Morgan Stanley Coffee Report - May 13, 2021

​Coffee fell 10 points to 146.40, a fair representation of the overall day’s trading (146.21 VWAP), while Robusta fared less well, losing $19 to 1495.  It was a curious day in all; while equities and commodities alike began the day under pressure, and Cocoa (a somewhat if not completely “off-broadway” market as a non-BCOM participant) closely tracked the DXY, Coffee began to take its cue from the FX world as well.  By 9am KC was the lone non-meat market in the black, and while the Dollar had been a rough gauge for KC support early, the BRL reassumed its position as the key input upon commencement of BMF trading.  That in itself was remarkable given overall external forces, although it bears mention that KC has not been the most inflation correlated commodity (logical as it is for that to be true).  However, what was equally noteworthy was the quiet strength the market maintained from 11am through noon, as both the BRL and DXY turned headwind yet KC remained stubbornly elevated, trading between 147 and 147.50, just off the day’s 147.90 high.  It is unclear what held KC aloft through that typically, and manifestly, quiet window, but shortly after 12pm EDT the gravity of the day became too much and Arabica fell into and through the settlement window, generating that negative closing print.  Nonetheless at -0.07% down on the day, KC was just off the commodity leaderboard’s pole position.  Safe-haven Gold gained 0.16% as of 2:55pm, the lone better performer on the day at the time of writing.  On a day of head-scratching trading, one of the bigger surprises materialized after the close.  After pendings had run themselves down to a mere 16,360 bags and it looked like the grading campaign was nearly over, inventories awaiting Ice’s blessing roared back a net 50,946 to 67,306 total.  While that in itself would be noteworthy given timing, the destination was moreso.  While the market has become desensitized to European grading, New York saw 50,586 bags join the party, remarkable for a port that currently only has 40,673 bags of certs in total.  Given replacement differentials, futures prices, and the perception of improving demand in the US, it is quite possible that the grading is simply good risk management, a “call” of sorts on margins.  Whether the market takes it as such, or rather a surprising signal of softer than believed demand, will only be known in time.  NU closed unchanged at -1.95, while NN fell a relatively dramatic 35 points to -8.00.  Robusta saw its heaviest outright trading in the July contract since May 6th, roughly 4600 lots above the past two days.  Notably,  this was not true in U or X, and spreads were below average as well.  The bid / ask volume split was virtually identical, so OI will be worth watching for insight into what drove this activity in the spot contract.