May 3, 2019 Coffee and Tea Market Report
A typical story for the C market this week as hard fought gains were given back quickly. Prices dropped 3.4% week to week and the market finished not far off recent lows. The market tried early in the week to build on the slight upside momentum seen at the end of the last week but it could not seriously challenge the highs. A weaker Brazilian Real helped keep pressure on prices and there was little support on the way back down. Larger specs remain a large short but their overall position was little change from last week. There also continues to be little news to drive prices in either direction right now. The market is dealing with an oversupply from the massive production cycle last year and seems to have little worry of a modest downturn in production forecast for the current cycle. Even the threat of a deficit year is having no impact on prices to this point. Producers continue to struggle under the low market. There has been little buzz this week though. Colombia is quiet overall despite protests over recent weeks. Coffee flow is minimal at this point so no notable disruptions have been noted. Brazil is gearing up for the coming harvest with some early harvesting noted in lower grown regions. Physical business remains slow as differentials continue to stay high. Aside from the weak Real, the macro picture has offered little directional input.
Technically more of the same as well. The market remains in a negative posture but lacks momentum. With prices resting near fourteen-year lows bears are reluctant to sell aggressively. At the same time with the trend, so mature and strong bulls have little reason to be aggressive either. All in all the choppy action over the last few weeks will likely continue for a bit. At this point would maintain a neutral stance. A quick bounce toward 98 or so seems possible but it would not be enough to change the overall picture.
Good demand was prevalent across tea markets this week. Kenya saw a second straight week of strong demand. The March production figures are down slightly but with the arrival of rains, we should see a steady climb of offers in the coming weeks. Other than increased rainfall in some areas, the effect of cyclone Kenneth in Malawi is minimal. Malawi is starting pruning while crop figures are dropping along the seasonal norm. There was good interest this week with an absorption rate of around 75% of all offerings. The Argentine tea season is over. Though it was a healthy crop season, prices and demand were not where the producers were hoping. The situation in Sri Lanka is slowly improving with the addition of safety precautions. All considering, there was strong to moderate demand throughout the auction. Weather remains sunny and hot in Southern India. There was good demand for orthodox varieties will some interest in CTC types. Northern India is preparing for cyclone Fani that, according to news reports, made landfall close to Puri between 8 and 10 am local time. Our thoughts go out to those affected by this event.
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.