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London commodities Coffee plunges as producers discuss supply plan

LONDON: Coffee prices plunged to a seven-year low, as producer countries discussed how to boost a market sucked downwards by a supply surplus.

Over the past year, prices have dropped by nearly 40 percent. The Association of Coffee Producing Countries (ACPC) is scheduled to meet again on May 8 and 9 in London to consider further its plans to limit supply.

On Thursday Vietnam, which is not a member of the ACPC, and Indonesia, a key member of the suppliers' body, held talks here on withholding stocks from the world market with Brazil's ambassador. Meanwhile, oil prices held steady, as dealers continued to asses precisely how much more oil will flow on to the market following last month's Organisation of Petroleum Exporting Countries' (Opec) agreement to increase output.

GOLD: Gold prices recovered slightly this week, as extreme volatility on the equities market again encouraged investment in the precious metal and helped to mitigate the effects of another central bank gold auction. The cash price on the London Bullion Market rose to 281.00 dollars an ounce from 280.15 dollars a week earlier.

GNI Research predicted that gold should be further bolstered by the resumption in demand in Asia, where low prices have attracted buyers.

The market was unmoved by confirmation from the Swiss central bank that it will sell off some of its reserves beginning in May.

As GNI brokerage commented in a research note, the planned sale "has probably been the most well-flagged announcement in the history of the gold market".

SILVER: Silver prices inched higher in a calm market. Cash prices rose to 5.10 from 5.09 dollars an ounce.

PLATINUM and PALLADIUM: The two sister metals retreated this weak, as dealers continued to await signs of resumed supplies from Russia the world's biggest exporter of palladium and the second-biggest platinum producer after South Africa.

Palladium prices fell to 560 dollars an ounce from 582 dollars last week. Platinum prices dipped to 500 dollars from 514.

Russian President Vladimir Putin, who at the time was only interim head of state, signed an accord authorising on the market because of the length of time needed to process export licences.

Turning to palladium, only Norilsk Nickel is currently exporting. The leading producer was last year given its quotas for the next 10 years, while two other producers, the Russian Central bank and Gokhran, the state repository of precious metals, have not been able to export since the start of the year because they have yet to obtain the necessary permits.

BASE METALS: Nickel led base metals higher this week on the London Metal Exchange (LME).

The metal was strengthened by high demand from the steel industry, analysts said. Three-month nickel prices on the LME rose 200 dollars to 9,540 dollars a tonne.

Stocks were 29,100 tonnes compared with 30,312 tonnes last week. Copper, that led declines last week, fell a further six dollars to 1,680 dollars a tonne.

Aluminium prices fell by 19.5 dollars to 1,472.5 dollars a tonne. Zinc crept 1.5 dollars higher to 439 dollars a tonne. Tin gained 25 dollars a tonne to 5,405.

OIL: Oil prices were flat as dealers awaited global output figures later this month, after a decision from Organisation of Petroleum Exporting Countries and other producers to increase production.

Brent North Sea crude for July delivery held at 23.10 dollars a barrel in London. Prices, which had risen to their highest level since November 1990 in March at 32 dollars a barrel, slipped to lows not seen since October early in the week, before rising back to the previous week's level.

In New York, light sweet crude for May delivery slipped to 25.38 dollars a barrel from 25.69 dollars.

Prices have fallen since the decision by Opec and other producers taken last month to increase output from April 1 to levels seen prior to reductions in March 1999 when the cartel slashed production to increase prices. Dealers were paying close attention to Opec actions, since the group informally agreed to implement a target range for the crude price of between 22 and 28 dollars a barrel.

Should prices rise above 28 dollars, then production would be increased by 500,000 barrels per day, whereas if prices fall below 22 dollars a barrel then output would be cut back by the same amount.

Opec will hold another extra-ordinary ministerial meeting on June 21 to review the output regime. Several countries, including Saudi Arabia, the United Arab Emirates, Oman and Iran, have voiced opposition to a further round of output increases this year. Some analysts said that the increases agreed in March would not meet strong demand forecast when autumn returns to the northern hemisphere.

The International Energy Agency said in its monthly report that world wide demand-for oil would reach an average 76.7 million barrels per day this year, 2.1 percent higher than in 1999.

The agency said that prior to the decision to increase output, global production had been running at 75.12 million barrels per day in March. The International Monetary Fund predicted that prices would stabilise around 24 dollars a barrel this year.

RUBBER: Rubber prices rose slightly amid quiet trading. The London rubber index rose to 502 pounds per tonne (for May delivery) from 497 pounds. In Kuala Lumpur, the SMR20 index covering rubber used in tyre manufacture rose to 2.61 ringgit from 2.60 ringgit.

COCOA: Cocoa prices fell as producers in Cote'd Ivoire began to stockpile their secondary harvest after a plentiful primary crop.

July contracts on the London market fell by eight pounds to 602 pounds per tonne. Dealers did not lend much weight to an announcement from the International Cocoa Organisation that the West African producer should block exports of low-quality cocoa from its secondary crop.

ICCO in March asked producers to withhold supplies of low-grade beans so as to invigorate the market. Analysts predicted that the total crop in Cote d'Ivoire could reach a record 1.3 million tonnes this year.

COFFEE: Coffee prices fell to the lowest level for seven years ahead of a meeting scheduled for May, when producers are expected to draft a framework for reducing international supply.

Robusta contracts in London (for July delivery) fell to 929 dollars a tonne from 971 dollars. May contracts had fallen as low as 850 dollars a tonne on Thursday. In New York, Arabica (for July delivery) fell to 97.85 cents a pound from 103.65 cents. Prices have fallen by almost 40 percent in the past year. The Association of Coffee Producing Countries is due to meet on May 8 and 9 in London to draft a supply-reduction plan that was expected to come in to place in June.

The Brazilian head of the ACPC met with diplomat from Indonesia and Vietnam, which is not a member of the organisation, to discuss plans for limiting supply.

"Vietnam reacted very positively and I am very hopeful that they will join the plan," said Sergio Amaral, the ACPC chief. The agreement that has been proposed by Brazil and Colombia is thought to propose the withdrawal of between four million and six million sacks (of 60 kilogrammes) during the 2000/01 season.

Exports from the 14-member association account for some 75 percent of global supplies.

TEA: Top-grade leaves found strong demand, while lower quality consignments saw prices fall. BP1 (Broken Pekoe) leaves rose by up to 12 cents, while PDust lots lost up to 68 cents. AFP