By Joe Hoppe

Arabica coffee prices hit a record level earlier in the session, as traders digest the withdrawal of President Trump's threats to impose tariffs and economic sanctions on Colombia.

Continuous arabica coffee futures on the ICE were up 0.1% at $3.48 a pound in volatile evening trading in Europe, though they are up more than 40% over the past three months and 79% on year. Arabica set a fresh record of $3.56 earlier in the session, exceeding the prior record of $3.48 set in early December.

Prices had accelerated in late 2024 when concerns over Brazil's production--amid adverse weather lowering the crop size--gathered momentum, Saxo Bank's Ole Hansen said.

Before November's rally, coffee prices had generally been supported by developments in the market for robusta coffee beans, an arabica alternative, as hot and dry weather in Vietnam sharply lowered production, Hansen said. Robusta futures wobbled in London, before settling 1.9% lower in evening trading.

The U.S. imports about 30% of its coffee from Colombia, along with other food staples such as bananas and avocados, and gold, JPMorgan analysts said in a note. Overall, the U.S. imported $16.1 billion in goods from Colombia in 2023, according to Census Bureau data.

Trump had issued threats to impose 25% tariffs and sanctions on the South American country on Sunday afternoon, in retaliation for the Colombian government refusing to allow two military planes with migrants to land. He changed course later, with the White House saying Colombia had agreed to all of Trump's terms, including to repatriate migrants into the country.

That said, the tariffs would only be "held in reserve, and not signed, unless Colombia fails to honor this agreement," the White House said.

The tariff actions directed toward Colombia provide important context to commodities markets amid looming threats of boosted tariffs on Canada, Mexico, and China as soon as Feb. 1, JPM said.

"Potential tariffs on imports from these countries could be much more impactful to both complex-wide pricing and U.S. price differentials more specifically," JPM said. This will likely mean increased volatility around trade in the coming weeks, even as requested policy reviews and investigations are underway ahead of an April 1 deadline, analysts added.

Write to Joe Hoppe at joseph.hoppe@wsj.com

(END) Dow Jones Newswires

January 27, 2025 11:54 ET (16:54 GMT)

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