May 25, 2018 Coffee and Tea Market Report

Coffee Market

After an early week spike the market basically wound up consolidating near the middle of the recent range. Early buying was triggered by light frost conditions seen in southern growing areas of Brazil over the weekend. Damage proved minimal though and the rally died quickly. It did serve as a reminder that weather can still effect the crop as the harvest began. Further gains were capped as producers sold into the rally. Larger specs and funds were buyers initially but industry buying materialized by the end of the week at higher levels than seen recently. Overall the last month of trading has seen the market start to slowly reverse the long unfolding downtrend that has held force the last eighteen months. The reversal has not been sharp by any means but the sideways trading and testing of recent lows is a sign that sentiment if changing. Also helping support the market was a strike in Brazil by truckers protesting high fuel prices. This was quickly supported by many including stevedore unions. While only a few days old the strike has basically halted exports from the main ports and paralyzed internal transportation. Thoughts are that the government will move quickly to end the strike as its effects are being felt domestically (i.e. empty supermarkets and gas stations). The market is watching closely though as any Brazil disruption can alter the supply picture quickly, especially if any delays hold on through the new crop starting to ship. Civil unrest continued in Nicaragua and has the industry concerned for upcoming shipments. Other markets were quite mixed overall.
Technically the market ends the week on a positive note as indicators, both short and longer term, have turned positive. The sideways trading is slowly working to reverse the long term downtrend. While further weakness cannot be ruled out at this point would continue to view lower levels as buying opportunities. Bigger picture the reversal of the long decline will likely lead to a period of sideways action in a fairly large range. Would expect prices to slowly work toward 140/150 over the coming months.

Tea Report

Markets remained steady this week. Argentina’s season has officially closed. The remainder of processing is sorting and packing outstanding contracts. Kenyan demand dropped slightly. Prices followed quality which went downward – 15 to 20 usc. Weather is mostly rainy, though rainfall does seem to be easing in some districts. Crop yield is strong. Good demand in Sri Lanka. Brokens were up 15-30 usc but were balanced a 15 usc weaker showing from high growns. Weather is bright with evening showers. Crops are at healthy levels. A smaller than usual market offering helped contribute to stronger than anticipated demand in the North Indian markets. Weather is wet with sporadic sunlight. Crops are good. South Indian markets displayed fair demand. Orthodox and CTC types were firm to dearer. Certain lower quality types eased up to 7usc. Weather is cool and wet but crops remain fair.

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.