November 22, 2017 Coffee and Tea Market Report
The C market coasted into the holiday trading quietly within a familiar range. There was some significance to the week from a technical perspective but otherwise little changed. Prices remain in a well-worn range. Funds remain the major factor in the market holding near record short positions. Their eventual covering of that position seems to be the only potential market mover. The physical market remains very quiet and differentials are firm overall. Industry buying into the lows continues as coverage is extended on a scale down basis. Origin selling is sporadic and currency based more than anything. The US dollar was weaker today on mixed economic data and this had a beneficial effect on commodity prices in general. There remains little coffee “news”. Some small downward revisions were released on the size of the last Brazil crop though this is more statistically significant than a price driver.
Technically the week was more significant due to the fact that the market came within one tick of the November lows. This formed a potential double bottom on the longer term charts. With the market’s inability recently to generate much momentum in either direction this is more significant and could potentially generate some positive momentum as disappointed shorts turn for cover. If this is truly a reversal signal at this point chart patterns would project the market toward the mid 150s near term. Again, it is worth noting that the market has seen a few potentially positive signals recently not follow through, so a grain of salt should be taken with this one as well. Still, given the large fund short and little else to talk about this reaffirms that the greater risk near term is for a rally with the upper end of the recent range well within reason.
Tea markets remained steady this week. The Argentinian season is in full swing. Weather was slightly dry this week. The Kenyan market had fairly good demand. The best BP1s sold slightly easier while low to midgrade’s showed a slight in bid prices. Increased rainfall has resulted in an uptick in crop output but is still lower than expected. Malawi had improved demand at easier rates. More factories are beginning to reopen which is a good sign even though power availability may become a concern for some. Sri Lanka had good demand with prices following quality. Weather is improving and crop production seems to be trending upwards. With the exception of Siliguri, who experienced strong demand at dearer prices, North and South India saw fair demand with prices following quality. North India’s production continues to be slightly down while the south has had increased volume over year to date 2016.
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.