LONDON, July 25 (Reuters) - Growing belief amongst traders that Brazil"s coffee crop did not suffer severe damage from the recent cold spell sparked sharp falls in international coffee futures prices this week. London-traded futures on robusta beans, used in instant coffee and blends, slumped back down to 8-year lows on Monday. In New York the higher-quality arabica bean market saw similarly sharp losses, less than one week after weather-induced buying catapulted prices significantly higher in both markets. Initial government estimates of crop damage in the world"s biggest coffee producing country have been met with scorn by the trade.

"You take it with the customary pinch of salt and because it"s the government, you take an extra pinch," one futures broker said. So far, the Brazilian Agriculture Ministry has pegged damage in Parana State at between 80 and 90 percent for the forthcoming 2001/02 crop and 15-20 percent for the current 2000/01 crop. "Trade talk is saying that for Parana, you"re maybe looking at 50 percent (damage). As for some of the other areas, I think they (government) are overstating absurdly," he added.

The Ministry said frost damaged half of the 2001/02 crop in Minas Gerais" prized Cerrado region, famed for top quality arabica. Cerrado accounts for about 18 percent of output in the Minas state, which in turn produces about half of Brazil"s crop. "Other respected agronomists have stressed that as far as the (2000/01) crop on the trees is concerned, frosts affect quality not quantity," said Laurence Eagles of Internet coffee news service CommodityExpert in a report made available to Reuters on Tuesday. "The full extent of any crop losses will only be known after the (2001/02) flowering in October," he said.

Various figures on damage to the next crop are floating around in the marketplace, ranging from under one million right up to five million (60 kg) bags. "But people who want to talk about five million bags, in my view, are living in a dream world," one trader said. "I could not take any of this seriously until we have seen some detailed reports," one major European coffee buyer said. "It just takes time to tell." Several traders point out that Brazil had widely been expected to produce a bumper crop of up to 40 million bags in 2001/02. "Herein lies the key as to why the market has so quickly shrugged off any concerns," Eagles said. "A four million bag loss would certainly not appear to be sufficient to provoke a dramatic shift in the world supply/demand balance." German analyst F.O. Licht said in a recent report that world coffee production could exceed 110 million bags in 2000/01, resulting in a third successive year of surplus.

Traders pointed out that despite the brief life-line that the recent cold weather in Brazil offered to the market, there is still simply too much coffee being produced. One said that other countries, such as the world"s number two coffee producer Colombia, are set to have healthier crops next year. "Centrals (Central America) are doing OK also and obviously we all know what"s happening in robusta production," one said, pointing in particular to Vietnam. The world"s biggest robusta producer is expected to harvest a bumper crop starting from Setpember, with overall output to reach at least nine million 60-kg bags. "It"s only a few months before the Vietnams start coming through to the market...and then there"ll really be trouble."