July 5, 2019 Coffee and Tea Market Report
The C market saw a very volatile week unfold as weather forecasts started to highlight a frost risk for Brazilian growing regions this coming weekend. Prices spiked early in the week as shorts covered and some bought the market for “just in case” coverage. Prices tested the year’s highs but fell back late in the week to close only marginally higher than last week, gaining less than one cent in the end. Still prices saw both ends of a six cent range a few times during the shortened week. Funds continued to cover long standing short positions and origin was happy to sell into fresh highs once again. The focus on weather forecasts adds to the volatility. There seems to be a consensus though from multiple weather services that temperatures will drop over the weekend into the zero to +2 celsius range across some of growing areas. How much of the crop could be affected and how much is left to be harvested in those areas is a little up for debate though. Otherwise there was little activity with the holiday shortened week, physical business was minimal. Differentials have eased a little in recent weeks but remain firm overall. Outside of coffee the macro picture was quite mixed and provided no clear input. The Dollar remains range bound against most currencies.
Technically the week was significant in that today’s high matched the high for the year and the market retreated sharply. This formed a triple top on the daily chart and further short-term losses be significant, especially if the technical sell signal is augmented by weather events over the weekend. If there is no frost damage to the crop sellers could be aggressive out of the gate Monday morning. Overall the short-term technical picture is a bit mixed. Chart patterns continue to suggest a broad range will unfold over the coming months with this week’s action potentially setting the upper boundary. Overall would expect to see recent lows revisited at some point. At the moment would not look to buy the market unless prices retreated toward 100 again. Volatility will likely remain high for the coming weeks.
Prices followed quality again this week but with better absorption across tea markets. There were limited quantities of improved and brighter teas available driving demand and prices. Other lower to intermediate grades and CTCs did not do as well at auction this week. Production in East Africa is healthy but there are dry days and colder nights. Crops are expected to fall in the short term. Weather is warm and dry in Indonesia with improved demand. This auction center saw some improved demand but mostly following quality. Crops are easing in India, as weather is cool and wet. Some cold weather teas will be at a premium. The usual monsoon weather is present in northern Asia. Opportunities are present for some growers to improve quality and push the price a little higher. Those who produce more of the intermediate grades may be locked into their position at auction for the time being.
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.