November 1, 2019 Coffee and Tea Market Report
The C market posted a third week of gains. Prices jumped almost 5% and touched six-week highs. The rally continued the back of spec and fund short covering though volume was modest overall. A lack of pressure from origins was a major factor as well. The US Dollar remained weak overall and the Brazilian Real was stable. This, along with the light flow of coffee, enabled the short covering to have a more significant impact. The physical side of the market continues to see business in fits and starts and mostly for nearby deliveries. For the most part differentials remain firm and there is a general reluctance to sell on a forward basis. Flow out of Colombia and Central America has been slow so far but the market remains well supplied overall. Some quality issues are showing up in early deliveries and this will be watched closely as the impact of low prices will be felt first at this level. The Brazil crop development continues to look ok though rainfall amounts are on the low side historically. The macro picture remains choppy overall and there is little clear input from this front.
Technically the market is positive near term and shows a strengthening short-term trend to end the week. Bigger picture though chart patterns continue to point to a broad range containing prices for the time being. Short term momentum may carry the market toward 108/110 but a sustained move that would challenge or break the year’s highs seems unlikely at this point. For the moment would stand aside and see where this rally plays out. Bigger picture would continue to view moves toward the recent lows as buying opportunities.
A relatively small tea auction in Kenya this week with just below 140,000 packages offered. There was good demand only leaving 10% unsold. News of heavy rains across the growing regions stifled some interest as the idea of better quality could be around the corner. The offering number continues to grow with next week being around 151,000 packages and the week after (week 47) coming in at 161,000 packages. Malawi had a normal offseason auction with only 60% of the auction offerings sold. Extreme heat can be seen across the growing region with temperatures reaching as high as 41 degrees Celsius. Presidential elections are going to be held on November 16th in Sri Lanka which will hopefully bring some stability. The growing regions need sun and more rain to create conducive growing conditions. Crops are low at this point. Production continues to be healthy in Northern India, but production will taper off and cease completely in December. India’s production figures show record quantities for the month of September with 184.7 million kgs. North and South India are seen heavy rains with flooding being present in the lower Assam region. Monsoon rains are supposed to be over, but this is not the case. There could be an excess of water for a decent amount of time.
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.