Coffee Market  

The C market posted a modest bounce so far this week on lighter volume. After seeing an eighteen-month low last week an attempt to continue lower failed early on and speculative short covering easily lifted prices thirteen cents on light overall volume. Producer selling evaporated after lasts week’s pressure into the December contract delivery period. Industry buying continues into new lows and provided enough support for the bounce. Industry coverage is in a much better position than a few months ago and while buying has thinned, there remains patient scale down buying in place. Fundamentally not much to talk about. Brazil continues to see agreeable weather for the developing crop but talk continues to grow tempering expectations of a bumper crop. Perhaps it is out of caution. The truth is there remains a good amount of time for the crop to reach harvest period and certainly expecting perfection is not the most rational approach. It is becoming more obvious though that the market really needs a good crop from Brazil and will be watching development closely. Colombia continues to struggle with delays and the lingering La Nina weather phenomenon has wet weather continuing and expectations for production to remain low through the next midcrop. Physical business has remained quiet and differentials stable. There remains a general feeling of unwillingness to sell forward from most producers. With the market basically “between crops” this is not that unusual. The macro picture was more commodity negative overall, so little impact. The Us Dollar remains choppy but weak.

Technically the market has a positive bias but that is weakening with today’s action. Still with the early failed attempt to break last week’s low even a weak positive bias is notable. While it is far too soon to call for a major reversal there is certainly room for at least a corrective rally after the decline of the last month. Would expect that prices toward 180 would be easily achievable over the coming weeks. Chart patterns have seen downside expectations exceeded certainly but would remains skeptical of substantially additional losses. Overall, would try to remain sidelined as the market finds equilibrium but certainly continue to see current levels as good value to add needed coverage. While the dust has settled a bit after the recent contract expiry volatility could return quickly given the large speculative positions. Would remain cautious in the weeks ahead.

Tea Market

Aside from growing concerns about the Argentine crop starting late there is little fresh to talk about this week. Factories are open but flow has been very light so far. Globally, more of the same as lower grade teas continue to move very slowly and inventories continue to build. While freight rates from Asia have improved dramatically there is no indication that South America will enjoy the same impacts anytime soon. Overall, things remained steady again this week with little news on the macro side of things.

For further insight and analysis on current coffee and tea market data, take a look at the weekly report from the Westrock Coffee commodities team.

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