June 21, 2019 Coffee and Tea Market Report
The C market posted modest gains on the week with prices gaining about 2% overall. A three week low was touched early on but the pressure was mostly due to forced liquidation before the active July contract entered delivery period midweek. The bounce of the last few days has been in reaction to the relief of that pressure more than anything. There is no coffee news and some of the volatility can be attributed to the “macro” picture. Geopolitical tensions saw crude oil prices jump ten percent on the week and such a move can draw money into (and out of) commodities in general. On the week funds were neutral. This can underscore that the market at the moment has no clear strong bias and the movement back and forth reflects different opinions. At this point prices are about at the mid-point of the last few weeks range. There remains limited physical activity as differentials remain firm. Some activity has been noted into the first part of next year though. Otherwise there is little to talk about.
Technically the market is a bit of a mixed bag near term and seems to be searching for a direction. Longer term charts appear to be trying to form a bottom but so far there are no clearly bullish signals. At this point it still seems likely that the market will settle into a fairly wide range for the months to come. A short-term push higher toward 110/115 would not be completely shocking. Overall though would refrain from buying until the market tests the recent lows again which should happen before too long.
Prices followed Tea quality for the second straight week. Auction quantities are moving up, but demand has not. There was a small increase in demand this week in certain origins. Growing conditions in Kenya are healthy and the outlook for auction quantities are high. This week 32% of all offerings were unsold at the end of the auction in Mombasa. In Sri Lanka, the 2nd largest auction of the year took place, but the demand held firm. Most of the 7.82 million kilos at auction were low-quality teas. There was decent demand for the well-made teas, but they were not the majority of the offerings. Indonesia also saw a small uptick in demand this week but still left about 17% unsold. Auction quantities are lower than last year and with current conditions, this does not seem likely to change in the near future. Indonesia’s dry season is just around the corner and growing regions are already in need of rain. Vietnam is also in need of favorable conditions as the production is slow at this point in the season.
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.