November 10, 2017 Coffee and Tea Market Report
The C market gained 3% on the week and touched three week high. As exciting as that may sound the market actually remains mired in a range and interest is minimal. Much of the volume is focused on the roll out of the nearby December contract as first notice day is just over a week away. The Index fund roll continued to pump of volume but overall the story remains the same. Funds remain large shorts in the market and the industry keeps buying into the low end of the range seeing value overall. While the market settled strong it is worth pointing out once again that prices remain at the low end of the broader range (roughly 120-150) that has held the market for the last seven months. There remains little fundamental news to speak of. Brazilian weather has seen more consistent rains falling though there remain some concerns about coverage. The next key window of time will be into the new year as bean development turns to rains to determine yield. So the weather story won’t go away for a while but has taken a back seat for now. Differentials overall remain fairly firm, mainly due to the low market prices and generally slack demand. The industry continues to seem well covered physically and focused on extending market coverage overall.
Technically the market has set a positive tone with indicators positive across the board. The strong close on the week opens the door for further gains next week though admittedly the market has struggled to maintain momentum in either direction. Chart patterns continue to point to a test of the upper end of the recent range (150ish) short term. At this point would continue to sing the same song. The lower end of the recent range continues to represent value, but there is little argument to pay higher levels. Play the range.
Buyers were selective in tea markets this week. The Argentinian season has now begun. Weather patterns are currently favorable but the forecast shows next week being dry. Though up and down throughout the week, the Kenyan market netted a strong demand. Weather is getting warmer and more rainy, Crop production is trending upwards. Demand was down following quality in Malawi. Many Teas were removed from bidding because of lacking interest. Crops are very low. Sri Lanka had fair demand at slightly lower prices this week. Crops are down. Northern India experienced slow demand and slightly lower prices this week. Weather is uncharacteristically cool and dry for this time of year. South India had mixed demand following quality. Weather is very warm and wet which is contributing to good crop production.
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.