Coffee Market

A familiar story this week as the C market traded wildly against macro generated volatility. Larger speculators and funds were again the main protagonists. The market rallied twenty cents early in the week as industry support prompted spec short covering. Prices saw a two-week high and were up 10% week to week at the highs. Once the buying thinned though prices dropped easily and today saw two thirds of those gains wiped out. In the end prices were still up 3% week to week but the market remains near recent lows. There remains no coffee specific news to speak of. Brazilian weather remains quiet and favorable for harvest activity. That said the flow of the crop seems slow and behind pace of expectations. No real reason is noted but it is a growing concern. Concern over the Colombian crop for the back half of the year continues to take hold as well. These factors against the backdrop of declining stocks keep price expectations firm despite the C market’s volatility. The macro picture continues to provide plenty of uncertainty and volatile money flow-based movement, which is likely to continue for the near term. 

Technically the market has a mixed bias to end the week once again. A few late sell signals were seen with today’s sell off and set the stage for a test of the recent lows over coming days. Chart patterns continue to target the 190 area to complete a larger corrective formation off the year’s highs. Whether the market takes a quick shot at those levels next week or sees a few more weeks of highly volatile activity is hard to say. Overall though, would continue to view prices toward 190 as good value to extend needed cover. Given the fundamental picture there aren’t too many arguments to get bearish the market from current levels and the market is still quite vulnerable to any supply disruptions. It won’t be until well into the fourth quarter that the market can start to make comfortable assumptions about the next Brazil crop despite early discussions that a bumper crop may be in play. Chart patterns also project a fairly stable range of roughly 180/250 for the coming months which reinforces the outlook. 

Tea Report

The price action continued to mirror quality this week with many lower grade CTC’s remaining unsold, but weather and production remained healthy overall. There was increased buying activity out of Mombasa which is a positive sign with so many lots remaining in inventory but there is still a very real risk for the smallholders within the country. Ceylon remained in the spotlight with the political turmoil continuing and production is likely to shrink considerably with the increased fertilizer costs and gridlock politically. All of these factors are also a big piece to the sustainably and responsibly sourced certifications within the industry as many of the farmers are not willing or able to meet the new parameters around these programs.  

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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