Key View
- While coffee futures have eased significantly since the all-time high reached on February 13, 2025 of USc425/lb, the commodity has recently returned to the forefront largely due to US tariffs imposed on Brazil, the largest exporter of coffee globally.
- While we believe there is potential for increased exports of Brazilian coffee to Mainland China, a process which is already well underway, we highlight that China remains a relatively small player in the market, dealing with volumes that are not yet large enough to meaningfully impact prices and dynamics in the way that the US and the EU do.
- Looking ahead, in line with our Food & Drink team’s views, we expect that the coffee market in China will continue to post robust growth over our forecast period, outpacing other hot beverages and overall consumer spending growth.
- Most recently, we have also seen growth in Chinese coffee imports from Africa, with part of this driven by political considerations as is the case with Brazil.
While coffee futures have eased significantly since the all-time high reached on February 13, 2025 of USc425/lb, the commodity has recently returned to the forefront largely due to US tariffs imposed on Brazil, the largest exporter of coffee globally. ICE-listed second-month coffee futures closed the August 11 sesion at USc314/lb, the highest price since June 24 and equivalent to an 11.5% w-o-w increase and a 9.6% m-o-m increase. As we have written in a previous article looking at downside risks for the Brazilian agribusiness sector associated with these tariffs, there had been some expectations that coffee would be excluded from the tariffs, as happened with orange juice. On July 29, the US Secretary of Commerce Howard Lutnick stated that ‘if you grow something and we don’t grow it, that can come in for zero’, citing mangoes, pineapples, coffee and cocoa as examples of products that ‘can come in without a tariff’. This did not end up happening, creating concerns about these elevated tariffs becoming prohibitive for US imports of Brazilian coffee. In light of these developments, discussion has centred about the potential for Mainland Chinese demand to mitigate the downside risks associated with decreased exports of coffee to the US. In this article, we will analyse Chinese demand for coffee, highlighting its potential for growth in the medium to long term while noting that it will not, in the short term, be able to offset potential disruptions to Brazil-US coffee trade. More broadly, we will discuss our outlook for Chinese coffee consumption, with our expectations for the market to become increasingly relevant.
Mainland China’s burgeoning coffee market has shown resilience amid global trade tensions, particularly those involving US tariffs on Brazilian goods. While coffee demand in China continues to rise, the immediate potential to mitigate risks associated with these tariffs remains limited. Brazil, one of the largest coffee exporters globally, faces challenges due to US economic policies. As a result, Chinese importers are exploring diverse sources and local market growth to offset any possible disruptions.
However, China’s coffee industry is poised for sustained long-term growth. With an expanding middle class and increasing urbanization, consumer preferences are shifting in favor of premium coffee experiences. This trend is supported by the rise of local coffee chains and the penetration of international brands, which are adapting to Chinese tastes. These developments indicate a robust domestic market, gradually reducing reliance on imports over time.
Overall, while the immediate impact of US tariffs on Brazil is being managed with limited alternatives, China’s coffee market is well-positioned for continuous growth. As consumer sophistication increases, the industry is expected to flourish, creating opportunities for both local and international stakeholders. This growth trajectory suggests a promising future, driven by evolving consumer habits and strategic market adaptations.
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