Coffee sees first price drop in 18 months, says IBGE

When releasing the official inflation for July this Tuesday (12), which was 0,26%, the Brazilian Institute of Geography and Statistics (IBGE) revealed a perception that had not been recorded in the country for over a year: after 18 months, the price of ground coffee fell. The National Broad Consumer Price Index (IPCA) showed that coffee fell 1,01%. In the previous 18 months, the increase in the product reached 99,46%, that is, it practically doubled in price.

With July's decline, coffee prices rose 41,46% year-to-date and 70,51% in 12 months. The annual inflation of ground coffee makes it the second-highest-influencing item in the IPCA (5,23%), accounting for 0,30 percentage points (pp). It is second only to meat, which accounted for 0,54 pp (a 23,34% increase).

price drop

According to IBGE research manager Fernando Gonçalves, last month's price drop is a result of the harvest and cannot be attributed to the tariff hike imposed by the United States on Brazilian products. "These are July figures," says Gonçalves, noting that the 50% tariff on Brazilian products entering the United States, including coffee, only began on the 6th. 

"[In July], the harvest was already beginning, with a greater supply in the field. This could be the effect of this increased supply," suggests the analyst.

With the harvest, more coffee becomes available for supply, reducing the pressure caused by consumer demand and, consequently, lowering prices. This effect, in fact, is also an expected consequence of the tariff hike, if coffee producers are unable to find other countries to buy Brazilian coffee, as the tariffs will increase the price of coffee and make American buyers reconsider purchasing it.

“With a greater supply of the product, the tendency is for prices to fall,” says Gonçalves.

Climate and China

According to the Brazilian Coffee Industry Association (Abic), the rise in coffee prices in the 18 months prior to July was explained by factors such as weather events, which harmed the bean harvest, and by greater global demand, driven by the Chinese, who increased consumption of the drink.