Arabica coffee futures have fluctuated due to trade tensions and a global market already facing tight supplies, Bloomberg Reports.
The most-active contract in New York gained as much as 2.3 per cent to a record $3.5555 a pound, before fluctuating between gains and losses.
The spike occurred amid a brief United States (US) tariff threat against Colombia, further heightening trade uncertainties. It also followed new record highs over the past two sessions, pushing the relative strength index into overbought territory, which suggests prices may have risen too quickly.
On Sunday 26 January, US President Donald Trump ordered his administration to impose tariffs and sanctions on Colombia for refusing to allow two military planes carrying deported migrants to land. Soon after, the White House said the President would hold off on imposing those measures after reaching a deal on the return of those deported.
The decision unsettled the outlook for coffee shipments at a time when the most actively traded Arabica futures have risen sharply due to harvest shortfalls in key producing regions.
Colombia is the world’s third-largest coffee producer and second-largest for the Arabica variety favoured for specialty brews. With at least 40 per cent of its coffee exports heading to the US, it is the South American nation’s biggest market, US Department of Agriculture data show.
“In reality, all LATAM coffee producers are likely to face the same threat as Colombia and all are likely to back down,” says Steve Pollard, an analyst at Marex Group. “If import tariffs are applied to coffee from all these origins, the impact is likely to be on retail prices in the US.”
If the tariffs were applied to Colombia, the physical market would be disrupted by prompting diversion of the country’s premium beans to Europe, raising US demand for other origins, Pollard adds. The futures market would be less exposed, as prices are tied to coffee stockpiles mainly in Europe, he says.
