Global coffee prices plunge after Trump removes tariffs on Brazil
Baku, November 22, AZERTAC
Global coffee prices plunged on Friday after U.S. President Donald Trump removed 40% tariffs on imports of many Brazilian agricultural products, including green coffee beans, according to Reuters.
U.S. retail coffee prices rose an annual 40% in September, due in part to tariffs. 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 move follows a similar order announced last Friday to roll back duties on coffee and scores of other products from producing countries.
Top coffee grower Brazil supplies the United States, the world's largest coffee consumer, with about a third of its beans and the end of import tariffs should allow for a quick flow of Brazilian beans to depleted U.S. coffee stocks.
Arabica coffee futures on the ICE exchange closed nearly 2% down to $3.6945 per lb, having earlier plunged more than 6% to two-month lows.
Robusta coffee , typically used in instant coffee rather than in the roast and ground blends where arabica dominates, fell 2.7% to $4,506 a metric ton, having earlier sunk 8%.
"(We) need the market to digest this. More downside? Maybe, but I do not believe we'll go below $3/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 global arabica crop is still in deficit, stocks are low, the industry is short on supply and needs to buy and there are still supply risks linked to the La Nina weather phenomenon.
Some traders will rush to ship Brazilian beans to the U.S.
"Once the announcement of tariff reductions was made, we will divert a shipment under planning for Germany to go instead to the U.S.," said Stephen Hurst, managing director at Mercanta coffee traders.
Tariffs aside, dealers were also trying to gauge the damage from floods and landslides in top robusta grower Vietnam.
A London-based coffee broker said the market had over-reacted somewhat to the Trump tariff U-turn given it was to some extent expected. "(The move) seemed to shock more than it probably should have," he said.
In other soft commodities, London cocoa fell 2.2% to 3,879 pounds per ton, New York cocoa fell 2.3% to $5,159 a ton, raw sugar rose 0.8% to 14.78 cents per lb while white sugar gained 1% to $424.10 a ton.
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