Coffee Cause & Effect

Behind the lower U.S. price of a can of drip grind or a jar of instant lies a revolutionary new Brazilian coffee policy. For years Brazil operated as though it grew all the coffee in the world, refused to sell for less than its own pegged price, watched its markets and export income dwindle. Last year Brazil pulled out the peg, let prices seek their level, began selling hard. By August, coffee sales were setting records, and by last week the first two major effects could be plainly measured.

Meeting in Washington, representatives of the world's major coffee areas agreed on the first export quota plan ever to include Africa as well as Latin America. Latin Americans, citing a world market of about 39 million bags v. production of about 51 million, wanted the Africans to join them in last year's pact, but the Africans were more interested in bigger markets than in price. Brazil's selling blitz cut sharply into African sales, persuaded Africans to sign up for 1960.

Brazil's President Juscelino Kubitschek found the second major effect of the new coffee policy in the latest Brazilian foreign trade figures. Last year Brazil's balance of payments deficit was $307 million; this year the experts figured the deficit would be closer to $400 million. But the booming coffee sales are bringing unexpected millions, and last week, by conservative reckoning, the 1959 deficit promised to be $200 million or less; Kubitschek & Co. even talk of a surplus. Turned down three months ago when he applied for approval from the International Monetary Fund for a $300 million bailout, Kubitschek says: "Loans? We don't need loans."

Only one faint whiff of danger marred coffee's future. The U.S. Senate Foreign Relations Committee last week noted that U.S. scientists have tracked down more than 30 of the volatile chemicals that give coffee its flavor, issued a report that concluded "there is little reason to doubt" synthetic coffee is on the way at a price about one-fifth of the real thing.

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