May 01, 2023
The C market saw a choppy week but eventually fell to three-week lows. Prices were down about 3% overall as larger speculators continued to square up recently added long positions. Industry interest remains thin on the buy side of the equation, modest origin selling was noted into the week’s high though. There remains little news to discuss. Consuming stocks continued to dwindle. The Brazilian crop continues to see favorable weather overall. Differentials remain under light pressure across the major origins at this point. Producers have some coffee to sell with harvests finishing in Central America and Brazil has seen a bit of a break on differentials as producers look to the upcoming harvest. This has not sparked a great amount of forward business so far though, as activity remains sporadic overall. The macro picture did not provide any direction, most markets were choppy and directionless on the week.
Technically the market is negative in the near term but not showing much strength to that outlook. Chart patterns are pointing a little lower with targets around 185 and support showing in the 185/180 range. The market has retraced 50% of the month’s rally at this point and seems to be looking toward further retracement targets which lie in the 180 area and fit within the overall expectations of the unfolding patterns. There remains the possibility of another spike higher basis this analysis with potential toward 215. At this point would look toward 180 as a value target for needed nearby coverage but otherwise would choose to remain sidelined if possible. Despite near-term expectations of some fairly volatile moves, longer-term continue to expect prices to settle into a range toward the back half of the year that may offer an opportunity for prices back into the 150 area.
Demand came back down to Earth this week following the quality with the lower tiers seeing little volume. The weather looks good overall with warm temperatures and showers happening across Asia, Africa, and South America alike. Argentina’s season is coming to a close, but the warm weather and showers have continued, and the Second Flush should start appearing in North Asia in the next week. Demand continues to disappoint as many point to currency issues in Pakistan and Egypt but many importing countries also have plenty of supply on hand so relief doesn’t look to be coming anytime soon.
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