March 18, 2023
The C market saw a choppy week unfold on modest volumes. Early pressure seemed macro related as larger speculators were in a “risk off” mindset over banking system concerns. A six-week low though saw good industry buying interest and the market bounced quickly. Wide ranges over the last two days saw a two-week high fail to gather steam and the market wound up settling slightly lower (down 1%) week over week. There was little activity on the physical side of things as folks came back from last week’s convention. Differentials have been static over the last few weeks and there was little new interest. As mentioned last week, the main takeaway from the convention was concern/confusion around demand. There remains little else to talk about. Overall things calmed quickly on the macro side (for commodities at least) with most markets posting minor losses on the week. The Dollar was choppy but roughly unchanged as well.
Technically the market is a bit mixed to end the week. Despite the volatility the market is at familiar levels seen over the last few months. Chart patterns are corrective in nature at this point and hint that the market may continue to bounce around current levels for some time. A working range of roughly 160/190 still seems viable at this point for the months ahead. Longer term patterns continue to show some risk potential to the upside but there would likely need to be some development on the fundamental front to spark anything notable. Would continue to view prices 170 and lower as value to extend needed coverage. Would continue to expect volatility over the coming weeks as Brazil moves toward frost season. Substantially lower prices seem unlikely at least into later this year.
The African CTC qualities are continuing to pile up and not finding homes as we continued the same pattern this week of demand only coming for the better qualities. The gap continues to widen which is creating a tricky predicament for producers and brokers holding these lower qualities. Malawi was the big macro story this week after being devastated by Cyclone Freddy. It will be a couple of weeks before the full extent of the damage can be understood but the heavy rains will dampen production for the next two weeks at minimum. One interesting thing to note was a noticeable drop
in demand across almost all markets, even with North India and Blantyre being down due to the cyclone, other origins didn’t seem to pick up the slack. The market is looking at tightening a bit through the first half of this year and everyone will be watching the weather in Kenya and Assam as they should dictate how things shake out across the market but also iced tea season should see a good uptick in demand.
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