July 7, 2017 Coffee and Tea Market Report
The C market posted modest gains week to week and saw much less volatility than the prior week. Overall, little changed in the background. Funds remain a record net short, covering only a small amount so far into the bounce off the lows. That short remains the potentially explosive factor for the short term, though prices are still likely a bit away from forcing them to cover more aggressively. The Brazil crop is flowing and early arrivals are generating a little concern on yield (or bean size). It is early and this is an off cycle year but this could lead to further reductions to the overall supply demand picture nearby. There remains a forecasted deficit in the global supply demand and while small, it could be a concern for the latter half of this year. The macro picture saw commodities in general quite mixed on the week. The Dollar was very choppy but a bit stronger overall.
Technically the market continues to try to turn from the downtrend that has been in force over the beginning of the year. At this point the near term picture is mostly positive and the longer term picture is slowly turning. Chart patterns continue to suggest a significant low may have been registered at the June lows but there remains some work to do. Short term a push a little lower into the mid 120s (basis active September) seems possible but overall prices back into the 140/150 range seem likely.
Prices remained fairly steady this week in world tea auctions. The African market experienced irregular pricing which closely followed quality. Kenya is beginning to cool and crop yield is beginning to soften. Prices hold firm in Malawi. Demand continues to outpace supply but this has not yet resulted in any serious price escalations. Cops are down but it is not unexpected for this time of year. Ceylon’s market was slightly down this week. Prices fell up to 10 usc but most commodity grade teas on lost a few pennies. Weather is mild and showery. North & south Indian markets witnessed slightly firmer prices from their second flush teas while other types experienced a slight drop in price. Overall, the two trends balanced out and markets held firm. Weather is exceptionally rainy with flooding being reported in the North.
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.