July 10, 2022
The holiday shortened trading week was not exactly dynamic, but the market did break the cycle of choppiness seen in recent weeks. Prices trended lower all week and touched six-week lows. Week to week losses were minor at just over 2% but a slightly negative tone prevailed. Selling was again mainly speculative in nature. The macro picture provided influence as better than expected US employment data eased recession fears a bit. Commodities in general saw some pressure as money moved out of the asset class. Industry interest in the market remains minimal from both sides though the fresh lows did generate some buying interest. There remains little news. Brazilian weather continues to be benign to date and forecasts show no threatening cold. Physical business remains focused mainly on spot positioning around delayed arrivals. Forward business remains light as differentials remain very firm.
Technically the market maintains a mixed to slightly negative bias near term. The six-week low was notable but still within the last few months range. On the monthly scale charts now have a negative lean as well. Patterns continue to suggest a test of the 190/180 range for the nearby months is likely. Would continue to view prices toward 210/200 as value to cover immediate needs. Longer term would target the 190/175 range as value to extend coverage further. There remains risk to the upside as all the action off of the year’s highs appears corrective in structure and the market remains in a very tight supply demand position. Volatility will likely remain high until later this year when the market can get a clearer view of the next supply cycle.
Demand showed signs of slowing for higher qualities over the past week and lower qualities stocks continue to build as demand remained all but non-existent. Otherwise, the story remained largely the same. Production overall remained healthy with weather staying favorable in most places, though production is slowing. Heavy rains continued in North Asia which has slowed activity, but this should stabilize as flood waters continue to recede. The crop is beginning to wind down in South Asia. Argentine factories are now closed, and focus is on final shipments for the season and looking toward the season after a difficult year. Hyperinflation and continued shipping issues has the mood pensive at best.
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.
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