April 26, 2019 Coffee and Tea Market Report
The C market posted small gains week to week, closing about 1% higher. After last week’s fresh lows the pressure on the market abated and this week saw large funds short cover a small amount of their position. Otherwise, there was a similar dynamic; industry continues to buy scale down into new lows. This has seen coverage extend well into next year. Origin selling is reluctant and sporadic. There remains little to talk about. Physical business continues to be light and only seeing nearby needs addressed. Forward differentials remain very firm. There was some buzz that early harvesting is beginning in some areas of Brazil. Weather has been good for development though this crop will be smaller than last years. Low prices continue to hurt producers. The most vocal worries continue to come from Colombia. Protests have been peaceful so far but growing in number, with calls on the government to help the industry. Strikes are threatened for next week but so far, nothing has effected access to the ports. There was also some talk of a truckers strike in Brazil but this seemed more like conjecture given the time of year than anything substantial. So far, all the talk has had little impact on market price. Large fund shorts remain comfortable with their positions and the market is dealing with a near term over supply. The macro picture has provided little input overall. The US Dollar was weaker on the day but remains strong over recent weeks.
Technically the market has a positive bias short term and chart patterns suggest another 6 to 8 cents higher is very possible over the coming days. That said it is very premature to label this anything more than a corrective bounce. Still the market came very close to long term objectives (.8485) on the monthly charts and the bounce has been structurally sound so far. With a trend as mature as the decline seen over the last few years it will be very difficult to pinpoint the eventual turn but the week’s action does suggest momentum has waned. Would continue to stand aside short term as see how any rally develops. Once a true turn is registered, a push back toward 120/130 is likely. There will be ample time to jump on board though once it is confirmed. At this point would expect some choppy but likely positive overall action over the next few weeks.
There was generally good to high demand across the tea world this week. The smallest auction in Kenya this week drove the demand higher. There was a sharp drop in offerings after week 19 and usually dry weather in the area. It looks like rain has finally come to the East and in select areas in the West. There was also good demand in Malawi this week with well-made PF1s being the center of attention. Hot weather prevails at the moment but there are some good rains for the area. CTC teas saw less demand in South India this week but there was a fair amount of interest in Orthodox types. Indonesia was one outlier this week seeing less demand and frankly less buyers. Many of the buyers were absent due to payment issues. Vietnam’s plucking season is starting slowly but it is getting warmer every day. Sri Lanka’s auction was postponed mid-way through after a threat was made. The auction was completed the following day to healthy participation despite the situation.
Our thoughts go out to the people of Sri Lanka in the wake of the deadly bombings on Easter Sunday. The tea world stands in support for those who have lost loved ones in this tragedy.
“The most beautiful people I’ve known are those who have known trials, have known struggles, have known loss, and have found their way out of the depths.”
– Elizabeth Kübler-Ross
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.