September 8, 2017 Coffee and Tea Market Report
The C market saw a choppy week unfold after the holiday but posted modest gains week to week. A slight break of the recent low generated no follow through as industry buying continued on a scale basis. Funds were once again sellers and remain quite short on a net basis. They sold rather aggressively on the week with no real impact. Once again their position is starting to present a possible positive influence on the near term price action. Physical business continues to show signs of life after a long quiet summer. Colombian differentials eased a bit more seeing a flurry of activity. Diffs had remained quite firm with shorts in the market and have eased with that short seemingly covered. At the same time the firm diffs had created a bit of pent up demand. Brazil diffs remained firm with the market down and the Real strong. Overall with the current crop complete focus is shifting to the developing crop. The weather watch is already beginning as rain over the coming months is critical for the development of what is forecast to be a very large (if not record) crop. That said with recent production deficits and stocks being drawn down sharply at origin there will be little tolerance for any reductions in crop estimates. The flowering over coming weeks will be critical to not only production but to market mood as well. At this point it is early but there is no significant rain forecasted over the next two weeks.
Technically the market has been chopping in a fairly tight range over the last three weeks. This was the first positive week on week move in a month but overall the market appears resigned to the range right now. Near term indicators are mixed, slowly turning positive from an over-sold state. Near term there seems little incentive to move out of the recent range. Would expect a bounce over the coming weeks to be followed by another dip into the mid-120s (basis the nearby contract) but longer term chart patterns still warn of a larger rally after predicting a major low in June. Overall would continue to view prices in the 130s as good value for the foreseeable future.
The trend of selective demand continues. Kenya saw increased demand this week. Better brokens, PD, and Dust grades made gains of up to 25usc pending quality. PF1s lost 5-15usc. Crops are fair and the landscape is spotted with sun and showers. Malawi maintained across most types. Slightly firmer prices were noticed in secondary types while colorly types saw slightly dearer rates. Crops are very low in the region. In Sri Lanka saw decent demand at dearer prices. Higher priced teas declined auction due to lack of quality. Over all crop production is fair. North India saw slightly dearer price this week but demand was steady. South India did not open auctions. Both north and south is experiencing rain.
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.