January 31, 2022
The C market saw another volatile week unfold before closing little changed week to week. Prices traded in an eleven-cent range up and down overall on fairly light volume once again. The dynamic remained the same as larger specs and funds were modest buyers overall but seen on both sides of the market. Sporadic industry buying was noted as well with producer selling modest overall. There remains very little fresh “coffee news” in the market at this point. There remain concerns about the Colombian mid-year crop due to excessive rains and shipping issues have been popping up out of Central America as crops start to flow but this is not new overall. Physical business remains very light as a general reluctance to sell is obvious. The market continues to look toward a deficit in overall production this year and this has intermediaries reluctant to sell without a clear picture of production. This will likely continue over the coming months. The macro picture continues to provide movement but not in a single direction. Inflation fears continue to drive commodity prices higher overall, but expectations of interest rate increases are adding notable volatility to the mix.
Technically the market is mixed near term, and this is not surprising given the recent range-bound trading. The consolidation over recent weeks speaks to the underlying strength in the market overall and the uptrend of recent months remains intact. That said chart patterns continue to suggest a chance to see a decline toward 220/215 short term. Longer-term though new highs seem likely before too long with some targets presenting toward 270. At this point would view prices toward 225/220 as good value for the remainder of the year. Expect volatility to remain high overall as well and would keep risk as low as possible over the coming months.
The tea auctions in Kenya continue to grow with 216,846 packages up for auction this week. Only 11% of that was unsold at the final hammer. Dust grades traded well with only 3% unsold. Brighter well-made teas sold at dearer rates. Leaf teas sold well, and secondary types were neglected. The crops are falling currently in growing regions so the large volume auctions may not stick around for many more weeks. Production continues in Argentina with some useful showers. Temperatures have been high consistently with little rain, so every little bit helps. Logistics continues to be problematic but stable for the moment. While prices are still astronomically high in comparison to previous years, the increases have all but stopped, for the moment. Bookings have become hard to come by and some bookings get rolled to the next vessel with little to no information surrounding the decision. Watch this space.
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.