Morgan Stanley Coffee Report - Dec 10, 2020

Arabica regained it dynamism, gaining 400 points on the heaviest implied outright volume of the month to close 121.05 in a day of big unbroken runs of upside and a thousand papercuts of friendly inputs burdening the shorts.  Positive forward statements from a prominent coffee shop chain released during their investor day after the market close yesterday likely added some strength early in the day as is often the case, broad commodity buying was noted in many markets from 8am onwards (KC being the largest beneficiary in the BCOM after NatGas, perhaps a factor being the otherwise dwindling participation in coffee), a positive CPI print exceeding expectations, a weaker dollar, and a particularly strong BRL (5.035, +2.6%, strongest since June 12th) all helped lift prices.  Nonetheless, looking back to November 17th’s breakout and the formation of the rough 115 / 125 range that has prevailed since, KCH has recorded a dead center VWAP of 120.02 through today.   This session’s 119.84 VWAP was a reminder that while a +400 day is always notable, KC has fashioned an ability to go everywhere and nowhere at once.  With a fresh trade house hitting the Bloomberg ticker with a projected 34% Arabica crop decrease for next year, joining a chorus of other similar public statements from commercials, perhaps some additional support will be provided going into tomorrow’s January option expiration.  HK weakened a tick to -1.80 nonetheless, yet the one year curve tightened 15 points to -7.90.  London trailed in pace as is typical, gaining $17 to 1351, yet managed an impressive outside day reversal, closing $2 off the high after slipping as low as 1317 intraday. FH weakened again however, closing -25, $3 wider.