Morgan Stanley Coffee Report - June 7'19

Arabica closed the week in typically ridiculous fashion, falling 110 points to 100.95 under near constant pressure.  KCN posted a higher high, higher low, negative close on all of the daily, weekly and monthly charts (although at this point the weekly is the monthly, so treat that as you will).  Trading desks were a bit thin in coffee with the Berlin event sucking away some of the commercial contingent, Monday’s Swiss holiday extending into some bridged weekends, and summer Friday absences ramping up.  Some have argued that the weakness in coffee and other ags could have been a function of pre-COT positioning with anticipation of a bearish report across those markets.  Also possible was the impact of index fund rebalancing.  With the ag rallies / energy selloffs shifting notional exposure to various markets (including coffee), entries into and exits from those respective commodities were expected.  The outlier nature of certain Ag products that are not in the prominent indexes (CC +1.4%) could add weight to that argument.  The prompt spread (N/U) weakened on day one of the combined index roll for the second consecutive time after having never done so in the prior 23 roll periods, settling 10 points weaker at -2.65.  London closed $1 weaker at 1430 in tight trading. N/U also closed on its low, -25 after tightening in to -22 intraday.  The arb closed 37.6.