December 1, 2017 Coffee and Tea Market Report

Coffee Market

It was another week where the C market went nowhere fast. Volatility continues to run high as prices whipsawed. Three days of gains were wiped out in minutes yesterday. In the end the market posted modest gains of 1.5% on the week and remains stuck in a long standing range. The market movement was once again almost entirely spec and fund related. Smaller specs bought early in the week and pushed prices to a six week high. They were unable to draw in larger fund short covering though and the market dropped sharply as the new longs were put to the test. Larger funds were on both sides of the action but net buyers on the week. They remain near record short levels though. Physical activity remains subdued overall. The industry seems well covered and differentials remain rather firm. Central American diffs are easing a bit as the harvests are underway but differentials for Brazil and Colombia remain quite firm. Brazil continues to await the developing crop to lend some confidence to sellers. Colombia is dealing with output reductions due to inopportune rains earlier in the year. On the macro side it was mostly a negative week for commodities in general. The Dollar remains range bound but strong gains in the stock market saw money flow in that direction.

Technically the market continues to struggle with an overall lack of momentum. Near term indicators are a bit positive while longer term ones remain negative overall. Chart patterns continue to suggest the longer term decline has run out of momentum but, so far, there is no clear signal of an imminent rally. Overall though from current levels the danger remains to the upside and the low end of the recent range continues to appear to be good value.

Tea Report

There was good demand in most tea markets this week. The Argentinian season is in full swing. New season crops will begin to ship soon. The Kenyan market experience fair demand. All types saw a softened price with the exception of plainer BP1s who remained steady of slightly increased in price. Crops are increasing but there is noticeably less rainfall than in previous years. Malawi demand continues to improve but prices remained stagnant. At least one BP1 lot was removed. Leaf quality appears to be improving. A good amount of rain is being reported with some areas receiving up to 40 mm. Demand softened in Sri Lanka. Pricing followed quality across the various types. Sunny morning and rainy afternoon are reported across the region. There was fair demand across all of India’s markets. Pricing was steady with some types makes slight gains.

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.