Morgan Stanley Coffee Report - March 9, 2021

​Arabica shook off early BRL related losses in the process of climbing out of an intraday 2.55c decline, settling 130.40, +1.25.  The Brazilian currency traded near 10 month lows after KC closed yesterday on the news that former Brazilian President Lula had his conviction in the Carwash scandal overturned, opening the door for him to run for office again, while setting the expectation for a poor KC start.  The FX tumbled again this morning, recording a new low of 5.8789.  Indeed this weighed on KC at the outset, though opening sales were quickly underwater and the overseas session was generally stable, followed by counterintuitive buying at the 8am bewitching hour.  The BRL lows were in place and on their way to intraday recovery by 8:45am, and KC curved higher through 9:25, trading to the precipice of unchanged after holding around the 50dma for a third day during the traditional pit opening.  With KC bulls optimistic at that point, sellers flooded in, wiping away the double bottom shared with yesterday’s action as coffee plummeted to 126.60, eclipsing the 2/22 breakout day’s low by 15 points.  Opportunistic buying held the price steady and after an attempt to break lower, price reversed higher dramatically, trading 1200+ outright lots from 11:02 to 11:07 as prices spiked 255 points upwards.  The shorts spent the balance of the session covering while urging futures higher en route to a final print of 131.70, just off the 132.00 high recorded in the post-settle hour.  By end of day, not only had KC turned green, but the BRL was back in positive (if still historically cheap) territory and the DXY was down -.35% (at time of KC close).  Nearby spreads were unchanged, yet the KK closed ticks weaker at -8.25, the lowest level since Feb 12th.  London was even more impressive in terms of settlement, arresting 7 days of losses and $154 pullback since the end of Feb en route to a 1400, +39 day.  Never digging quite the hole her sister market did, the path upwards was nonetheless just as steep.  The heaviest volume traded at 10:24 as futures fell $10 en route to intraday lows (1330), while outright volume overall was stellar (12,416 in RCK alone).