February 9, 2018 Coffee and Tea Market Report
The C market posted modest gains on the week. Wild swings in equity markets (Dow Jones with 1,000 point daily swings loses 7% on the week) shook up market players and saw a general “risk off” attitude take hold. Coffee benefited from some light fund short cover and gained around 1% on the week. Overall though the market continued to wallow around the recent lows with little industry interest. In addition to the light fund short cover the market is starting to focus on March contract position liquidation ahead of first notice day. Index fund rolling will last through early next week and this will dominate market action. There remains little in the way of physical news. The Brazilian crop seems to be developing well and a few industry estimates released over the week are targeting production near 60mil bags. Differentials remain firm overall though with the low market price and little physical interest. Colombia is starting to show concerns over a smaller and delayed mid-year crop.
Technically the market continues to struggle to find momentum. Technical indicators are fairly mixed to end the week. One chart pattern analysis is suggesting a near term low may be in place and is targeting levels into the higher 130s short term. If this pans out it should happen fairly quickly and it would tie into historical seasonal trends. Overall though there is no evidence of a major low in place and would continue to refrain from buying into strength. Still within historical norms current levels continue to suggest good value overall.
Tea markets ran smoothly this week in both production and at auction. Argentina’s season is looking promising. Crops appear to be much healthier than last year. The Sri Lankan market had fair demand this week. Prices followed quality. BOP & BOPF held firm while most other types sold a bit easier. Weather is bright with scattered showers. Indonesian demand was down. About 25% of offerings remained at auction. Crops are increasing. Heavy showers are being reported in Java and moderates rains cover Sumatra. India had fair demand across most CTC and orthodox types. Prices generally followed quality. The Guwahatti auction showed irregular rates, both high and low, but netted out even overall.
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.