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Department of State bulletin (Volume v. 56, Jan- Mar 1967) online

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During the past year the International
Coffee Agreement has successfully served
both coffee producers and consumers in a
changing market situation. New measures
have made the Agreement more flexible and
responsive to consumer wants. Coffee prices
continued to be reasonably stable, at levels
fair to consuming and producing countries
alike.

Nevertheless, major problems remain. Un-



til production is brought into balance with
demand, countries heavily dependent on
earnings from their production of coffee will
face a continuing threat of instability. The
Coffee Agreement provides time to work out
solutions. It has already encouraged produc-
ing countries to pay more attention to the
need to diversify their economies.

With cooperation from all members, the
Coffee Agreement will continue to operate
as a stabilizing force in the world coffee mar-
ket. It is an important adjunct to the Alliance
for Progress in Latin America and to our
economic assistance programs in other parts
of the world.



Lyndon B. Johnson



' For text, see Bulletin of Jan. 30, 1967, p. 158.



The White House,
January 19, 1967



250



DEPARTMENT OF STATE BULLETIN



FIGURE 1



S. Cints Ptr Poiinil, Ntw Vork




GREEN COFFEE SPOT PRICES

ANNUAL AVERAGES - 1951-1966



.'Colombia MAMS



Brazil SANTOS 4 S'\ \
\



;*—




Uganda W I C



_L



1960



'62



'ES Est 1966 '67



TEXT OF REPORT



Introduction



This report is submitted in accordance
with Section 5 of the International Coffee
Agreement Act of 1965.

The International Coffee Agreement was
negotiated at the United Nations during July,
August and September 1962 and signed by
the United States on September 28, 1962. The
Senate gave its advice and consent to the
ratification of the Agreement on May 21,
1963, and on December 27, 1963, the United
States deposited its instniment of ratifica-
tion. The Agreement entered into force pro-
visionally in the summer of 1963 and defin-
itively in December 1963. The implementing
legislation— the International Coffee Agree-
ment Act of 1965 — -to enable the United
States to meet all its obligations under the
Agreement, came into effect on May 22, 1965.

The objectives of the Agreement, as set
out in Article 1, are as follows:

1. to achieve a reasonable balance between



supply and demand on a basis which will
assure adequate supplies of coffee to consum-
ers and markets for coffee to producers at
equitable prices, and which will bring about
long-term equilibrium between production
and consumption;

2. to alleviate the serious hardship caused
by burdensome surpluses and excessive fluc-
tuations in the prices of coffee to the detri-
ment of the interests of both producers and
consumers;

3. to contribute to the development of pro-
ductive resources and to the promotion and
maintenance of employment and income in
the member countries, thereby helping to
bring about fair wages, higher living stand-
ards, and better working conditions;

4. to assist in increasing the purchasing
power of coffee exporting countries by keep-
ing prices at equitable levels and by increas-
ing consumption;

5. to encourage the consumption of coffee
by eveiy possible means; and

6. in general, in recognition of the rela-



FEBRUARY 13, 1967



251



FICURE 2

IMPORTANCE OF COFFEE EXPORTS TO 13 COFFEE ■ PRODUCING COUNTRIES^

1963-1965 Average

VALUE OP COFFEE EXPORTS AS PER CENT OF TOTAL EXPORTS

68%



COLOMBIA


wmm//m/////m////mmmm/mm/mm^^^^^^^






ETHIOPIA


w/mmm//////mm////////m^^^^^






EL SALVADOR


mmmmm/mm/M/m/m






BRAZIL


w/m//mm/M/m/Mmm^^^^^






UGANDA


y//////////////////////////////////M//M^^^^^^






GUATEMALA


m///////////M////////////////////////M






HAITI


W///////MM///////////////////M///M






COSTA RICA


w/mmm/mmm/m/Mm/A 44% ^






IVORY COAST


m///mmm///mMm////M^^ 41% * of Eiportable World Collee.

world to undertake another new wave of
plantings. By 1959-60, total world export-
able production had reached 62 million bags
(one bag equals 132 pounds) whereas world
consumption outside the producing countries
was only 37 million bags. In the face of such
surpluses, prices fell sharply and the pros-
pects of any improvement in prices were
dim. Coffee growers were in difficulty and
the economies of many producing countries
were under pressure.

Fluctuating coffee prices hurt many of the
developing countries of Latin America,
Africa and Asia in two ways. First, sharp
declines can be disastrous to all those con-
nected with the coffee economy, and espe-
cially to farmers, many of whom operate
small holdings. Second, because so many of
the countries are heavily dependent on cof-
fee exports for earning foreign exchange,
sharp fluctuations in coffee prices can seri-
ously disrupt economic development pro-
grams. Thus, the efforts of the United



252



DEPARTMENT OF STATE BULLETIN



states under the Alliance for Progress and
other aid programs have sometimes been
hindered by this historic pattern of sharp
price changes. The chart [figure 2] shows
the extent to which 13 countries depend
upon coffee for foreign exchange earnings.

A major aim of the International Coffee
Agreement is to smooth out price fluctua-
tions so as (i) to provide a steady and grow-
ing earnings base to the coffee producing
countries as world consumption rises, (ii) to
maintain reasonable prices for coffee con-
sumers, and (iii) to enlarge the role of the
coffee economy in contributing to the growth
of the overall economy. In addition, it is
hoped that the stabilization of the coffee
market will encourage the transfer of re-
sources from the production of excess cof-
fee to other crops for which there is an un-
filled demand.

Both because of our concern for the steady
economic development of the coffee growing
countries and because we are far and away
the largest coffee consuming country, the
United States has an important role to play
in maintaining the effectiveness of the Inter-
national Coffee Agreement. The United
States' share of world coffee imports is
demonstrated in the chart [figure 3] .

I. Operation of the International Coffee
Agreement

The Coffee Situation

From the negotiation of the Agreement
in the summer of 1962 through the summer
of 1963, large surpluses overhung the mar-
ket and depressed prices continued. In
August 1963 prices reached a level lower
than at any time since 1948, with serious
strains on the economies of the producing
countries.

In the autumn of 1963, the situation
changed abruptly as news of severe frosts
and drought in the principal growing regions
of Brazil started to come in. Buyers all over
the world feared that they might not be able
to obtain the quantities of coffee they would
need when the Brazilian crop was harvested
in summer 1964. They started a scramble for



FIGURE 3

WORLD IMPORTS OF COFFEE

MIILIONS OF BUGS



unci ,si, I DDiiiiii
\ll /lis




OINIt KillltlS " 1 3



TOTAL 47,392,000 BAGS



coffee, first for Brazilian coffee, and then for
coffee of all types in order to build up inven-
tories. The United States feared that the
wildfire price increase of 1954 might be re-
peated. Therefore, we moved promptly
within the framework of the Agreement to
do all that could be done to assure buyers
that adequate supplies would be available.
As a result, the price rise was halted by
March 1964 and the Agreement had met
its first serious test. Thereafter it has been
clear to all that supplies of coffee were more
than ample to meet the world's needs and
that only the restraint on exports provided
by the Agreement prevented a disastrous
general price decline. Annex C^ sets out the



' Included in the report are five annexes, which
are not printed here. They are:

Annex A: U.S. Customs Regulations: Import
Quotas on Coffee From Non-member Countries of
International Coffee Organization.

Annex B: Composition and Voting of the Execu-
tive Board for 1966-67.

Annex C: Green Coffee: World Exportable Pro-
duction for the Marketing Year 1966-67, with Com-
parisons — USDA Estimates.

Annex D: Coffee Year 1966-67, Annual Quotas,
Waivers and Special Export Authorizations.

Annex E: Bureau of Labor Statistics, Data on
Retail Prices, 1964-66.



FEBRUARY 13, 1967



253



FIGURE 4



GREEN COFFEE SPOT PRICES

MONTHLY AVERAGES - 1964-1966



U.S. Cents Pic Pound. Naw Totk
.90

.80

.?0
.60
.50
.40



,



Online LibraryUnited States. Dept. of State. Office of Public CoDepartment of State bulletin (Volume v. 56, Jan- Mar 1967) → online text (page 47 of 90)