November 16, 2018 Coffee and Tea Market Report
The C market ended the week on a positive note but lost a little ground overall. Prices settled down 1% after another volatile week. The market saw volume thinning after last week’s fund rolling and prices moved easily on light volume. Specs and funds sold early on but industry buying provided support into the 110 area and the market bounced easily. At this point, there is no commanding news in the market and the trading action reflected the mixed opinions and indecision. On the week larger funds added back to their net short after weeks of buying. Overall though their exposure is far below recent record highs. Physical activity remains thin overall. The market did see Colombian differentials ease slightly again as the new crop, coffee begins to flow. Threat of a trucker’s strike in Colombia next week though muted activity. Brazil continues to deal with a shipping issue that has been going on for months now. Lack of containers and vessel space has seen origin warehouses filling quickly. As the record crop makes its way to port this is an increasing concern. Delayed shipments have seen consuming country stocks starting to be drawn. If the delays continue, there will be increasing concerns about quality and supply. This is not having a direct market impact so far but bears a close eye. From a macro perspective, the US Dollar has been strong overall and commodities in general have seen some modest pressure.
Technically the market continues to build its case that the long-term downtrend ended with the September lows. Despite the volatility seen over the last few weeks the chart patterns that are unfolding are positive near term. After seeing prices surge 30 cents off the lows the market has retraced a little more than half of those gains. This is not unusual and actually leads some credence to a bullish argument. Near term, indicators are positive at the end of the week as well. Overall would continue to expect another spike higher near term that should put the nearby active month into the 140/145 range over the coming weeks. Bigger picture a wide range is expected to unfold in the months ahead. Prices below 120 should continue to present value but would not look to buy into notable strength at this point.
The Argentinian season has officially started Weather is dry but there is rain on the horizon. Demand in Kenya continued to decline. Prices generally followed quality and were down by up to 15usc. Weather is continuing to get wetter. Crops are improving especially in Kericho and Nandi. Aside from the best types coming from the western region, demand lessened this week in Sri Lanka. Leafy Low-Growns gains up to 15usc but this was balanced out by losses in smaller leaf sizes. Weather is mixed and crops are increasing. Smaller than normal auction in North India, however, there was still good demand at firm to dearer prices. Weather is cool and dry. Crops yield South Indian markets were closed due to the Diwali celebrations. Diwali is the Hindu festival of lights, which is celebrated every autumn in the northern hemisphere.
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.