April 11, 2022
A strong day to finish the week put the C market in slightly positive territory. Week over week prices were up about two percent. It was the third week in a row that prices closed higher, albeit only slightly. The overall tone seems more apathetic than anything. Light industry buying was seen over the last few days. Very light fund buying was noted but their overall interest remains very limited at the moment. Lack of selling was more of a defining factor as producers and importers remain largely sidelined. There remains little in the way of fresh coffee news. More of the same as talk focuses on lack of shipping containers and high freight rates, producers holding onto what coffee they haven’t sold and very firm differentials. The Brazilian crop seems to be developing well as harvest approaches, though in a few weeks’ focus will shift to weather and any potential cold could impact the market easily after last year. Shipping delays continue to hit Central American shipments and port congestion as they arrive is delaying things further. Physical business remains more focused on the nearby as the trade works around these issues. The macro picture continues to provide some volatility overall but on the week commodities in general were a little more civilized. The Brazilian Real remains strong, which in turn will continue to incentivize producers not to sell.
Technically the market remains in a positive stance near term. Indicators are pointing higher across the board with no overbought conditions noted yet. Chart patterns are pointing higher near term as well. From a candlestick perspective there is a weekly hammer formation in force and a bullish engulfing formation on the daily chart to end the week. Elliott patterns suggest the recent decline is over though leave room for a range of roughly 210-250 to hold prices for some time. Longer term upside targets still present in the 270 to 290 range. Overall, the likelihood of prices below 200 seems low and risk remains to the upside. Would continue to extend coverage as needed when prices dip below 225 but otherwise try to remain patient. Would expect volatility to remain fairly high over the coming months until the fundamental picture for next year starts to develop.
A fairly large auction was reported this week in Kenya with 204,210 packages (13.4million kgs) offered. Surprisingly, good overall demand with only 13.4% being neglected. Dust grades traded well while some leaf grades were neglected. Crops remain steady for now as most of the growing regions are seeing sun and some rainfall. Useful rains have come to the growing region in Argentina. But they may have come a little too late. This will help overall production slightly, but the forecast is production will be well below last year’s figures. Logistics continue to be an issue. There are container shortages in some origins and in other origins bookings are hard to come by. For some customers, vessels are skipping US ports entirely. As the port of Charleston becomes more and more congested, freight companies are skipping that port and trying to drop containers in other ports.
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.