The global coffee market is undergoing changes after former U.S. President Donald Trump removed the 40% tariffs on Brazilian coffee and other agricultural products. This move has been a significant event for the coffee industry, as Brazil is the largest coffee producer, and the U.S. is the largest consumer. The decision to remove the tariffs was made in response to the growing coffee shortage in the U.S., where coffee prices had risen significantly, partly due to the tariffs.
According to FinancialMediaGuide, the removal of tariffs has impacted commodity markets, particularly arabica coffee futures, which dropped by 2%, falling to $3.6945 per pound. Robusta coffee prices, primarily used in instant coffee, decreased by 2.7%, reaching $4,506 per ton. However, despite these short-term fluctuations, the global coffee shortage continues to put significant pressure on the market. While the increase in Brazilian coffee supply may help, it is not enough to meet the growing demand. Coffee inventories remain low, and supply chain issues persist, limiting the potential for sustainable price reductions.
Additionally, FinancialMediaGuide highlights that climate risks, such as flooding and landslides in Vietnam – the largest producer of robusta – are adding further pressure to the coffee market. Weather disruptions in producing countries remain a crucial factor for coffee price stability in the long term. FinancialMediaGuide predicts that supply disruptions caused by extreme weather conditions will continue to support high coffee prices.
Moreover, the coffee market remains under pressure from unstable supply situations, as evidenced by an increase in redirected shipments from Brazil to the U.S. Traders are adapting their logistical schemes in response to market changes. However, experts warn that supply issues and high risks related to climate change may continue to limit the potential for price reductions.
At FinancialMediaGuide, we forecast that, despite short-term fluctuations and possible price reductions, the global coffee shortage and climate changes will continue to influence the coffee market in the long term. In an environment of uncertainty caused by changes in key markets and climate catastrophes, producers and traders must remain flexible in their strategies, closely monitoring market changes and adapting their business models. While the removal of tariffs may provide short-term relief for consumers, Financial Media Guide predicts that a sustainable decrease in coffee prices is unlikely in the future.
