Robusta Coffee Prices Slip as Brazil Reverses Decision to Allow Imports

Just as it seemed that Brazil was set for the unprecedented move of allowing imports, Brazil’s President Michel Temer did an about-face and reversed his decision.

On Monday, Brazil appeared ready to allow robusta bean imports and even published guidelines detailing the requirements for imported beans. But, late Tuesday, Temer provisionally suspended authorization for local coffee processors to import robusta beans from Vietnam. The change came after a meeting between Antonio Imbassahy, the government minister in charge of relations with Congress, and dozens of lawmakers with ties to coffee farmers.

Brazilian coffee farmers have strongly opposed the imports, concerned that imports would take over market share and possibly introduce pests that would damage Brazilian crops. The farmers also claim that there are enough local beans to meet industry demands until new supplies are available around May. Coffee processors; however, say they need imports with supplies both scarce and expensive due to the recent droughts which impacted robusta yields.

Brazil’s agriculture Minister Blairo Maggi was convinced of the need for imports after an evaluating robusta stocks; however, he was silent after Temer suspended the imports.

Brazil is a major coffee exporter that generally does not need imports. Although the country does not ban coffee imports, it applies a high tariff. To open up to imports, the government was set to reduce the tariffs from 10% to 2%. Brazil unsuccessfully tried to import green coffee in May 2016 but suspended its authorization to import 400 metric tons of coffee from Peru after producers protested.

The drought in Brazil and challenging growing conditions in other robusta growing regions have supported global robusta prices for awhile. Robusta coffee futures are up 53% over the last 12 months. According to the University of Sao Paulo’s Cepea research unit, in Brazil robusta prices have plunged 22% from a record high on Nov. 14 on the prospect for imports.

Leia Toovey has a B.Sc. in geology from Simon Fraser University, and her degree had a focus on resource economics. Out of school, she started working in the booming mining industry of Vancouver, Canada, covering junior mining stocks and commodities including potash, copper, nickel, oil and gold. Then she moved to New York and worked as a commodities analyst covering a breadth of commodities, from the Baltic Dry Index through the softs. As a geologist she has a greater understanding of the exploration and extraction side of commodities, and how changes in technology and the depletion of resources impact pricing. At Economic Calendar she covers a variety of commodities, providing daily technical and fundamental analysis and assessing major market developments.