BRAZIL’S COFFEE EXPORTS TO THE U.S. EXPECTED TO NORMALIZE WITHIN SIX MONTHS AFTER TARIFF REMOVAL

BRAZIL’S COFFEE EXPORTS TO THE UNITED STATES ARE EXPECTED TO TAKE AT LEAST SIX MONTHS TO RETURN TO NORMAL LEVELS AFTER THE REMOVAL OF THE TARIFFS THAT HAD BEEN DISRUPTING SHIPMENTS SINCE AUGUST. THE ESTIMATE COMES FROM THE BRAZILIAN COUNCIL OF COFFEE EXPORTERS WHICH WARNS THAT LOGISTICAL BOTTLENECKS WILL SLOW THE RECOVERY OF EXPORT VOLUMES.

ACCORDING TO CECAFÉ ABOUT 1 MILLION BAGS WERE NOT SHIPPED TO THE U.S. OVER THE PAST THREE MONTHS AFTER TARIFFS OF UP TO 50 PERCENT WERE APPLIED. BETWEEN AUGUST AND OCTOBER EXPORTS TO THE AMERICAN MARKET FELL BY MORE THAN 50 PERCENT WHILE CERTIFIED STOCKS OF BRAZILIAN ARABICA COFFEE AT THE NEW YORK EXCHANGE PLUNGED 96 PERCENT TO JUST 19,951 BAGS.

WITH THE BIDEN ADMINISTRATION’S DECISION TO REMOVE THE 10 PERCENT AND LATER THE 40 PERCENT TARIFFS THE MARKET NOW EXPECTS AN ACCELERATION IN OUTSTANDING ORDERS. U.S. ROASTERS THAT SPENT MONTHS CONSUMING INTERNAL STOCKS OR BUYING FROM OTHER ORIGINS SHOULD NOW RUSH TO REGULARIZE PENDING CONTRACTS.

HOWEVER THE SECTOR FACES A SIGNIFICANT LOGISTICAL CHALLENGE. QUICKLY SHIPPING THE 1 MILLION BACKLOGGED BAGS WILL NOT BE POSSIBLE BECAUSE COFFEE MUST COMPETE FOR SPACE ON VESSELS WITH OTHER AGRICULTURAL COMMODITIES HARVESTED DURING THE BRAZILIAN SUMMER. CECAFÉ SAYS THE COUNTRY WOULD STRUGGLE TO EXPORT AN ADDITIONAL 400,000 TO 500,000 BAGS PER MONTH MAKING A FULL NORMALIZATION UNLIKELY BEFORE MID 2026.

THE SPECIALTY COFFEE SEGMENT HAS ALSO BEEN IMPACTED. EXPORTS TO THE U.S. DROPPED 55 PERCENT FROM AUGUST TO OCTOBER AND THE BRAZILIAN SPECIALTY COFFEE ASSOCIATION HAS NOT YET PROVIDED A TIMELINE FOR FULL RECOVERY. THE ASSOCIATION CELEBRATED THE END OF THE SURCHARGES AND PRAISED THE JOINT EFFORT OF THE BRAZILIAN COFFEE INDUSTRY AND THE FEDERAL GOVERNMENT IN REVERSING THE TRADE BARRIERS.

THE GENERAL OUTLOOK FOR THE INDUSTRY IS ONE OF GRADUAL RECOVERY. U.S. DEMAND REMAINS STRONG BUT THE REBALANCING OF STOCKS PENDING CONTRACTS AND PORT LOGISTICS CONSTRAINTS SHOULD KEEP THE NORMALIZATION PROCESS SLOW AND PROGRESSIVE OVER THE COMING MONTHS.