LONDON: Global coffee prices plunged on Friday after US President Donald Trump removed 40 percent tariffs on imports of Brazilian agricultural products including coffee and cocoa in the face of growing angst from American consumers about high food costs.
US retail coffee prices rose an annual 40 percent in September, due in part to tariffs, and rising food prices are a major factor behind Trump’s approval ratings falling to their lowest since his return to power, a Reuters/Ipsos poll found.
Trump’s overnight tariff removal on Brazil follows a similar order announced last Friday to roll back duties on coffee and scores of other agricultural products from producing countries. Top coffee grower Brazil supplies the US, the world’s largest coffee consumer, with about a third of its beans.
At 1017 GMT, arabica coffee futures on the ICE exchange , used as a benchmark to price physical coffee around the world, were down 4.6percent to USD3.5925 per lb, having earlier plunged more than 6percent to two-month lows.
Futures prices for robusta coffee beans, typically used in instant coffee rather than in the roast and ground blends where arabica dominates, were down 5percent to USD4,400 a metric ton, having earlier sunk 8percent.
“(We) need the market to digest this. More downside Maybe, but I do not believe we’ll go below USD3/lb. If anything I would be a buyer into whatever market dip comes from this news,” said a Europe-based trader at a top global coffee trade house.
He explained that the arabica crop was still in deficit, exchange certified and industry stocks were low, the industry was short on supply and needed to buy, and there were still weather risks due to the La Nina phenomenon.
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