Coffee Market

The C market got its first taste of frost season volatility this week. Things started on a negative note as speculative selling continued and pushed the market a fresh low for the year. Prices touched a six-month low before industry support materialized near the two-dollar mark. Prices rebounded sharply midweek as specs turned quickly to cover their new shorts after weather forecasts for the next two weeks in Brazil showed temps into the single digits (Celsius). The sixteen-cent spike caused quite a stir but, in the end, it put the market back into a familiar range. Choppy action continued for the rest of the week on light volume. In the end the market closed up 2% week over week. The reaction to the weather forecasts was extreme and premature (there has never been a frost recorded this early in the season) but can certainly be a precursor to the season ahead. After last year’s back-to-back event speculators will be on edge, even though that was the first notable frost in twenty years. Otherwise, little has changed. There is some optimism over the beginning harvest that yields may be a little better than expected but not enough to change the overall supply picture. Shipping remains a concern and all indications are that the issues will continue into next year for sure. The macro picture saw little change as well. More inflation data came out worse than expectations but so far there is no indication of additional interest rate hikes being considered. Commodities in general were a little weaker overall. 

Technically a mixed bag given the week’s movement. Near term indicators are mixed overall. Chart patterns continue to paint all the action off the year’s highs as corrective but not complete. There remains a short-term window to see the market toward 190 but it is not a given by any means. Expect continued high volatility over the coming months and would remain as risk averse as possible. Prices toward 200 certainly would seem to present decent value. For the moment would not buy into strength but will be watching for clearer signs that the recent weakness is over. 

Tea Report

This week was a mixed bag with many origins seeing very selective buying and relatively poor qualities, especially in India and East Africa. There was an abundance of lower quality teas, but the demand just isn’t there with most exporters waiting for the Second Flush qualities. The diminished demand continues with most auctions seeing 15-30% unsold, which is far off from the normal balance of supply and demand which should see only 5-10% unsold. This uncertainty is rampant in other markets, not just tea, but it does seem to leave an uneasy feeling throughout the supply chain as the world watches and waits for the fallout from not only a post-COVID global economy but also the impacts coming from the Ukraine-Russia conflict.

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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