July 12, 2019 Coffee and Tea Market Report
We left off last week monitoring a potential frost carrying cold front fast approaching the Brazilian coffee growing regions. Monday started off with a bang when the market traded up as much as 5 cents during early morning hours, after reports of frost were confirmed. The pop however was short lived as news traveled fast that damage was not extensive, only affecting plantations at lower elevations and a few high grown spots. Much of the coffee in Brazil has been harvested at this point and any losses attributed to the frost won’t come until the next crop. While reports varied, the general consensus was that the damage was minimal, most projections are of a loss somewhere around 1 million bags, not too significant a hit when considering the world’s largest producer.
On the macro side the Brazilian currency the Real strengthened significantly this week after the first portion of a pension reform bill was approved by the government, moving the pension age up to 65 from 60. While the US Dollar weakened on hints of lower interest rates by the Federal Reserve. Speculative funds took advantage of the pop in the market to cover reducing their net short to 17,000 which is the lowest it has been since September 2017. Differentials remained firm as expected. Brazil played host to the World Producer’s Forum this week where there was much talk about low prices and how to address them, many opinions were shared however there was no major news of universal action items.
Quality was still king this week across the tea world. Even though there was a larger auction this week compared to last week, Kenyan auctions still left 23% of the offerings unsold. The year to date crop figures are down about 17 million kgs and the cold season is right around the corner. Sri Lankan high grown grades continued their trend upward with strong demand. The other small leaf categories saw less demand as their quality lacked. Indian markets are staying strong as Assam and Darjeeling teas seeing increase with sale average and price. North India is experiencing some landslides, as there have been extreme rains in many of the planting districts. Indonesian auctions saw a lot of tea left after the final hammer. The grades left were mainly teabag types and secondary grades. In total, 46% of the offerings were unsold.
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.