Morgan Stanley Coffee Report - March 21'19

Opportunity wasted, the story of the coffee market.  Arabica futures closed a single tick higher at 94.80, +.05, ignoring the FOMC driven FX inputs overnight.  Late buying ultimately arrived around the traditional US arrival time, driving intraday gains to +1.75 before news hit the wire that former Brazilian President Temer had been arrested.  Reactions to the news were mixed, yet the currency suffered an emotional response widening to 3.83 from 3.77, ultimately taking coffee from intraday highs to intraday lows over the following 90 minutes.  Option volumes were decent, led by paper buying 1500+ N 85p vs 97.75, 8d, 1000+ K 100 C, and 1000 K/N -275 C CSOs at 15 points.  Structure went out trading unchanged, with all the KN volume again in a stable -275 / - 270 range.   London tracked KC closely, gaining $8 to settle 1503.  A strong bout of MOC buying lifted the market back through the 1500 strike after weakening off the highs post BRL move.  K/N briefly inverted just after 8am EDT, driven in to par by around 750 lots of buying, adding an extra tick to +1 on small volume shortly thereafter.