December 27, 2019 Coffee and Tea Market Report

Coffee Market

The C market saw volatility continue this week and posted modest gains week to week. Prices rose 1% after falling initially. Larger speculators and funds continue to drive the overall movement. Origin selling has been a little more active into renewed strength and some light industry buying was noted into the early week lows. However, the overall interest from the industry has remained tentative. So, in all, same story as the last few weeks. Volatility will likely continue near term. With the new year the market will look toward index fund annual rebalancing. This is should lead to some selling given the current market levels though it has been difficult to quantify how much. At this point thought it might be interesting to look back on the market’s trading year.

The market jumped 30% on the year from last year’s close of 10290. It traded in a wide range of 8760 to 14245. Interestingly the upper 60% of that range was only established over the last five weeks. The market spent the lion’s share of the year in the lower 50% of that range. Overall the one take away is to remember that our beloved C market can be a wild beast and needs to be respected.

On the technical from the market ends the week with a modestly positive bias. Chart patterns since the mid-month highs actually are looking more corrective than not despite the sharp reversal. At this point it is tough to put a definitive bias on the short-term outlook but a push toward 150/152 seems possible. For the moment would view the action as the range having adjusted for the next few months at least and view prices below 130 as an opportunity to extend coverage with a patient approach. Prices back toward the lower end of the recent range are certainly still possible but at best it would seem they are months away.

Tea Report

This marks the last report of the Tea Auctions for 2019. As many auctions around the world are closed this week this will be a short report. Kenyan Tea auctions ended on a general good note with improved demand on all grades and only 10% unsold. The first of the 2020 tea auctions will be held the second week of January. It also looks like to be a large start with 178,000 packages offered. Malawi has yet to post the auction quantities for the start of 2020. But the auction will also start back the second week of January. The first auction in Sri Lanka is looking a little small but they will start back the first week of January. The auction quantity is listed at about 3.7 million kgs. A little smaller than compared to the second week auction listed at 6.5 million kgs. Indonesian markets are also closed until the second week of January. Only time will tell at this point how the tea auctions will fair in the new year.

We would like to take this time to wish everyone Happy Holidays and a prosperous New Year!

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.