August 3, 2018 Coffee and Tea Market Report
Another lower low for the September contract hitting $1.06 on Thursday before a slight recovery on Friday continues the slow slump of the NY Arabica market to levels not seen since 2014. The slow pounding the market is taking feels like watching George Foreman fight toward the end of his career, the methodical punches that end in an opponent slumping to the canvas. The wallop in this case is the methodical boom boom boom of the funds piling into the short side of the market, which is resembles those pictures of the listing Lusitania as it slowly slipped bow first into the sea. Massive net shorts (– 88k) remain – basically unchanged from last week – with the total spec position over 75% to the short side continues to tilt the market lower.
From a fundamental perspective there’s not much new news (but maybe fake news here and there). Brazil harvest is in full swing which continues to encourage producer selling on marginal up ticks in the market or a slightly weaker Real, with weak corresponding roaster buying as end users are very well covered. Estimates have Brazil harvest at 75% complete. With very hot weather in the USA and extremely hot weather across Europe, consumer off take is very subdued even when figuring in the growth of iced coffees and cold brew beverages. Difficult at this stage to gage when the bottom will come. Every time a hopeful sign emerges the “C” finds another leg lower.
Demand was down in most markets as Argentina’s season has officially closed. The remainder of processing is sorting and packing outstanding contracts. Kenyan demand continued to trend downwards with prices closely following quality. The best types gained up to $0.15 while lesser quality offerings lost up to $0.25. Weather is cool and dry and crops are low. Sri Lankan demand was down with prices following quality. Prices swung +0.10 to -0.35 following quality. Weather is sunny with intermittent showers. Crops are down with good demand in North India. Prices eased a few cents following reduced quality. There are monsoon conditions with flooding in some areas along with solid demand in South India. Most teas were up by a couple cents.
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.