4.65c or 4.9 per cent, to 98.75c in New York, the highest for a week.
In London, July futures on the LIFFE exchange rose 3.2 per cent to $US940 a tonne.
The key issue is whether - as with Opec - countries for whom coffee is a major revenue source will stick to the deal.
"We are all sceptical," said one trader.
"It is hard to see how some of the less wealthy countries would finance the scheme."
- INDEPENDENT
Coffee cutback deal boosts price hopes
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