March 10, 2017 Coffee and Tea Market Report
The C market ended the week lower overall but prices basically meandered in a tight range (less than five cents) for the entire week. “Quiet” was the most used word on most phone calls. The industry seems well covered, though there was buying again as prices neared 140. Origin is quiet as well with Central American crops ending, Colombia between crops and Brazil having already committed as much as 85 percent of the current crop by most estimates. Differentials remain fairly static amid this lack of interest. Still open interest increased on the week suggesting specs were sellers into the lows looking to generate a move. Overall, their interest remains fairly small compared to recent extremes though. The “macro” picture influence was minimal as well. The Dollar remains fairly range bound. The Brazilian Real did weaken earlier in the week which may have generated some pressure but it bounced back toward the end of the week. Fundamental news remains scarce as well. Additional industry estimates continue to come in looking for a balanced to slightly deficit supply demand picture for the next two years. Brazilian exports in February were at a three year low for the month further evidence of the Robusta deficit continuing.
Technically, the market continues to trade in a contracting triangle or wedge formation. Indicators are very mixed with the lack of clear direction. The week did however see a double bottom posted at 13965, and prices seem to be consolidating above that level. Hardly a resoundingly bullish reaction but as prices continue to contract an eventual breakout of the pattern could be violent. Near term chart patterns continue to favor a push higher toward the 160 area, a break of the week’s high could be the spark for such a move under current conditions. Longer term, the wider range still appears likely to hold.
Improving weather is a great sign in many of the tea growing regions of the world. Kenyan growing regions have seen more rainfall recently although normally the second half of March is when long rains set in. Auctions saw less demand this week in Kenya and Malawi. There was an increase in auction quantities in Malawi as the weather was favorable and improving into warm and rainy conditions. February crops were reported as being a healthy number for Malawi. There was not much change in the tea auctions in Sri Lanka. There was good demand ― enough to sustain the current prices. Weather in Sri Lanka was also showery with bright periods. Northern India is still in the offseason, but there are useful rains in the Assam region while Darjeeling is still dry. But the forecast for both of these areas looks better than current conditions. South India is receiving regular rains and the crops are expected to recover. The Vietnamese spring season has started but with poor green leaf quality. This is due to the absence of winter like conditions. Argentine crops are good, and the weather is warm and showery.
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.