May 21, 2021 Coffee and Tea Market Report

Coffee Market

The C market saw a quiet start and end to the week but surged midweek on growing concerns over Colombian unrest and inflationary worries from a macro perspective. Prices gained 3.5% week to week after Tuesday’s surge wiped out the last two week’s losses. Prices stabilized and quieted after that though. Funds bought on the week and are now matching their largest net long over the last five years. Industry buying did not follow the rally, but interest was seen building at last week’s lows. Origin pressure was light overall. The physical side of the market remains quiet overall. Protests continued in Colombia this week and the situation is lasting longer than most would have expected. Road blockages to the ports as well as to the processing mills has coffee flow at a standstill. At this point there is growing concern that even if things normalize quickly the backlog could delay shipments by months. Coupled with shipping delays pretty much everywhere supply for the back half of the year is a concern. Also, this week the monthly Green Coffee Association stock figure showed a small increase during a month which historically shows a fairly large increase. This has some talking of consumption being higher than thought as markets reopen. Lastly the macro picture saw the dollar weaken and commodities strengthen after some inflationary data was released.

Technically the market ends the week in a mixed stance. Indicators are correcting from overbought conditions though are not pointing strongly lower. The sideways consolidation seen is enough to ease any overbought concerns. Chart patterns view the action off the recent high as corrective. A few cents lower on Monday could open the door for a test of 140 but it is not needed structurally. A push back above 154 should see the highs give way and prices target the 165 area quickly. Bigger picture no real change to the idea that we are seeing the market establish the upper end of a range. Spikes toward 180 would not be out of the question as the market digests the supply situation but overall, 130/160 should form the boundaries for the year. Would view a push toward 140 as an opportunity if any near-term coverage is needed. Otherwise, would try to be patient over the coming months as the range plays out.

Tea Report

A light increase in demand at the Kenyan tea auction this week. Of the 185,000 packages (12.2 million kgs) offered, only 8% were unsold. The crops are steady for the moment. Useful rains continue across the majority of the growing regions. Areas around Lake Victoria are reporting floods but nothing severe. Logistics continues to be a main concern across the tea world. Argentina is seeing struggling port congestion and shipping delays. These issues are causing rate increases and extended lead times. Asian origins are continuing to see logistics delays as well. Rates continue to increase and there seem to be no end in sight. Indonesia is seeing logistics concerns due to COVID lockdowns enforced in Malaysia and Singapore. Most shipments from Indonesia pass through Singaporean ports. COVID lockdowns are also being enforced in many origins. India is seeing total lockdown in West Bengal until May 30th. Offices have been shut and estates are allowed to work at only 50% capacity. On top of COVID problems, the growing regions in North India need rain.

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.