Large purchases of coffee futures by foreign investors have raised fears that coffee producing nations are using the American futures markets to prop up their coffee prices.

To answer concern in Congress about foreign participation in the coffee futures market, the Commodity Futures Trading Commission has ordered a special report next week on foreign holdings on the New York Coffee and Sugar Exchange.

It is neither illegal nor unusual for coffee producing nations to trade in the U.S. futures markets, but the current actions are believed to be producing higher prices for American coffee drinkers.

By buying coffee on the futures market in New York at the same time they are selling coffee elsewhere in the world, the coffee growers are, in effect, creating artificial demand for their product. This tends to push up the price.

The tactic is enormously costly, but 11 coffee growing nations met in Bogota, Columbia last summer and created a $140 million coffee fund to support prices.

Although coffee prices have gone down since then, the growers' effort have been "partially successful" said Fred Carlson, the chief coffee analyst at Merrill Lynch, Pierce, Fenner & Smith, the nation's biggest commodity futures trader.

"The market has declined less than it would have had they (the coffee growers) not been in the market," said Carlson. "If they had not been in there, they certainly would not have gotten less for their coffee.

"That's not an attempt to manipulate the market," he added. "It's a reasonable response for them to make" to counter downward pressure on coffee prices.

The coffee growers are not trying to increase the price of coffee, stressed Carlson and Dr. Fred Gray, a U.S. Department of Agriculture coffee specialist.

"They can keep the price up in the short run," said Gray "All they're doing is really slowing what's going to happen anyway."

But slowing the downward trend in coffee prices means consumers are continuing to pay high prices for coffee.

Back in 1975 a pound of coffee in the supermarket cost $1.27 and green coffee beans sold on the world market for 60 to 65 cents a pound.

Then one night in August 1975 a cold wave swept over Brazil and 1.5 billion coffee trees literally were nipped in the bud by frost. The coffee leaves turned black and Brazil's harvest plummeted from 23 million bags of coffee to 9 million bags.

The teeter-totter of supply and demand bounced the price of raw coffee to a record $3.40 a pound and the supermarket price streaked toward $5.

Now the Brazilian coffee bushes have grown back, world output is up 7 percent this season and coffee prices are coming down -- but not to where they were before the freeze.

Cash coffee prices are down to $1.30 a pound, and Washington area supermarkets are advertising Maxwell House on special for $2.89 to $2.96 a pound.

The Commodity Futures Trading Commission's efforts to determine the full extent of coffee producers' participation in the futures markets have been defied by one major Swiss firm, Wiscope, S.A.

When the CFTC last November first ordered disclosure of foreign coffee futures holdings, the Wiscope firm refused to identify the owner of 276 contracts, each representing 37,500 pounds. The CFTC now is considering banning Wiscope from trading in coffee futures unless it produces the information.

But more important than determining who bought futures contracts for 10 million pounds of coffee, commission officials say, is establishing the agency's legal power to police the market.