August 23, 2019 Coffee and Tea Market Report
A familiar song for the C market as prices fell to a three-month low (the active December contract actually traded to a new contract low). Pressure came mostly from the “macro” picture. Weak world economies have the US Dollar stronger overall (despite an inverted yield curve in the US having many warning of an impending recession) and this saw the Brazilian Real fall to a new low for the year. This encourages producers to sell despite the declining C market and with the harvest all but complete they have selling to do. Some large speculative selling was seen as well, and the market declined easily. Light industry buying was seen on the way down but overall this sector has plenty of cover in place. There remains little physical activity as differentials remain quite firm. Extreme volatility on the macro picture, especially the stock market, has a general risk off mentality in place once again and commodities in general were weaker.
Technically the market ends the week in a negative posture. Some light oversold conditions exist but nothing that is strong enough to force a reversal. Chart patterns suggest a minor low was registered into the week’s low and a bounce could be seen short term. If that unfolds would expect it could be good for ten to fifteen cents. Recent patterns continue to suggest the market will be largely rangebound for the coming months. Would continue to view current levels as good value overall but would not buy into any strength for now.
An increased amount of tea offered in Kenya was met with good demand. With 132,000 packages (8.4 million kilos) to offer, only 10% were left without bids. This amount is still down from the 2018 figure with 149,000 packages to offer at this time last year. The well-made teas in the room were strong gaining up to 21usc for some types. The theme of the year still holds true with quality driving price. Most production has followed seasonal norms with a little lower production volume for Kenya. That may have helped increase demand. Asian tea markets have eased following monsoon rains. Although the Assam region has had a hot spell as of late, this could suppress the crop figures for August. But as of now, not much is set to change in the coming weeks.
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.