November 13, 2020 Coffee and Tea Market Report
The C market posted modest gains this week as it continued to slowly move away from recent lows. Prices gained about 2.5% week to week. Industry buying slowly moved higher and offset continued speculative selling. Funds end the week about square, so their selling pressure of the last few weeks seems to be abating. At this point even with the week’s gains the market remains within the last month’s range. Physical activity remains very quiet. Most of the industry has moved to a more hand to mouth approach as demand remains difficult to forecast. There is a fair amount of coffee available and this is allowing this approach for now. There remains debate though on just how much excess coffee is actually around. Covid lockdowns certainly reduced overall demand but there is debate on how much in home (retail) consumption increased to offset out of home decreases. Reports are starting to circulate that perhaps demand wasn’t as negatively impacted as originally thought. On the supply side the Brazilian dryness over the last month is expected to impact both quality and quantity of the developing crop. It will be some months before those impact can be quantified but forecasts are starting to look for a reduction from an already cyclically lower crop. Hurricane ETA left a swath of destruction through Central America. Most of the concerns are around infrastructure though as crops have been delayed and were able to withstand the storm with little loss. The macro picture is providing little direct input. The US Dollar has stabilized around recent lows. Commodities in general have been firmer over the week.
Technically the market ends the week a bit mixed. Indicators are positive overall but showing signs of tiring. Short term chart patterns suggest that the market will likely consolidate the last few weeks’ gains for a bit but continue to expect the market to move higher within the broader range over the coming months. Continue to expect a range of roughly 100 to 140 to hold the market for some time. The lower end of that range should continue to represent good value for the year ahead.
The Argentine season continues with a slow start. Most factories are open. The weather has been warm and mostly dry. More consistent rain and humidity is needed in order to pick up harvest momentum. Prices are firm versus last season. China and Vietnam are wrapping up production. Domestic demand continues to be strong in South India. Growing conditions have been very good. Shipping remains a challenge in most of the world – vessels, space, and empty containers are hard to come by. Freight rates have doubled. Increasing covid cases is impacting several markets.
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.