LONDON: Arabica coffee prices rose on Thursday but gains were muted overall as traders continued to hold out hope that the United States could exempt coffee from its 50% trade tariff on most Brazilian goods.
U.S. President Donald Trump on Wednesday slapped the 50% tariff on Brazil to fight what he has called a “witch hunt” against former Brazilian President Jair Bolsonaro, but excluded some key sectors like energy and orange juice.
Coffee has not yet been excluded from the 50% tariff, raising the prospect that trade between the world’s largest coffee producer and the top consumer of the commodity could be severely disrupted.
Brazil’s coffee exporters said in a statement they would continue to push for exemptions. The new tariffs come into effect August 6, not on Friday as originally planned.
“Another week until 50% comes into effect. Most (sector participants are) still hoping for a general coffee exclusion. I think it’s unlikely,” said a Europe-based trader at a top global coffee trade house.
Prices are expected to rise in the short term if a 50% tariff is imposed, with a scramble for stocks and a major upheaval in global trade flows likely as supplies are redirected to new destinations.
Arabica coffee steadies as market awaits tariff developments
In the longer term, however, tariffs are set to weigh on world coffee prices as they would likely hurt demand in top consumer the U.S. by boosting the country’s already inflated coffee prices.
The U.S. is almost entirely reliant on coffee imports with the quantities grown in Hawaii and Puerto Rico accounting for less than 1% of its consumption.
Brazil accounts for around one-third of the U.S. imports.
ICE arabica coffee futures, seen as a global price benchmark, were up 1.9% at $2.9220 per lb at 1320 GMT, having closed down 1% on Wednesday, while robusta coffee slipped 0.4% to $3,332 a metric ton, having closed up 1.7% in the prior session.
Cocoa prices were also higher with London futures up 2.9% at 5,489 pounds per ton while New York futures gained 2.8% to $7,703 a ton.
Raw sugar fell 0.7% to 16.33 cents per lb while white sugar was down 0.3% at $468.50 a ton.
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