Weekly Market Report

Coffee Market

The C market closed little changed after a holiday shortened week. Prices were contained to a small, by recent standards, seven cent trading range. The dynamic was a familiar one, fund buying continued. At this point their net long position is matching its highest since 2016 and data suggests the need for industry buying continues to build. Producer selling was modest and easily absorbed. Physical business continues to be mainly focused on spot supply as late shipments are compensated for. Overall supply remains rather static though as late shipments replace offtake. Freight issues and costs have not yet shown any signs of improvement. Differentials remain firm and are keeping forward business light. Little fresh news otherwise. Brazil crop surveys are starting to point toward further losses from the frosts earlier this year and overall global production estimates are trending toward back-to-back deficit years. Colombian concerns are growing over excessive rain impacting the developing Mitaca crop, Honduras is dealing with quality and yield issues as well. Basically, nothing that suggests any notable relief in differentials in the near term. The macro picture continues to provide underlying support as money moves into commodities as an asset class with high inflation in the background.

Technically the market ends the week leaning toward a negative bias. Indicators are either negative or close to turning. Chart patterns saw a negative hanging man formation on the candlestick chart, which aside from having a cool name, suggests at least a minor trend reversal. Elliott wave patterns are also still suggesting a deeper correction remains possible with potential toward 215. That said, both suggest that such a decline is corrective within a larger unfolding uptrend and longer-term patterns continue to see the low end of the projected range ratcheting higher. Upside targets now presenting towards 270. Overall, would continue to view prices into the 220s as good value to extend needed coverage. Remaining cautious though for another spike higher as volatility is expected to remain high. The strength of the trend overall could certainly limit downside expectations for now.

Tea Report

Another large tea auction this week in Kenya with 193,989 packages (12,991,726kg) offered. Improved demand this week with only 11% of those offered. CTC grades traded well with only 5% left unsold. Leaf grades did well but 14% were unsold. Overall, tea traded at dearer rates. There were useful showers this week in growing regions in Kenya but most of the crop is still on a downturn and they could use more. Argentina is in need of rain too. It’s hot and dry at the moment which is slowing green leaf production. Most factories are running full production but if the green leaf doesn’t produce as much, we could see a decrease in made tea production. As of today, forward contracts place by buyers are covering almost all of the made tea. Last season failed to produce enough to have stock leftover, so the majority of the tea set to be produced has already been sold. This could cause some headaches for some buyers.

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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