Brazilian Tariffs

Here we go again. If one were to look at our blog posts, one would think that the only issue in coffee right now is tariffs. That is not even remotely reality, however it's worth taking some time before August 1 to think a little about the upcoming proposed tariffs. The biggest problem with the current situation is that real people are getting caught up in narcissistic "leaders'" ambitions. This in turn will cause unnecessary suffering in both Brazil and the United States.

In Brazil the stakes are much higher. In Houston, I had the opportunity to meet with the individual responsible for getting the coffees together, processed and exported. This is where our "Running George", a good part of "whitetail", and our "Italian Espresso"

come from. Most coffee that is grown in Brazil is relatively low quality. It's grown on massive farms and more resembles soy or corn production, than what we think about when we think of coffee farms in the mountains.

The coffee we purchase through Cafe Imports, however, is not produced on large scale. It's actually grown on steeper hills in the Minas Gerais state. The mechanization that you see on larger farms is not how the coffee we use is grown. Furthermore the coffee is hand picked. This is referred to as "EP" or the "European Process", but all it means is that the coffee was hand picked.

The proposed Brazilian Tariffs are 50%. For green specialty this will most likely mean an increase in price from around $2-2.50/lb. Our coffees are on the lower end of this, but we would expect our green purchasing price to go from around $5.50-7.50 / lb overnight. This will increase the price of a 5 lb bag of coffee by around $10/bag from around $60-70/ 5 lb bag.

While the first round of tariffs were largely offset by declining commodity coffee prices, the market cannot accommodate a 50% increase in green coffee.

Brazil has been the backbone of world wide coffee production. Brazil produces more coffee than the next four countries (Vietnam, Colombia, Indonesia and Ethiopia) combined. These tariffs will have implications on world wide coffee supply.

While markets readjust and more coffee goes to China and Europe, people will loose their jobs, the financial institutions that grease the wheels of coffee agriculture will go broke, farms will go under, mills will be shuttered. It takes three years for coffee trees to come into production. Farming doesn't adjust when Tariffs go into effect. It takes time.

Upon consulting with Tug Hill Artisan Roasters' import partners at Cafe Imports, we've locked into a quarters worth of contracts at current market prices. The coffee we will be using through November (most likely) is coffee that is already located in warehouses here in the US and not subject to the new tariffs. All other things staying equal, we do not plan on increasing our prices until we have to start using tariffed coffee.

Through all of this, I cannot stop thinking about the people involved in coffee. I think about the individual responsible for coffee exports that I met in Houston. We spent the evening talking about coffee, but also about our families and how it was so great the coffee provides us with the opportunity to travel and meet other coffee professionals occupying different spots along the supply web.

Through all of these tariffs and the great uncertainty ahead. Tug Hill Artisan Roasters is committed to purchasing great quality coffees. When the C-Price spiked last year, we remained committed to quality and we will continue to remain committed to quality in the face of tariffs.

One of the greatest acts of resistance is to continue supporting Brazilian farmers through this artificial crisis. The further away from the farm you are, the less impact the tariff has ($2.00/lb at port to just a few cents by the time it's in your cup). Tug Hill Artisan Roasters will continue purchasing Brazilian coffee and we will price it appropriately considering the inputs.