Market and Tea Report

Coffee Market

The C market treaded water furiously this week, trading a sixteen-cent range but closing little changed overall. Prices lost 1% in the end. Prices bounced early in the week after finding strong industry support into the 220 area. The bounce was fueled more by waning speculative selling allowing industry buying to prop prices than anything else. There remains little in the way of “coffee news.” The Brazilian crop seems to be developing well as harvest approaches. The physical business continues to seem hand to mouth as the industry deals with these issues and inconsistent demand. Differentials remain firm as producers remain reluctant to sell. Shipments continue to be a revolving issue from many origins. The industry seems resigned to reacting to a different curveball each day. So, overall, no change to the coffee outlook. The macro picture continues to add volatility with the Ukraine conflict churning the markets. Inflation came in at a forty year high today though that was no surprise. It’s hard to point to a direction for coffee from the macro picture but it will continue to add sporadic volatility for sure.

Technically the market ends the week in a negative posture. Chart patterns continue to paint the decline off the February highs as corrective but given the scope of the rally over the last year, there remains some room to the downside. Technical retracement targets lie just below 200 and a test of that area cannot be ruled out. Overall, though there remains a risk of new highs further into the year, it would take a break above 240 to confirm this decline over from a chart pattern perspective. Until then it is seeming like the market may settle into a range for a bit of time. At this point would try to give prices little room to come lower but be watching carefully for signs of a reversal higher which could come at any point.

Tea Report

Many of the same challenges remain in the tea world this week. Inconsistent demand and pricing remain in Kenya this week. There was a larger auction with 204,463 packages offered but 23% were neglected and remain unsold at the final hammer. This came mainly due to the lack of Russian and other independent states. The Rupee fell sharply this week making for an interesting turn at auction. Agreed upon prices turned out to be a lower value than originally thought due to the fall. There has been a decrease in rainfall in many of the growing regions. There have also been reports of damage from hail in some of the growing regions. Argentina is still in need of rain. There has been some rainfall, but producers need more in order to rebound the season. Logistics remain on everyone’s mind as port congestion and trucking is causing issues. Fuel prices increasing sharply and the idea of further sanctions on Russia remains at the forefront of the conversation. Many shipping lines are still considering the advantages of shipping anything via Russian ports. The Russian Ruble fell this week about 80%. The coupled with the lack of buyers from those areas means there will more than likely be extra tea at auctions. AN estimated 10% of the world’s traded black tea ends up in Russia. Adding more to the worry, Russia and Belarus combine to export 30% of the world’s potash. (A potassium-based compound used in fertilizers.) This could see an increase in fertilizer prices that could affect the supply and the producer’s ability to afford fertilizer. Eyes remain on the Russia-Ukraine conflict and what is to come. 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.

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