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MILAN – Coffee futures fell sharply in the first trading session of August. In New York, the Ice Arabica contract for September delivery lost nearly 4% on Friday, August 1, closing at 284.20 cents, down 4.5% from the Friday, July 25 close. London saw smaller declines: the main contract for September delivery was 2.1% down, ending the week at $3,330 — up 3.1% from the previous Friday’s close.
Meanwhile, the Brazilian harvest is nearing completion. According to Safras & Mercado, harvesting operations were 90% complete as of July 30, ahead of last year (87%) and of the historical average of the past five years (84%).
Robusta harvesting is virtually complete (98%). Arabica harvesting is 85% complete, with a 9% progress over the previous week.
U.S. wavering trade policies have caused strong market volatility over the past week. Washington’s move not to include coffee on the list of products excluded from 50% tariffs continues to raise discussion and controversy.
The decision seems incomprehensible, even more so considering the fact that coffee is not a crop grown in the U.S., except for a modest (albeit excellent) production in Hawaii and a few tiny plantations in California.
Brazilian authorities and trade associations have expressed great concern, but remain confident that coffee will be added to the list of exempt products by Wednesday 6 August, when U.S. tariffs against Brazil will come into effect.
The National Coffee Association, the leading U.S. industry association, is also actively working to achieve this outcome.
If the 50% tariffs are confirmed, the United States will have to source coffee from different regions, such as Colombia, Central America, Africa and Asia, which would also affect the usual composition of mainstream blends.
However, Safras & Mercado analyst Gil Barabach argues that it will be difficult for the U.S. industry to completely replace the 7 to 8 million bags of coffee it imports annually from Brazil.
The United States is the world’s second-largest coffee importer and consumer, behind the European Union and ahead of Brazil.
