July 19, 2019 Coffee and Tea Market Report
The C market basically went nowhere in a violent fashion this week as the market continues to speculate about the recent frost in Brazil and its implications. The week’s range was established on Monday as the market dropped initially but reversed sharply later in the day. The six-cent range established then would hold the market for the week though both ends were visited multiple times. IN the end prices gained less than half a cent on the week. The rally Monday was sparked by “news” that a large Brazilian Co-op was going to report damage much higher than their initial estimates from the frost a few weeks back. That never was made official and the rally fizzled out quickly. At this point all estimates for actual damage to the current crop are minimal as the frost was isolated to a few growing areas and the harvest is well advanced. Talk of damage to next year’s potential record crop is difficult to quantify at this point but logic would say it would likely not be much more impactful than what was seen this year. Still the last few weeks have seen the market return to more historic volatility norms. If nothing else this makes things more interesting near term. At this point there is little going on in the physical side of the market. Differentials remain firm overall after an initial dip was seen with the first leg high on the market. There is much unknow about the volume and quality of the next crop cycle in many origins as the impacts of low global prices. The coming months will be critical to gauge the overall supply. The macro picture has been providing little input overall.
Technically the market ends the week with a slight negative bias. The volatility lends to a consolidation pattern that continues to suggest the recent rally is establishing the high end of a range that is expected to hold the market for the remainder of the year. Will continue to monitor the activity for any change to that sentiment but for the moment would maintain a neutral stance. A move back down toward the recent lows is probable and at that point would assess buying opportunities.
Tea auctions varied from origin to origin with one main theme; quality drives sales. Malawi saw better demand throughout the auction this week. Only 15% were unsold after 160,000 packages were offered. This could be from low crop figures and from a lower closing sale last week. Quality leaf grades gain more momentum at the Sri Lankan, but lower grades and qualities did not. The gap widens between better and poorer teas. The auction started strong but due to missing key buyers in the room, it dwindled quickly. The auction ended with a lower average sale price than the previous week. There was improved demand at the Indonesian auction with on 27% of the offerings unsold. This was a great sight to see after last week leaving 46% of all offerings. It was mainly PF and secondary BT grades that were absorbed but other types were steady to firm during the auction.
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.