August 27, 2021 Coffee and Tea Market Report

Coffee Market

The C market saw a modest bounce this week by recent standards. Prices were up 5% week to week on fairly light volume. Industry short covering seemed to be the driving force. The market did post a one month high though and on a monthly basis, its highest close in seven years. There was no fresh news to speak of really. The market is in a bit of a holding pattern at this point as it waits to see how Brazilian rains develop for the development of the next harvest. That will be the true indication of the damage done by the frosts seen earlier in the summer. This is still some weeks away though and the weather watch won’t likely begin in earnest until the latter part of September. Until then some choppy activity remains likely. Physical business remains sporadic. Continued logistic struggles are keeping the spot market somewhat active. Bumped shipments and delays are now the norm and costs have doubled and even tripled in some cases. This is keeping new physical business to a need only basis for the most part. Demand seems stable overall despite the renewed concerns over covid restrictions but that remains a constant point of debate. So far, the market remains well supplied despite the erratic shipments. The macro picture saw a supportive week for commodities overall which helped the overall tone. 

Technically the market is in a positive stance overall but there seems little strength behind it so far. Chart patterns, while appearing corrective off the July highs, continue to suggest that prices toward 170 or even a bit lower are possible near term. At this point would look for strong support into that area and would continue to view that as a target to extend needed coverage. Bigger picture higher prices are still possible over the coming months with targets presenting into the 230 area. That is certainly not a foregone conclusion, but the potential remains. One certainty will be continued volatility over the months ahead. Eventually would expect prices to settle into a more modest range around 150 or so but that likely won’t be until well into next year and would also depend on the development of the coming crop cycle. 

Tea Report

The Kenyan tea auction this week saw good general demand for a smaller offer volume. Only 129,000 packages were offered with only about 31% unsold. This marks the second auction with smaller volume with more to come in the next several weeks. Next week will be slightly larger at 132,000 packages but the volumes will fall furthers at 128,000 and 121,000 in the following weeks. The KTDA announced an increase of green leaf prices which could cause issues at auction in the coming weeks. India saw strong demand in both North and South. In the North, Assam CTCs and Orthodox sold at firm rates. The highest absorption was listed at 88% of all offerings. Quality was king across all auctions with well-made teas driving prices higher while secondary grades fell or were unsold. Logistics continues to be on the minds of most with prices still rising and no end in sight. We will continue to watch this space. 

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.