November 23, 2018 Coffee and Tea Market Report
The C market continued to retrace October’s gains on the holiday-shortened week. Prices dropped about 5% week to week as volume thinned into the holiday. Larger funds reduced long positions on the week but remain a decent sized net short overall. Industry interest resurfaced as the market neared the 110 area but otherwise there was little activity. Physical business has slowed again as the market decline has differentials firm once more. The late flow of the Colombian main crop is starting to raise some quality concerns and shipment issues out of Brazil continue to see origin warehouses filling up. Otherwise, though there is little in the way of news. On a macro level, year-end positioning seems to be taking hold and a general “risk off” bias was evident across the commodity sector. The US dollar remains firm overall and the Brazilian Real has been weakening over the last few weeks.
Technically the market has a short-term negative bias and at this point has retraced almost exactly 62% of the Sep/Oct rally. Chart patterns continue to paint this decline as corrective of the rally and not a resumption of the long-term bear trend that held the market for the last few years. Overall prices toward the 140 area still seem viable over the coming month or so. A broader range of 110/140-ish should unfold barring any major changes in production. At this point, would still view current levels as good value but refrain from buying into strength over 120 for the time being.
The Argentinian season has officially started are factories are gathering momentum. Weather is still a bit dry. Kenyan demand rebounded this week. Prices moved irregularly following quality. Better types gained up to 10usc. Lesser grades lost by similar margins. Weather is dryer in the east but there are reports of hail in the west. Yield remains good but is lessening. There was selective demand in Sri Lanka. Eastern types and leafy low-growns made some gains while the rest of the market suffered slightly lower prices. Weather is bright and dry. Crops are healthy. Solid demand in North India, there were some withdrawals among the lesser types but most others maintained pricing from last week. Weather is dry and getting cooler. Crop yields are dwindling. South India saw good demand. Prices were firm to dearer following quality. Weather is cool and wet but crops are still fair.
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.