July 9, 2021 Coffee and Tea Market Report

Coffee Market

The C market saw another choppy week unfold but eventually finished little changed. Prices lost just 1% on the week. Early selling after the long weekend was met with strong industry support into the 150 area. Funds sold initially but quieted after the decline lost momentum. Prices then drifted in a fairly tight range for the remained of the shortened week. There remains little fresh news. Last week’s frost event in Brazil is estimated to have destroyed 300k bags of the current crop being harvested. Within the context of a 50mm bag crop that number is not particularly concerning though given that production is already 30-35% smaller than last year it underscores supply concerns. Shipping remains the gorilla in the room as costs and delays continue to mount. Transit times have more than doubled normal expectations over the last few months. Consensus is that these issues will be part of the equation for the remainder of the year at least. Physical business remains spotty though some activity has been noted for the first half of next year. It is admittedly hard to forecast when, of if, demand will return to pre-covid levels but there seems to be some confidence growing. Still demand seems a bit fluid as economies slowly reopen. From a macro perspective commodities in general saw early week pressure but shared a similar fate, changing little week to week.

Technically the week ends in a slightly negative stance but overall, the market seems to be consolidating after a corrective pullback. Chart based support into the 150 area seems to be holding so far. Short term chart patterns still allow for a push lower into the mid140s but overall, the outlook remains that prices will stabilize. Upside risk into the 180 or so area still seems possible. At this point would continue to view prices into the 150/145 range as buying opportunities to extend coverage, as necessary. Otherwise, would continue to let the volatility play out and the range develop.

Tea Report

Overall production is healthy with an increase in better quality teas. Rain has been consistent in Southern Asia. Cooler weather is on the horizon for Asia and East Africa. Prices are soft for standard and lower grades and holding steady for brighter teas. Reports circulating of Malawi tea theft en route to Beira port. Ocean freight continues to plague shipments across the globe with no end in sight.

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.