November 9, 2018 Coffee and Tea Market Report
The market saw another choppy week within the last month’s trading range unfold. Trading focused on the move out of the nearby contract as expiry looms. The index fund roll began as well over the last few days and that saw ranges narrow as focus was on spreads. Overall, the market lost about 5% week to week. After the quick rally in October, the last few weeks have seen the market correcting that move. Funds have whittled their short down to less than 40k lots and at this point are not a major factor in the market. Industry interest has been modestly active on both sides of the market. At this point, the market appears to be trying to find its next focal point. Brazilian weather continued favorable for crop development but forecasts are expecting a notable cyclical downturn in production after the bumper crop this year. Central American crops still seem to be a bit behind schedule and physical activity is light. Differentials remain somewhat firm overall. The macro picture appeared to see a little pressure from a strong US Dollar as most commodities posted losses on the week.
Technically the market has turned positive overall and the recent consolidation is a welcome sight from that front. Indicators are mixed to negative after becoming overbought into the rally. It seems likely that the decline off the October highs will continue a bit longer and prices could test the 110 area (basis active second month) before the rally continues. Overall, though a push into the 140s is suggested basis current chart patterns. Would continue to view prices toward 110 as a buying opportunity.
The Argentinian season is officially starting. Weather is warm and showery with all signs indicating more rain is on the way. Good demand in Kenya but not quite up to the bar set last week. Prices were irregular. Brighter teas gained several USC while lesser types lost in similar fashion. It is wet and cold with intermittent sunshine. Crops are mixed but improving. Demand remained down in Sri Lanka. High growns eased 5-20usc following quality. Low growns were down by up to 15usc. Weather consists of afternoon showers, which are supposed to get heavier throughout the week. Crops are healthy and yields are improving. Steady demand in North India. Prices closely followed quality. Crops are low. South Indian markets had improved demand this week. Some withdrawals were seen among the lesser types. Weather is cool and wet crops are 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.