September 19, 2022
The coffee market was not immune to this week’s macro news that saw an unexpected increase in inflation in Tuesday’s CPI (Consumer Price Index) report. The impact of which was felt across the board, seeing commodities, equities and bonds all taking sizable hits. At this point, it is apparent the Fed will have to continue painful interest rate hikes to beat down stubborn inflation. Aside from the macro picture, physical trade remains mostly unchanged. While there are reports of limited physical coverage being taken into 2023, roasters as a whole remain conservative, and physical business remains light. An inverted market highlighted by a negative 5-cent switch between December and March futures has suppliers reluctant to offer much volume forward. Differentials, especially for washed arabicas remain rock solid. Any hope of differential relief from the upcoming Colombian main crop is unlikely, as negative harvest projections after months of poorly timed rains are commonplace. In Brazil reports of a moisture in next week’s forecast perhaps will ease minds worried about a drought impacting next year’s expected bumper crop. While there exists the opportunity to test the $2 mark, considering we were trading 30 cents higher mere 3 weeks ago the drop in the market represents a decent buying opportunity to take some C Market coverage into Q1 and Q2 2023.
This week was relatively quiet and unchanged in terms of quality and price correlation. The lower quality stocks continue to pile up while the higher qualities are finding steady demand. There was a bit of a drop in the offerings out of the Colombo Auctions, but demand was good. The weather outlook remained positive in both North and South India, as well as the African origins, and forecasts remain positive in Argentina as well for the upcoming crop. The future is murky at best concerning uncertain demand in a global economy seemingly headed towards recession and a logistics situation that remains tumultuous, at best.
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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