If it does not rain beyond this date, Brazil's 2008/09 coffee crops could be threatened and marklet tension would grow, illycaffe Chairman and Chief Executive Andrea Illy told Reuters.

"If it rains (in Brazil), the prices will fall to 110-120 cents per lb. If it does not rain, the autumn rally can start and the prices will rise to as much as 200 cents per lb by Christmas," Illy said in a telephone interview.

Illy, whose group buys half of its green coffee from Brazil to make a trademark 100-percent arabica blend, said he expected the Brazilian coffee crop to come in at 45-47 million 60-kg bags in 2008/09, down from an earlier estimate due to drought.

"The initial estimates were of more than 50 million bags, which would have been an all-time record for Brazil. Now it is more reasonable to forecast crops of 45-47 million bags, anyway among the record years," Illy said.

Analysts had forecast record output of 50 million to 55 million 60-kg bags from the new crop in Brazil but views have since been cut by 10 percent at least, due to dry weather, still up from around 32 million bags in 2007.

COFFEE BALANCE

Strong new Brazilian crop would help bring global coffee output in line with demand next year after a deficit of 5-6 million bags seen this year, with the stocks worth less than four-month demand currently, Illy said.

"If the new crops are good, we can return to the situation of balance," he said.

Illy forecast global coffee output at 115 million bags this year, against a demand of 121 million bags -- a slightly narrower range than estimated by the International Coffee Organisation which sees supply at 114 million bags and demand at 122 million. Looking at global coffee demand, Illy said it would grow over years powered by Brazil, Russia, eastern Europe, India and China were people take to drinking more coffee along with westernisation of life and personal income increases.