July 14, 2017 Coffee and Tea Market Report

Coffee Market

The C market saw the recent rally accelerate a little into the end of the week and posted a six week high. Light spec and fund buying continued to find little resistance as they attempt to cover shorts. Industry buying continued as well with forward coverage still being added. The main feature in the market, the fund position, remains supportive as they continue to sit at record net short levels. The physical market remains rather quiet which is not unusual at this time of year. There are some growing concerns over the Brazil crop being harvested. Flow of coffee seems slow so far, and there are concerns about yields. Bean sizes seem small so far due to the uneven weather seen late in development. This is not a quality concern but overall it could see further reductions to output for an already smaller crop. There is also ongoing concern for Colombia both in mid-crop quality and for the main crop development which seems behind schedule. Overall there remains concern for overall supply later in the year, with most estimates for global production showing a small deficit to supply. Converse to this stocks in consumer countries are ample at the moment. On the macro side, the Dollar was weaker overall after some mixed economic data. Commodities in general were a little stronger.

Technically the market continues to strengthen. Indicators are turning higher and an early week decline found support at a strong technical level, the 38% retracement. Chart patterns continue to support the idea that significant low was registered in June. At this point a short term move into the 140/150 area remains likely. Longer term patterns are targeting more substantial gains but more data is needed to lend confidence to that outlook. For the moment though the market has moved to a positive stance and any notable dips would be seen as buying opportunities.

Tea Report

Tea markets remain fairly steady. The Kenyan market continued its trend of irregular pricing. Fannings brought usually high prices but were balanced by uncharacteristically low price on dust grade teas. The season is coming to a close as cool dry weather rolls in. Despite poor crop yield prices remain firm in Malawi Bright and colorly teas shoulder most of the market as broken grade teas were largely pulled from market due to poof leaf quality. Ceylon’s market rebounded with a small uptick in price being seen across almost every grade. Increased production from Western districts was offset by lesser yield from other region. Flooding has been reported in India. However, most disruption was caused by confusion over their newly implemented Goods and Service Tax (GST) which disrupted the Southern market. North India’s teas lost a few cents but remained unaffected at large.

 

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.