September 3, 2021 Coffee and Tea Market Report
The C market saw a one month high as prices spiked briefly over $2 as the week started with a Hurricane barreling toward New Orleans. Some speculative buying was accompanied by industry buyers with memories of Hurricane Katrina. The coffee supply in New Orleans seems to have dodged a major bullet, though there will be lingering delays as the city recovers. Thankfully flooding was not an issue. Further supply delays were seen as the New York area got hit unexpectedly hard by the storm as it continued north. The market settled down though and drifted off the highs for the remainder of the week. Prices eventually settled little changed (+0.50%) on the week, a wide ten cent trading range but little overall change. The weather watch in Brazil really shouldn’t begin for another 3-4 weeks but it will increasingly be the focus for the market. It is generally hot and dry at this point, and it is supposed to be, but as long-range weather forecasts creep into the “rainy season” window headlines will become more impactful. So, would expect volatility to only increase over coming weeks and it will remain high for some time. Only once the market sees Brazilian flowerings can it get a true assessment of the damage done by the frosts and gauge output potential for the next crop and the overall supply situation as it comes out of this deficit year. Physical business remains spotty and more focused on nearby needs and delays. Transportation issues continue, especially out of Brazil in recent weeks. Costs remain double or more of what they were a year ago. This is offsetting any differential relief the high C market prices might normally afford and keeping forward business very light. The macro picture has been mixed in recent weeks and little direct impact on coffee.
From a technical perspective, the market is a bit mixed near term. Despite the large ranges and increased volatility prices have been basically consolidating since the late July rally. At this point near term chart patterns are still looking at the activity off the July high as corrective and suggest that correction is not yet complete. Short term there appears to be an opportunity for prices to test levels toward 170 to complete the correction. At this point would continue to view prices into that range as good value to extend needed coverage. Bigger picture there still appears to be an opportunity for higher levels with chart targets presenting around 230. Overall, would expect once things calm down that the market settles into a range toward 150/160 basis the current production outlooks.
The challenges in the Tea world continue this week. The Kenyan tea auction saw much of the same from a demand point. A little better absorption with only 21% unsold of the 132,000 packages offered. Better, well-made teas sold better while the plainer teas were irregular, and prices varied widely. Indian auction centers saw good demand this week. Many CTCs sold with good demand and steady rates. But again, the well-made teas saw high demand while the plainer teas were left unsold or sold at lower rates. For the most part, origins are following the seasonal norms. Asian origins are seeing production decreasing over time. Argentina should be seeing some warmer weathers in the future but the big issue there is rainfall. Logistics issues continue and there are varying ideas on when it will ease. For now, quarter 2 of 2022 is the earliest that many could see the ease.
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.