June 20, 2022
The C market spent another week treading water aggressively. Prices dropped early in the week only to reverse sharply and then settle back. In the end, an eighteen-cent trading range saw the market close down 1% week to week. Larger speculators were sellers overall, reducing their long position into industry short covering. Much of the action was focused on the upcoming July contract notice period and the liquidation of unnecessary positions. There remains little to discuss. Brazilian weather has been cold but not dangerously so. Forecasts continue to look benign. Colombian production continues to disappoint and despite slightly improved weather this week the overall outlook estimates for overall production continue to decline. Differentials remain very firm and physical activity light. Freight issues seem to be a little less noticeable over recent weeks but at the same time costs for the next quarter are increasing. On the macro side, plenty of fireworks as the US Federal Reserve pushed through the biggest interest rate hike in almost thirty years to try and tame the current inflation problem. In general, this pressured most commodities on the week with the biggest impact on energies.
Technically the market ends with a bit of a negative bias but is not showing any strong signals. Chart patterns have a bit of a negative bias as well. A bearish engulfing formation on the candlestick chart suggests a test of recent lows short term. Bigger picture the recent activity continues to project a broad range for the months ahead. Overall, would expect boundaries of roughly 180 to 240 to contain prices for much of the remainder of the year. Very short term would look for at least a test of the 210/200 area but that could set the stage for another bounce toward 230/240 pretty quickly. Overall, would continue to view prices toward 200 as good value and otherwise try to ride out any volatility with patience.
Once again, not much changing this week in Tea with higher quality teas commanding better and consistent pricing and lower qualities either remaining at auction or being sold at a heavy discount. Production in all regions, except Ceylon remained positive, and even Ceylon was healthy overall. Many eyes are looking to Argentina now as they ramp up to begin exporting as reports have been trickling out regarding fuel and labor shortages. The overall logistics landscape remains a nightmare and seem to be changing every day and with how fragile the supply chain is at the moment; any big shifts or events could spell disaster.
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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