Coffee prices rise as US imposes tariffs on top exporter Brazil

By May Angel

LONDON, July 31 (Reuters) - World coffee prices rose on Thursday but gains were muted overall as traders continued to hold out hope that the United States could exempt coffee from its 50% trade tariff on most Brazilian goods.

U.S. President Donald Trump on Wednesday slapped the 50% tariff on Brazil to fight what he has called a "witch hunt" against former President Jair Bolsonaro, but excluded some key sectors like energy and orange juice.

Coffee has not yet been excluded from the 50% tariff, raising the prospect that trade between the world's largest coffee producer and the top consumer of the commodity could be severely disrupted.

Brazil's coffee exporters said in a statement they would continue to push for exemptions. The new tariffs come into effect August 6, not on Friday as originally planned.

"Another week until 50% comes into effect. Most (sector participants are) still hoping for a general coffee exclusion. I think it’s unlikely," said a Europe-based trader at a top global coffee trade house.

Prices are expected to rise in the short term if a 50% tariff is imposed, with a major upheaval in global trade flows likely as supplies are redirected to new destinations.

In the longer term, however, it could weigh on prices as it could boost already inflated U.S. coffee prices and hurt demand.

The U.S. is almost entirely reliant on coffee imports with the small quantities grown in Hawaii and Puerto Rico accounting for less than 1% of its consumption.

Brazil accounts for around one-third of its imports.

ICE arabica coffee futures KCc1, seen as a global price benchmark, were up 2% at $2.9920 per lb at 1046 GMT, having closed down 1% on Wednesday, while robusta coffee LRCc2 rose 1.4% to $3,391 a metric ton, having closed up 1.7% in the prior session.

Cocoa prices were also slightly higher with London futures LCCc2 up 0.3% at 5,349 pounds per ton while New York futures CCc1 gained 0.6% to $8,243 a ton.

Raw sugar SBc1 fell a marginal 0.2% to 16.42 cents per lb while white sugar LSUc1 was down 0.1% at $469.60 a ton.