Key takeout
Plan to spend more on breakfast drinks in the near future.
The Trump administration’s 50% tariff on Brazil was announced on July 9th and is expected to come into effect at the beginning of August, targeting countries that account for an estimated 75% of global orange juice exports and more than half of orange juice sold in the US.
Coffee drinkers are inevitable. Brazil, the world’s largest coffee producer, supplies about 30% of all coffee beans imported to the US last year.
Since the administration’s announcement, prices for both products have skyrocketed. Prices of frozen concentrated orange juice for future delivery surged by more than 10% last week, while coffee prices rose 6%.
There are no easy options
In particular, with orange juice, a simple reality is reflected when prices are spiked as a result of the announcement of prices. There are few options to replace Brazilian supplies.
This is because US orange production has dropped significantly over the past 20 years. The weather challenges facing Orange Gloves, labor shortages and catastrophic citrus diseases in Florida and Texas are all contributing to a decline.
Over the past 20 years, the area dedicated to orange production in the United States has decreased by 50%. Production in Florida, the largest producer state in the United States, plummeted nearly 90% over the same period.
There are more alternatives that can help reduce the impact on coffee drinkers. Colombia supplies about 20% of the US coffee market, while Guatemala, Honduras, Peru and Vietnam each account for about 5%. However, these countries face tariffs that could raise the cost of imports and ultimately the prices consumers pay.
Plus, those who drink sugar-based coffee can have two collisions. Brazil is the world’s largest sugar producer. Shipping to the US is subject to an allocation that exempts import tax. It is not clear how the new tariffs will affect its allocation, but supply beyond that will likely face a 50% tax. The price of future sugar delivery rose 6% last month.
