January 27, 2022
The C market saw a five-week high on modest volume trading before settling back to close little changed on the week. Volatility remains high. Midweek buying was directly attributed to macro-based buying on the US inflationary data. The highest numbers since the Reagan era spurred a bout of aggressive buying across the commodity base. Funds added to their long positions into continued light resistance from producers. Prices drifted easily lower though once the dust settled on light volume. Overall, their remains little fresh “coffee news”. Crop surveys continue in Brazil and reports so far are rather mixed depending on what regions are being surveyed. There seems little doubt though to the five million bags of damage estimates as a base though. There continues to be growing discussions over the annual supply demand deficit creeping higher. It will still be a bit of time though for a clearer picture as the crop progresses. Physical business remains quiet with differentials firm overall. Some slight relief has been seen in Central American diffs but not what would normally be expected as the harvests progress. Sporadic spot business continues in reaction to delayed shipments. Logistic issues continue unabated it seems.
Technically the market ends the week in a positive stance, though not a strong one. With prices near the middle of the last six weeks range arguments can be made in both directions. Chart patterns still point higher long term though this current rally appears to be part of a broader corrective pattern off the December highs. If so, there remains potential to see prices toward 215/210 over the coming week or so. That said, the overall structure is corrective so would be cautious about trying to get to negative the market. New highs still seem very likely with longer term targets pointing toward the 270 area. Would continue to view anything toward 225/220 as an opportunity to extend needed coverage. It is seeming less and less likely prices below 200 will be seen this year.
A decent week at the tea auctions this week. Kenya had a fairly large auction at about 193,696 packages (totaling 12,796,974 kg). Of those offerings 13% remained unsold and the majority of those were leaf or secondary grades. Many of the CTC grades attracted interesting and, in some cases, made gains in price. But demand followed closely to quality. Indian tea centers traded at irregular levels. Many CTC grades attracted interest and, in the North, many leaf grades held value. But it all depended on quality. Brighter and well-made teas traded at higher prices and demand. Argentina is still humming along but the lack of rain is worrisome. There are chances of rain in the forecast over the next week and many producers are holding their breath. Quality is following seasonal norms at this point but if rains don’t move to the growing areas soon, it could create issues.
For further insight and analysis on current coffee and tea market data, take a look at the weekly report from Westrock Coffee commodities team.
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