December 14, 2018 Coffee and Tea Market Report

Coffee Market

The C market posted another down week, its sixth in a row. Prices dropped a little less than 2% week to week. Overall though it was a quiet week with choppy price action. General apathy persisted. Specs and funds continue to add to short positions through light scale down industry buying. Physical activity remains quiet overall with differentials firm. There was some sporadic business noted though as year-end looms and desire to sell outweighed the less than ideal prices. There remains little in the way of coffee news. On a macro scale, there continues to be a relative “risk off” mentality across many markets (aside from coffee). Focus on the New Year index fund rebalancing is looking like it will actually see some buying come into coffee but it has been difficult to quantify. The Dollar remains strong overall and is providing a little weight on the market.

Technically the near term trend is negative but a little oversold. The proximity to the recent lows and the lack of momentum send mixed signals. At this point chart patterns still suggest another rally similar to the October move could start at any point. That said, there is no evidence of a reversal so far. While new lows cannot be ruled out would expect that the downside would be rather limited even if they were seen. Overall continue to view current levels as good value.

Tea Report

The Argentinian season is in full swing and is welcoming need rain. Although rain has come, the temperature remains relatively cool. The Mombasa auction saw good demand but a lower price than last week. Kenya set a record this year in production and stands to close out a strong 2018. Sri Lanka had strong demand for select grades of teas. Without a solution in sight, estate workers have called off the labor strike. This still makes some exporters uneasy. Indonesia saw lessened demand and hopes for higher demand as the last auction of 2018 will be next week. Production has stopped in Northern India per the Tea Board and now pruning commences.

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.