US plans to impose 50pc tariffs on Brazilian imports will make Brazilian coffee uncompetitive in what is one of its top markets, forcing sellers to shift sales toward Europe and Asia.
Brazil accounts for more than 30pc of US coffee imports, while the US represents 16pc of Brazil's exports, according to Brazilian coffee exporters council, Cecafe. The US' heavy reliance on Brazilian supply was one factor many coffee exporters thought would shield the crop from the new tariffs set to begin on 6 August.
While Brazilian officials say they are hoping to negotiate with the US for lower rates and more exemptions, coffee exporters are ready to intensify efforts to expand in other existing markets and enter new ones, said the national coffee council CNC, especially those with solid economies.
Brazil exported 50.6mn 60kg bags of coffee to 120 destinations in 2024, lead by the US (8.1mn), Germany (7.6mn), Belgium (4.4mn), Italy (3.9mn) and Japan (2.2mn).
While the US consumes 24.4mn bags/yr of coffee in total, the EU consumes nearly 40mn bags/yr and Japan 6.7mn bags/yr, according to data from the US Department of Agriculture (USDA) -- meaning there is more room for Brazil to take market share.
There is also growth potential in developing markets such as Asia, the Arab world, and Eastern Europe. The average annual coffee consumption growth rate in Asia, for example, is estimated at 2.3pc over the last five years, according to Cecafe.
But building new markets and increasing export volumes takes time and depends on investment, marketing, trade agreements, and the profile and level of consumption in each country. Regulatory and environmental issues in areas like the EU hinder further market expansion in member countries.
While Brazil is the second-largest global coffee consumer, with an annual consumption of 22mn bags, its domestic market would not be able to absorb the US volumes that are likely to stop under tariffs, said Cecafe.
The trade group said this week it will keep lobbying the US National Coffee Association to get Brazilian coffee included on the tariff exceptions list, while other officials are pushing to change the terms as well.
Brazilian coffee prices had been falling this year before the US tariff threat was announced. Between January-early July, Arabica prices in Brazil main producing area, the southeastern Minas Gerais state, fell by 22pc to R1,714/60kg bag on 11 July, due to a large harvest and a positive production outlook. The market has turned more volatile since then, with prices up by 5pc to R1,796/bag on 25 July.
