Since February, when the price of Arabica coffee futures on the commodities market reached an all-time high (not including inflation), there has been a bit of a downward trend. As recently as July, the price has dipped back down to $2.76. Then August hit, and coffee futures are once again nearing their peak price.
Prices reached $4.17 on Monday, just $.08 shy of the all-time high in February. The uptick, as anyone paying remote attention to global affairs can attest, is due primarily to the American tariff on Brazil. The 50% tax on all imported goods from Brazil, including coffee, took effect August 1st, and the price has only gone up since then. In just a month and a half, it has increased by nearly 50%, which represents one of the most significant jumps in history over that short of a timeframe.
Still there are other factors working in concert with the tariffs to push prices higher. Per Barchart, a lack of rain in Brazilian coffee growing regions “ahead of the critical flowering period for coffee trees” is causing prices to spike. Meanwhile the Brazilian real is at a 15-month high against the dollar, which further discourages producers from exporting coffee. Adding to all this is the fact that International Commodity Exchange inventories of Arabica are at a 16-month low.
But the main concern is the tariffs, and there appears to be no end in sight. Many American coffee buyers are cancelling contracts with Brazilian producers in favor of other countries with smaller tariffs. The current administration has expressed that commodities not grown domestically, like coffee, could be exempt from tariffs, but only after the producing country has signed a trade deal. And given that many believe the Brazilian tariffs are more politically motivated than fiscally—Brazil is one of the few countries for which America has a trade surplus—the actual end of the 50% tax on coffee from the largest exporter to the US isn’t quite as clear cut.
Zac Cadwalader is the managing editor at Sprudge Media Network and a staff writer based in Dallas. Read more Zac Cadwalader on Sprudge.
