VARGINHA, Brazil, July 7 (Reuters) - Brazil's government should sell out within a year hundreds of thousands of bags of coffee harvested as long ago as 1982 and warehoused during a bygone era when the state bought supplies to keep prices firm.

Government agronomist Antonio Ernesto said the IBC had amassed 17 million to 18 million bags of coffee by the time President Fernando Collor's government did away with the Institute in 1990. Around 718,000 of those 60-kg bags remain.

"This coffee is now used more on the local market ... After more than four years coffee loses its taste," he said, adding it was used to blend with other coffees.

The warehouse in Varginha looked spartan and clean-swept. Cobwebs cast just a thin veil over some sacks, but these serve a purpose, Ernesto said, helping keep bugs away from the stocks on which the use of pesticides is prohibited.

"Cobwebs provided a defense against insects. It was biological (pest) control," he said.