October 19, 2018 Coffee and Tea Market Report
The C market posted its fourth week of solid gains rallying just under 5% on the week. Prices saw their highest levels since January as larger fund short covering continued. The dynamic remained the same. After holding record short positions for many months, funds are cashing in. There was little new developments. The Brazilian Real has stabilized after strengthening over recent weeks. The Brazilian Presidential election is still a few weeks off. There is little fundamental news. Shipment delays continue out of Brazil but so far, this is not directly influencing the market price. It has seen consuming countries stocks decline though. Physical business has seen a bit of a pickup in action, mainly on Colombia where diffs have eased off with the rally. Brazil diffs remain firm with the move in the Real offsetting much of the C market gains for them. Central American crops are just beginning and there has not been too much movement so far.
Technically speaking the market has turned the tide on the two-year-old bear trend. That said it is slightly overbought near term. While it is certainly possible that continued fund buying will easily push the market well into the 130s the bull would be better served by a corrective pullback at this point. A decline into the 113/110 range basis the nearby month would present a buying opportunity at this point. Bigger picture the trend has truly turned. The market closed above the 200-day moving average for the first time in over a year. This is a significant barometer of the overall trend. Over the coming months would expect to see the market remain volatile but eventually settle into a range of roughly 120 to 140.
The Argentinian season is officially starting. Weather is warm and showery with no sign of lightening up in the forecast. Kenyan demand was fair this week. Overall the market eased by 10-20usc. However PDs, D1s, and the best PF1s a saw irregular pricing following quality- the lesser types sold low while the better types witnessed significant gains. Weather is warm with heavy showers. Crops are irregular. Lead by brighter types, Sri Lanka has good demand this week. The market as a whole gained 5-10usc on average. Weather is bright though there are showers and some flooding in low-lying areas. Crops are starting to ease. There was good demand in North India mostly lead by Assams. Weather is warm and dry. Crops are fair. South India has fair demand this week. The majority of teas declined in price up to 4usc. Weather is overcast with scattered showers. Crops are down.
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.