LONDON: Arabica coffee steadied on Wednesday in cautious trade as investors braced for Friday when U.S. tariffs of 50% on imports from top coffee grower Brazil could come into effect if the two countries fail to reach a trade deal.
The United States imports 100% of its coffee, a third of which comes from Brazil.
Coffee
Arabica coffee was little changed at $2.9670 per lb by 1148 GMT, having closed down 1.7% on Tuesday.
Dealers said the market was deflated after a brief relief rally on Tuesday after U.S. Commerce Secretary Howard Lutnick said commodities not grown in the U.S. could be exempt from tariffs if trade deals with producing countries are reached.
“As the echo of the Secretary’s words fades, a more sobering reality sets in: nothing has changed. No official policy shift. No executive statement. Not even a credible leak,” said broker and consultant Michael J Nugent.
The U.S. Congressional Coffee Caucus has been lobbying for coffee to be excluded from tariffs because there are no viable domestic substitutes.
If the tariffs go ahead, they are expected to raise already elevated prices in the world’s leading consumer of coffee, hurting demand there and possibly weighing on global prices.
Citi said it expects the global coffee market to record a 6.1 million bag surplus in the upcoming 2025/26 season amid improved production in Brazil, Vietnam and Indonesia.
Robusta coffee rose 3.3% to $3,400 a metric ton after touching a 16-month low of $3,166 last week.
Arabica coffee and sugar prices rise
Cocoa
London cocoa ?rose 2.5% to 5,439 pounds per ton, having lost 1.8% on Tuesday.
U.S. trade tariffs are meant to boost domestic manufacturing. But in the chocolate industry, they’re doing the opposite: ramping up the cost of importing already pricey cocoa and hurting the competitiveness of local factories versus Canadian and Mexican outfits that supply the U.S.
Dealers noted Lutnick’s comment on tariff relief has not yet been made official and they expect tariff negotiations to change on a case by case basis.
New York cocoa rose 2.6% to $8,434 a ton.
Sugar
Raw sugar fell 1% to 16.43 per lb, having settled up 1% on Tuesday.
White sugar was down 1.3% at $469.40 a ton.
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