May 27, 2022 COFFEE & TEA MARKET REPORT

May 27, 2022 COFFEE & TEA MARKET REPORT

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Coffee Market

The C market saw another volatile week unfold on thin volume. Prices saw a one month high and closed up 6% week to week. There remains little news and speculators continue to drive the activity. The week started with a test of last week’s lows but reversed quickly late in the week. Prices closed at their highest level in six weeks, seemingly for no real reason. Speculative buying ahead of the long weekend seems the most likely reason. “Never be short a long weekend during frost season” is an old trading adage that seems to be more relevant this year. Overall, the Brazilian harvest is progressing well, and early quality results look good. The Brazilian agency, Conab, revised their forecast again for the current harvest, citing a 9.7mm bag reduction over last year. That said, early optimism for the next crop seems real with some talk of a bumper crop if all goes right. The forward curve on the C market eased a bit this week which could signal a better feeling about the next crop cycle is taking hold. There has been discussion around demand being softer than expected but at the same time stocks are declining. So that is open for debate and very difficult to quantify. No optimism is showing up in forward differentials so far, as they remain firm and business very light. The macro picture continues to provide chaos in the background but little in the way of direct impact to pricing. 

Technically the market ends the week on a strong note. Indicators are positive across the board. That said prices are in familiar territory and trading within the last three months well-worn range. Chart patterns continue to put the market in a corrective phase off the February highs, but the recent volatility is suggesting that phase may last longer than originally expected. The late strength projects a test of the 240 area fairly soon, but the chart structure does not necessarily point to a test of the highs. A continuation of the recent volatility and range seems more likely. Longer term a new high does still seem possible but it could come later in the year. Overall, would continue to view prices toward 200 as buying opportunities and try to remain sidelined into short term strength. 

Tea Report

Demand was a bit irregular this week for CTC’s but quality was slightly improved. The rains continued to have negative effects on the quality which also caused the absence of normal demand but there are many questions around global demand due to major shifts in usage post-pandemic. Buying was active out of the Middle East and the UK but Russia is still at a stand still with many wondering what the futures holds on that front. Overall, it was more of the same with slight fluctuations in demand and quality but all eyes are still on the global macro picture and what that will do to the market in the next year or two. 

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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