W17 Coffee Update: Mexico Imposes 20% Tax on Coffee Capsules, Brazil's Arabica Coffee Prices Surged by 24% Due to Robusta's Price Rise, and Vietnam's Coffee Industry Struggles as Local Prices Tripled

Published May 2, 2024

In W17 in the coffee landscape, Mexico has introduced a 20% tax on coffee capsules to increase green coffee production and create jobs. The tax aims to diversify supply sources and simplify regulations. Due to Robusta's price appreciation, Brazil's Arabica coffee prices surged by 24%. Vietnam's coffee industry faces challenges as local prices triple, while Iran's coffee bean imports surged by 48.55% YoY in the 2023/24 season.

Mexico's Ministry of Economy Introduces 20% Tax on Coffee Capsules for Industry Growth

Mexico has implemented a 20% tax on coffee capsules, which were previously tax-free, to boost the coffee industry, mainly green coffee production, and create jobs. The Ministry of Economy (SE) sees this as increasing national coffee capsule availability and productivity. In 2022, the SE noted supply chain disruptions due to global weather events and allowed tariff-free imports of this coffee type. The Mexican government views this tax as promoting primary coffee producers' competitiveness without market distortions, aiming to diversify supply sources and simplify regulations. Despite being the world's ninth-largest coffee producer, Mexico saw a 0.42% annual decline in cherry coffee planting areas in 2023.

Robusta Price Appreciation Drives 24% Increase in Brazilian Arabica Prices

In Apr-24, Arabica coffee prices in Brazil surged by 24%, driven by a substantial increase in Robusta prices due to global supply concerns. The Centro de Estudos Avançados em Economia Aplicada/Escola Superior de Agricultura Luiz de Queiroz (CEPEA/ESALQ) Indicator for type 6 Arabica reached its highest value since Feb-22, closing at USD 260.78/60 kilograms (BRL 1,342.17/60 kg) on W17. This rise has made trading in Arabica coffee more attractive for producers. Moreover, contracts for the 2024/25 season and some for the 2025/26 harvest are finalized.

Vietnamese Coffee Industry Faces Challenges as Prices Reach Decades-High Levels

Vietnam's local coffee prices have nearly tripled in the past six months, reaching record highs not seen in decades. While this has brought financial gains to farmers, particularly in Gia Lai Province, which can now sell green coffee for over USD 3.95/kg (VND 100,000/kg), it has posed challenges for businesses in the coffee supply chain. Purchasing agents, suppliers, exporters, and roasters face high purchasing costs, concerns over insufficient supply, and potential disruptions to contractual obligations. To address these challenges and ensure the industry's sustainability, the Vietnam Coffee Cocoa Association (Vicofa) has urged banks to increase loan limits and offer preferential interest rates to coffee import and export businesses.

Iran's Coffee Bean Imports Surged by 48.55% YoY in the 2023/24 Season

Iran imported 49 thousand tons of coffee beans worth USD 148 million in the previous Iranian calendar year (Mar-23 to Mar-24), showing a 48.55% year-over-year (YoY) increase. Coffee beans were imported from the United Arab Emirates (UAE), Vietnam, India, Indonesia, and Uganda. The UAE was the largest exporter, accounting for 52.89% of Iran's coffee imports. Most coffee was imported through the Shahid Rajaee Customs Office. The global trade value of coffee in 2022 was USD 45.5 billion.