October 10, 2022
The C market traded nearly a 13-cent range in what turned out to be a volatile week that was all for naught as the market closed today relatively unchanged. At this point most are numb to 3-5 cent day-to-day moves. Global macro news was rampant this week which saw the World Trade Organization issue a gloomy forecast for 2023 global trade, OPEC announced a reduction of oil output by 2 million barrels per day, and a better-than-expected domestic non-farm payrolls number. The dollar continued to strengthen, and the Dow closed below 30,000. As for coffee fundamentals, there is little to report amongst light physical business that perhaps has origin a bit nervous as there appears to be more willingness to sell. This has not necessarily translated to softening differentials but perhaps the unknown of lower global demand on the back of a global recession has people spooked. On the weather front, Brazil saw some heavy storms that brought hail, but damage seems limited. Central America is tracking tropical storm Julia to see if it will approach the coffee growing regions of Nicaragua, Honduras, and Guatemala at hurricane strength. Overall, it seems we are range bound between $2.00 to $2.30 marks and it would be fair to expect more choppy trading between those levels.
Production and weather remained steady this week with continued rains in India as well as in Argentina as farmers prepare for the upcoming harvest. Argentina saw low precipitation earlier in the year in, but recent weeks have brought rain and seem to point towards a favorable harvest. Demand out of other origins continued to follow quality with lower grades are becoming a problem. The core inputs such as fuel and fertilizer remain a huge question mark and the decision by the Saudis to curb production has many fearing for a large increase in the cost of production and less fertilizer being used, which could mean poorer quality. The quality piece of the equation could be compounded as the quality teas continue to pile up at origin.
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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