August 4, 2017 Coffee and Tea Market Report
The C market posted modest gains on the week overall, but did touch a four month high. The rally has gathered some technical strength and seen new spec buyers entering the market in addition to funds continuing to cover shorts. Industry buying was noted into early weakness and continues to trail the rally. Physical business remains very slow with the market firmly in the usual summer slow period. Differentials weakened slightly overall basis the market rally as well as a growing desire from the trade to get some business on the books. Overall though, there was little action. There remains little news as well. Brazil stories continue to debate the issue of Broca damage with no consensus at all seen. There remains some concern about yield issues with the current crop and the flow of coffee remains inexplicably slow given the progress of the harvest. Otherwise there was very little to talk about. On the macro side coffee marched to its own drummer being one of the only markets higher on the week. Commodities in general were modestly lower with the Dollar posting some late gains. A favorable monthly employment report saw a quick Dollar reversal higher today.
The rally progressed nicely over the last two weeks from a technical view. Pullbacks retraced well to Fibonacci levels and prices reacted strongly off of them. Late week gains were modest but the market consolidated well near the highs. Overall technical indicators are strong long term though short term there is room for another corrective dip. Chart patterns continue to point higher overall with minimum targets lying above 150 short term and much higher levels possible over the coming year. At this point would continue to view any notable declines as buying opportunities.
There were firm to dearer prices in world tea markets with slightly down crop production but over all good quality. Crop production remains down in Kenya. Medium quality PF1s saw a slight gain in price which was balanced out by plainer leaf grade PF1s. Malawi experienced uneven demand across its various offerings. PF1s saw slightly dearer pricing. Weather is cold and dry. Crops production is low. Once again there was above average market demand in Sri Lanka. However, pricing was slightly dearer compared to last week. India’s northern and southern markets maintained last week’s strong demand with slightly down pricing. Last week’s monsoons have begun to lighten. Crop production remains fair.
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.