November 3, 2017 Coffee and Tea Market Report
The C market tested five month lows once again this week. Volatility remains king as prices continue to whipsaw back in forth in a fairly tight range (seven cents over the last three weeks). There remains little fundamental news. The Brazil crop continues to see good rains over the last two weeks and a more normal pattern. So after seeming to arrive a bit late the rainy season is progressing normally. The market continues to look for a bumper crop developing for next year. This year’s crop continues to flow slowly with differentials firm. Other origins are a mixed bag price wise but overall production seems good. Again the market is looking for a surplus year on global supply demand after successive deficit years. The main story continues to be specs and funds selling the market at record levels. Funds were short almost 47k lots this week and likely added more into the end of the week. Industry buying continues on a scale down basis. Overall current levels continue to present good value for much of the market and coverage continues to extend deeper into next year. A strong US Dollar today after a positive monthly employment report saw the Brazilian Real at four month lows. This prompted a wave of Origin selling as well.
Technically the market continues to send mixed signals. Overall a downtrend remains in place off last November’s high but the choppiness over the last month or so suggests that trend is tiring. Indicators are a mixed bag with multiple conflicting signals generated on the week. Overall chart patterns cannot rule out lower levels and a test of the June lows but they continue to warn against a sharp reversal. For the moment would continue to view levels sub 130 as good value but use a patient scale down approach until something changes.
Argentine factories are open and receiving leaf for the new season. The season is underway and gaining momentum but still in the slow stages despite warm weather and periodic thunderstorms. Malawi auctions saw strong demand but a slight decrease in output. The weather is still hot but there is a wet front that should move in this week. Fair demand in Indonesia with continued rains over all the growing areas. This could mark the end of the dry season. Temperatures are dropping in Vietnam that should mark the end of their season as well. Vietnam’s outturn reports show a satisfactory October but not enough to help the low numbers from September. South India did not have a common trend as different auction centers showed different outcomes.
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.