Tag: Coffee tariffs

Why Have Coffee Prices Surged Again Globally?

Posted on by Qahwa World

Dubai, September 9, 2025 (Qahwa World) – Coffee prices are once again on the rise, pushing global markets into a renewed bullish phase after months of volatility and decline. Analysts point to a mix of climate pressures, trade barriers, falling inventories, and speculative buying as the key forces driving the market upward.

Arabica coffee futures on the Intercontinental Exchange (ICE) climbed above $3.70 per pound in early September 2025, nearing record levels last seen at the beginning of the year. This rebound followed a sharp downturn during the first half of 2025, when prices fell by 19.22% in the second quarter and dropped 4.07% overall in the first six months, closing June at $3.0675 per pound.

On July 8, 2025, the December Arabica contract reached its lowest point of the year at $2.72 per pound. From there, the market staged a dramatic recovery, rallying nearly 43.9% to $3.9130 by August 28. The turnaround signaled a renewed long-term bullish momentum for coffee.

Climate Concerns Put Pressure on Supply

Brazil, the world’s largest coffee producer, is facing challenging weather conditions, including drought in some regions and unusually cold temperatures in others. These climate issues have heightened concerns about reduced crop yields in the upcoming harvest.

At the same time, ICE data shows that open interest in coffee futures rose 11.5% between August 12 and August 28, climbing from 146,352 to 163,170 contracts, highlighting increased speculative activity. Meanwhile, ICE coffee inventories fell to multi-year lows, further tightening global supply.

Tariffs Fuel the Rally

Adding to the pressure, the United States has imposed additional tariffs on coffee imports from Brazil and Vietnam, the two largest exporters. These trade barriers have raised costs for roasters, while well-capitalized Brazilian farmers have held back sales, using the tight market to strengthen their negotiating position. The result has been an acceleration of the rally in coffee prices.

Starbucks Feels the Impact

Rising green coffee costs are weighing directly on Starbucks, one of the world’s biggest buyers. While U.S. equity markets reached new highs in August, Starbucks shares underperformed. From March 3 to September 5, 2025, the stock fell 27.5% from $117.46 to $85.06, before closing at $85.32—6.4% below the year-end 2024 level. Analysts point to rising input costs, particularly coffee, as a major factor behind the decline.

Lack of Investment Vehicles

Since the iPath Coffee Subindex ETF ceased trading in June 2023, investors seeking direct exposure to coffee have had to rely exclusively on futures and options listed on ICE. Each futures contract represents 37,500 pounds of green coffee. At $3.7365 per pound on September 5, the December contract was valued at approximately $140,118.75. With an initial margin requirement of $10,659, traders can control the contract with just 7.6% upfront, though they must meet maintenance margin calls if equity falls below $9,690.

Outlook: Volatility Ahead

Looking forward, analysts expect heightened volatility in the coffee market over the coming weeks and months. Climate challenges in Brazil, tariff-driven trade distortions, and dwindling inventories will continue to keep upward pressure on prices. While the long-term trend remains bullish, sharp fluctuations are likely to remain a defining feature of the global coffee trade.

U.S. Roasters Halt Brazilian Coffee Purchases After 50% Tariffs

Posted on by Qahwa World

Dubai, 20 August 2025 (Qahwa World) – American coffee buyers are pulling back from new deals with Brazil, the world’s largest coffee producer, after President Donald Trump’s 50% tariff on imports took effect earlier this month.

According to brokers, roasters, and exporters contacted by Bloomberg, U.S. companies are avoiding fresh contracts and looking for ways to adjust existing agreements to escape the higher levies. Some buyers are even requesting delayed shipments in the hope that tariffs might later be eased, Brazil’s exporter group Cecafé reported.

“Deals between the U.S. and Brazil have totally stalled,” said broker Thiago Cazarini. “No one’s really buying anything.”

Brazil supplies roughly one-third of America’s unroasted coffee. The tariff escalation follows Trump’s earlier April announcement of a 10% levy on Brazilian agricultural imports, which surged to 50% on August 6. The trade conflict is intertwined with Trump’s criticism of what he calls the “politically motivated persecution” of former Brazilian President Jair Bolsonaro, a close ally now facing trial over an alleged coup attempt against current President Luiz Inácio Lula da Silva.

For U.S. roasters, the tariffs pose a major challenge. Florida-based Zaza Coffee, which sources about 25% of its beans from Brazil, has 14 to 16 weeks of supply left. “Within this window maybe something can change regarding the tariffs,” said JP Juarez, Zaza’s director of coffee innovation. “But if tariffs remain, we probably won’t buy Brazilian coffee.” The company is exploring alternatives from Central America, Peru, and Mexico.

Still, for many roasters, Brazil’s dominant volumes and bean profiles are nearly irreplaceable. “Roasters have blends they want to keep consistent in any cost environment,” noted Jim Watson, analyst at Rabobank. Starbucks, for example, uses only Brazilian arabica in its blends.

With Brazil sidelined, U.S. buyers are eyeing other origins. Colombia, Vietnam, and Honduras are the next biggest suppliers, according to the Department of Agriculture. Vietnam’s robusta beans—cheaper and mostly used in instant coffee—could see imports rise to “historical highs,” according to Laleska Moda of Hedgepoint Global Markets, since tariffs there are only 20%. Indonesia and Uganda could also gain market share with lower tariffs.

Yet shortages loom. Honduran coffee is already trading 30 to 40 cents per pound above futures prices, while Colombian exporters are holding back, waiting for possible market surges, said Tomas Araujo of StoneX.

Some roasters are turning to futures markets to hedge costs. Café Aroma, a Cuban-style brand, is shifting imports toward countries with more predictable tariffs, said vice president Bernadette Gerrity.

If U.S. demand for Brazilian beans declines, those supplies will likely flow to Europe, where buyers are seeking traceable coffee to comply with new EU deforestation rules. More beans may also head to China’s expanding market, leaving U.S. roasters exposed to a more expensive supply chain, said Dave Behrends of Sucafina SA.

For some companies, the immediate hit is already being felt. Gregorys Coffee in New York received its last Brazilian shipment on August 2, just before the tariffs took effect, securing stock until mid-November. But its next shipment is already locked in at the higher rate. “Absorbing a 10% tariff is nearly impossible for a small business to do on its own,” said Daria Whalen of San Francisco’s Ritual Coffee Roasters. “Fifty percent feels staggering and insurmountable.”