Coffee prices went into retreat as the International Coffee Organization, raising its world production forecast, highlighted signs that Colombia's output may recover from a three-decade low.

The intergovernmental group lifted its estimate for global output in the 2011-12 season by 1.37m bags to 132.7m bags.

The upgrade was in the main down to better forecasts for the crop in Vietnam, the top producer of robusta beans, which was upgraded by 1.0m bags to 21.0m bags, an increase of 7.9% year on year.

However, the organisation also noted that "concerns over heavy rains in Brazil at the beginning of the harvest seem to have been mostly alleviated", if flagging the damage from the poor weather to the quality of the crop in the top producing nation of arabica coffee.

Signs of revival

Furthermore, the group flagged "signs that production is recovering in Colombia", historically the third-ranked coffee grower, and a particularly important source of high-quality arabica beans, but which has suffered a series of weak harvests.

An extended period of poor weather, combined with losses to a replanting programme, has depressed Colombian output since 2008.

While the country's output for the first 10 months of 2011-12 is still behind that of last season, "there are signs that production might be starting to recover in Colombia", the ICO said.

A rise of 26% to 668,000 bags in Colombian output in July represented a fourth successive month of year-on-year production growth.

'We will see a recovery'

The comments follow a series of upbeat statements from within Colombia, although these extend a long series of announcements which have proved largely unfulfilled.

Juan Camilo Restrepo, Colombia's agriculture minister, said last month that "thanks to the good weather we've been having all forecasts show that we will see a recovery", estimating output at up to 9m bags this year.

The ICO stood by a forecast for Colombian output of 7.8m bags for 2011-12, a drop of 8.5% year on year.

Central America setbacks

However, the organisation flagged "less positive" reports emerging of output in Central America.

"Coffee leaf rust disease has affected crops in Guatemala and Honduras," which combined are set to show 2011-12 production of 8.25m bags.

"The magnitude of this damage remains to be quantified."

New York arabica coffee for December delivery fell back from a high of 167.90 cents a pound hit earlier to close at 165.30 cents a pound in late deals, a gain of 0.3% on the day.

London robusta beans for November shed 0.6% to $2,081 a tonne.