The extent of the erosion of coffee inventories in major producing countries may have left the market "highly susceptible" to a price spike, the International Coffee Organisation said - as arabica futures hit a six-week high. The intergovernmental group acknowledged the continued weakness in coffee markets, which on its own assessment averaged 116.02 cents a pound in July, an 18-month low. The ICO said: "The coffee market registered further decreases in July with prices reacting to the depreciation in the Brazilian exchange rate," which dropped to a 12-year low against the dollar, cutting the dollar in dollar terms of assets in which Brazil is a major force. Indeed, prices of so-called Brazilian natural arabica beans fell particularly strongly last month, by 5.3%. Futures in arabica beans overall, of which Brazil is the top producer, underperformed robusta coffee, of which Vietnam is the biggest grower, again last month to cut its premium to 51.43 cents a pound, "less than half its level of August 2014", the ICO noted. 'Highly susceptible to a rapid surge in prices' However, the organisation urged against complacency among buyers, flagging the continued dent to supplies caused by disappointing harvests in some major growing countries - although in Vietnam a reluctance to sell into a weak market is undermining exports. "While the coffee market seems to have no immediate supply concerns, it must be reiterated that stock levels in most producing countries are waning," the ICO said.  "While there is a moderate buffer in importing country warehouses, this may not be sufficient to cover any significant negative shock to production. "This could leave the market highly susceptible to a rapid surge in prices… if production fails to meet expectations," the ICO said, noting that such a dynamic had lifted markets in, for example, early 2011 and March last year. Lingering drought worries The comments come amid a fresh debate over Brazil's coffee harvest spurred by comments by ProCafe that it could come in well below its come in 20-30% below the coffee research group's March estimate, of 41m-42m bags. Several other commentators have forecast production of more than 50m bags. ICO said that although "concerns over production in Brazil have largely subsided… some recent domestic reports have reiterated that the crop could still be feeling the effect of last year's drought. "This could potentially result in a smaller bean size, which would reduce overall output." Stocks drawn down Strong Brazilian exports - which hit a record 27.4m bags in the October-to-June period, the first nine months of 2014-15 – after a weak 2014 harvest have raised expectations of a large drawdown in inventories. Indeed, the country's Conselho Nacional do Café producers' group on Friday, which is like Procafe downbeat on domestic harvest prospects, flagged Brazil's lowest-ever coffee inventories. The ICO also highlighted a 26% tumble to 4m bags in exports from Indonesia, the fourth-ranked coffee producing nation, after a weather-affected harvest last year. Indonesia's exports have fallen below those of Honduras "for the first time... a consequence of the adverse weather in 2014 as well as increasing domestic consumption, which reduces export availability". Source: agrimoney.com/news/coffee-market-may-be-vulnerable-to-rapid-surge-in-prices--8672.html