April 25, 2022
Another familiar week for the C market. Prices traded in a wide thirteen cent range but closed up just 1% week to week. Once again, the activity was dominated by speculators and funds. Short covering was seen as first notice day approached for the May contract (first notice day is when the nearby trading month moves into delivery period) and buyers found little resting selling. The market shot up almost ten cents yesterday on very light overall volume. Prices drifted a but today as that forced buying was a singular event but in the end, the market is in the middle of the last few month’s trading range and there is little industry interest at these levels. From a fundamental perspective, there is little new to focus on. Brazilian weather has been good, and the harvest is just starting in a few areas. In a month it will be in full swing. Weather watch will begin soon as temperatures start to cool. A similar situation is seen in Peru as early harvest activities begin, the weather has been mixed and overall production is expected to be lower than last year. Physical business remains light overall. Spot market activity picked up a bit on the week and still seems to be a product of reactions to delayed deliveries. The forward business remains spotty as well though some interest for first quarter next year started to show. Differentials remain ever firm of course. The macro picture continues to provide volatility though no clear direction.
Technically the market is a bit mixed at the week’s end. The choppy activity and overall range are sending mixed signals. Chart patterns continue to hint at a test toward 200 being possible short term but overall are not yet indicating a major reversal of the last two years’ rally. At this point would continue to see value in prices toward 210/200 to extend coverage through year end. Longer-term a broad range is likely to hold prices through the next year or so. The boundaries of that are likely to be roughly 170/250 barring any further chaotic events. Near term, though new highs cannot be ruled out and the risk remains to the upside. Would continue to work with that in mind at least until later this year.
Much remains unchanged this week in the worldwide Tea landscape. Kenya continued its trend with a healthy sized auction with demand varying depending on quality but steady overall at 83% sold. As we have seen across most sectors, the uncertainty in the World around the Ukraine-Russia conflict as well as increasing worries around Worldwide inflation and an impending recession have kept prices firm. There have been mixed reports around the logistics nightmare as some origins are seeing some relief but the lockdowns in China, specifically the Port of Shanghai, are likely to throw another wrench into an already chaotic situation so anyone betting on better freight rates in the second half of 2022 might have to wait a bit longer.
For further insight and analysis on current coffee and tea market data, take a look at the weekly report from the Westrock Coffee commodities team.