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3-21-2022 Armenia Coffee Report

Good morning. Welcome to Spring.

Coffee continued caught up in the whirlwinds of the world last week. The beginning of the week saw most commodities under pressure including oil and coffee. Continued inflation, expected interest rate hikes, general lack of inflation influenced public buying power all factors that saw coffee blowing off on Monday and challenging (and holding for now) the 200 day moving average in May, always an important number. Tuesday’s trading was an almost 8 cent range with the market closing just off the lows and looking like it was in real trouble.

Wednesday was the mirror opposite however and most commodities based and some including coffee and oil, moved higher. Early in the day a respected coffee analyst was sending out photos from her most recent trip to Brazil. It showed at least on that farm, real challenges to production for the coming crop. Perhaps the most important thing it did was remind folks there’s a reason we’ve moved this high in the first place. In a near identical range to Tuesday, Wednesday was the mirror closing just off the highs.

Thursday brought some consolidation and then Friday closed a bit higher and today we’re a bit higher again as we write this.

The commitment of traders, as we expected, once again showed long funds exiting, this time buying 7463 lots to be 38,346 lots long while short funds sold another 484 lots. Trade was once again the best buyer, and the roasters now have better coverage then they have had in a long time.

Earlier in the week, the GCA reported USA warehouse stocks in all hands-on Feb 28, 2022 at 5,765,348 bags down 30,493 from the end of January. ICE stocks continued their recent trend upwards, up 13,329 bags on Friday to 1,085,621. There were still 82,475 bags pending grading as of Friday.

Are the long funds finished pairing down or do they have more to go? For the moment they seem to have taken a breather. If they return, they will continue to be the reason the market is having a hard time the last 3 weeks or so. If they’re done, it’s likely the market might sneak back a little higher just on momentum. Nothing has really changed, supplies are tight, shipping is tough. Rates, both freight and interest are headed higher and it’s on this basis we like the market still in the long term.

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All the best,
The Armenia Team