April 1, 2021 Coffee and Tea Market Report
The C market saw continued volatility this week. Larger fund selling continued to pressure prices and the industry continued to be more than willing to buy as prices pushed lower. The fund selling seemed to be a mix of long liquidation and new shorts as the sector squares off against itself. Technical signals encouraged the new shorts. Physical activity remains muted as differentials remain firm with this C market dip. There continued to be more and more headlines and affirmations of the late year projected supply deficit. The debate in the market remains around how much current supply will be able to offset that short fall, hence the market volatility. While short term funds seem to be willing to bet on lower prices the industry is certainly focused on the deficit and potentially higher C market prices. The macro picture has been sending mixed signals and commodities in general are showing no consensus at this point.
Technically the market ends the week in a negative stance. Continued pressure is certainly possible short term but overall, the volatility continues to support the longer-term idea that the market will continue to trade in a broad range. At this point prices have retraced roughly 50% (the most common corrective retracement) of the rally off of last year’s lows and prices are starting to chop a little. Longer term with the expectations of the range moving higher from 100/130 to roughly 120/160 current levels would continue to represent value. The risk certainly seems to remain to the upside given the fundamental outlook despite the short-term volatility.
With the Suez Canal issue cleared up, the logistics world is still settling the aftermath. Freight rates continue to climb in Asia and may not come down any time soon. Vietnam’s spring harvest has come to an end and the last of the volume is being processed. Kenya saw decent demand with around 16% unsold of the 191,000 packages offered. Much needed long rains have come to the growing regions East and West of the Rift. Good weather conditions can be seen in both Northern and Southern growing regions. Many of the auctions were reduced as buyers are waiting for new season teas. Argentina has been mostly slow due to holiday. It seems to be a little on the dryer side and there does not seem to be much in the forecast.
For further insight and analysis on current coffee and tea market data, take a look at the weekly report from S&D’s commodities team.