NEW YORK: Arabica coffee prices hit a 10-day high on Friday as investors focussed on Brazil’s threat to retaliate should the Trump administration proceed to impose 50% tariff on Brazilian imports, but receded late in the trading session to end lower.
Brazilian President Luiz Inacio Lula da Silva said on Friday he wanted to find a diplomatic solution to the US tariffs threat but vowed to reciprocate like-for-like if they take effect on August 1. Brazil is the world’s largest grower and exporter of coffee, while the US is its biggest client and the world’s largest drinker of the beverage. Out of all the coffee the country consumes, no less than 33% of it comes from Brazil.
Coffee trade sources said the new duty, if confirmed on August 1, could all but halt Brazilian coffee shipments to the United States, and the country will not be able to source from elsewhere at similar volumes or prices.
US prices aside, experts said the Brazil tariffs are bullish in the short term for ICE exchange-traded coffee futures - seen as a global price benchmark - because they create demand in the US for exchange-certified stocks.
Coffee futures on the ICE exchange tend to rise when stocks fall, as that signals supply tightness. ICE New York arabica coffee futures hit a 10-day high of $2.9760 per lb, extending Thursday’s 1.3% gain, but later settled down 1.3 cent, or 0.5%, at $2.865 per lb. The quick pace of harvest in Brazil was cited by dealers as one factor behind the reversal in price.
London-based robusta coffee futures continued weak, falling 3.1% to $3,216 a ton. The contract lost 13% in the week and hit a one-year low on Friday.
“New York is reflecting a greater desire to own coffee stocks in the US This bounce is small and can get stronger,” said Alberto Peixoto, director at brokerage and consultancy AP Commodities. Longer term, however, the US tariffs on Brazil are if anything bearish for world prices, experts say, as they could mean more supply becomes available to the global export market. In other soft commodities traded on ICE, raw sugar rose 1.9% to 16.57 cents per lb, while white sugar was little changed at $483.70/ton.
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