Even With Colombia Tariffs On Pause, Coffee Prices Are Spiking – CoffeeTalk
Coffee prices have reached a new high on Monday, the day after President Donald Trump threatened and reversed course on a 25% tariff on Colombia during a spat about deportation flights from the US. Colombia is the third largest coffee-producing country in the world, behind Brazil and Vietnam. Future contracts for Arabica coffee produced in Latin America and traded on the Intercontinental Exchange jumped from a closing level of $3.48 a pound on Friday to $3.49 a pound on Monday, a 0.5% increase. By mid-day Tuesday, coffee futures moved even higher, to $3.53 a pound, a 1.7% increase from Friday.
The mere threat sent nerves racing throughout the coffee market. Arabica coffee prices surged by 13% in December, a 60% year-over-year increase, according to the World Bank. Coffee futures have been elevated since 2011 as bad weather has plagued key coffee growing regions like Brazil and Colombia. The market just hasn’t really caught a break, and there has been a growing realization that the impacts will be worse than people were originally thinking.
The US isn’t a coffee producer, except for some production in Hawaii. The US imports most of its coffee, and US consumers tend to prefer Colombian coffee. Starbucks, Nestle, and Keurig source a lot of coffee from Colombia, but they lock in prices years in advance, so consumers often don’t feel price increases right away. As more deportation flights head to Latin America, President Trump could threaten tariffs once again, which has already spooked exporters and importers — just enough to hedge.
With or without a threatened tariff, coffee prices are high and will likely continue rising. Tyler Schipper, economist and associate professor at the University of St. Thomas in St. Paul, Minnesota, says people will have trouble separating tariffs that didn’t even pan out, versus what were the underlying price dynamics of coffee even before the Trump administration.
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Source: Coffee Talk