Coffee prices go up despite Trump tariff cancellation to Colombia

New York
CNN
–

Coffee prices reached a new maximum on Monday, one day after the president of the United States, Donald Trump, threatened (and then reversing) to apply a 25% tariff to Colombia during a dispute over deportation flights From the US and the price continues to rise.

Although the tariff never entered into force, the mere threat generated nervousness throughout the coffee market.

Colombia is the third country producing the world, behind Brazil and Vietnam.

The Arabic coffee futures contracts produced in Latin America and marketed in the intercontinental stock market rose from a closing level of US $ 3.48 La Libra (0.45 kilograms) on Friday at US $ 3.49 La Libra on Monday, Monday, a 0.5%increase. At noon on Tuesday, coffee futures rose even more, to US $ 3.53 La Libra, an increase of 1.7% compared to Friday.

“When President Trump even makes tariffs threats, at the moment when uncertainty is introduced into a global trade system, and that is what global trade is, things are going to become a little crazy,” said Dan Gardner , President of Trade Facitators, a supply, trade and logistics chain company.

However, President Trump did not make the price of coffee shoot on his own. Arabic coffee prices increased by 13% in December, an interannual increase of 60%, according to the World Bank.

And coffee futures have been on the rise since 2011, since bad weather has affected key regions for coffee cultivation, such as Brazil and Colombia. And the next harvest of the region is not expected to produce greater performance.

“The market has not had a respite. The offer has improved, but not enough to meet demand. There is more and more awareness that the impact will be worse than was originally thought, ”said Ryan Delany, chief of coex trading academy, which focuses on the world coffee market.

The United States is not a coffee producer, with the exception of a small production in Hawaii. The United States imports most of their coffee and US consumers tend to prefer Colombian coffee.

According to commercial data from the Census Office, last year the United States imported coffee and derived products for a value of almost US $ 9,000 million from around the world, not counting the month of December. Colombia was the second largest coffee exporter to the United States, with coffee shipments worth US $ 1.4 billion until November last year (Brazil was the main exporter).

Starbucks, Nestlé and Keurig buy a lot of Colombia, said Gardner, but set prices in advance, so consumers often do not feel the price increases immediately.

However, as more and more deportation flights are directed to Latin America, President Trump could threaten tariffs once again. And that single threat has already scared exporters and importers, enough to protect themselves.

“Companies, as they know that the average American does not understand how these things work, will begin to increase prices, perhaps not suddenly, but little by little. Thus they will have a small cash reserve for when products begin to arrive and have to deal with those tariffs, ”said Gardner.

With or without the threat of a tariff, coffee prices are high and will probably continue to increase.

“Coffee is one of those products that has experienced a rapid increase in wholesale prices and will probably arrive soon to supermarkets,” said Tyler Schipper, economist and associate professor at St. Thomas University in St. Paul, Minnesota.

“Therefore, people will have trouble separating tariffs that did not even work for the underlying dynamics of coffee prices even before the Trump administration.”