Morgan Stanley Coffee Report - January 10th'18

 
A lackluster trading session in KC settle down 120 points at 123.95 with the high for the day (125.95 +.80)in place by 7 am, and from 8:10 a.m. onward, the market remained entrenched in negative territory.  The first higher high in 6 day’s proved fleeting as momentum sellers reemerged, and as the selling dried up yesterday’s low held and support was found at the 12540, 26 day moving average. Open interest increased by 4,855 lots noteworthy for a day the market closed unchanged, yet all but the close traded in the red.  The assumption is there was a mélange of new non-commercial shorts, index and commercial longs and a fair chunk of new spreads, however we look forward to Friday’s COT for greater clarity.  Since the beginning of the year Coffee and Sugar have had a strong positive price correlation, apparently under the influence of similar new year spec flows, not driven by action in the BRL.  The lowest settlement since Boxing Day comes in 10 cents above last year’s low (11550), which for point of reference occurred when funds were net short 37,000 lots, compared to what is likely 50,000+ as of today’s close.  While much attention has been paid to index fund buying during the reallocation, the question remains how much more selling power is left from the seemingly relentless systems funds?