A concession by Brazil to demands to ramp up coffee stockpiling would have a big impact in reviving stagnant prices, Fortis Bank Nederland said, as it trimmed its forecast for the world's surplus this year.
Growers at the National Council for Agriculture have urged the government to take up to 20m bags of coffee – equivalent to some 40% of output in the world's top coffee producer.
The request, which Brazil's administration was due to consider this week, would see the coffee lodged in return for loans of a minimum loan of R$261.69 ($145) per bag – with the twist that the government would take the market risk.
A grower ending up selling at below the support price would be refunded the difference by the government.
"Quite how stockpiling on such a mammoth scale, and with the deliberate intention of pushing up prices, would accord with Brazil's membership of the World Trade Organisation is not clear," Fortis said.
"But if it did happen, then futures' prices would certainly rise and perhaps quite strongly."
A rise would end a period of stagnant prices of arabica beans, the main type produced in Brazil, which on the New York market have, since July, traded at between 125 cents a pound and 150 cents a pounds.
With expectations of a strong Brazilian harvest, "there has been little to put fire in the belly of speculative investors", the bank said.
Nonetheless, Brazil's production of both arabica beans and robustas, the variety most commonly grown in Asia, looked set to fall below previous forecasts by a combined 670,000 bags, leaving the country's total coffee crop at 52.28m bags in 2010-11, Fortis said.
World consumption, meanwhile, looked set to rise a little quicker than had been previously estimated, now that economic recovery "has taken firmer root".
Fortis pegged the global arabica surplus at 6.99m bags, 320,000 bags fewer than it forecast last month, with the robusta surplus estimated at 2.98m bags, a cut of 430,000 bags.
Arabicas for July delivery stood up 0.3% at 132.10 cents a pound in New York at 15:00 GMT, with robustas up 0.4% at $1,294 a tonne in London.