Morgan Stanley Coffee Report - October 3'18

Arabica posted a wild ride, settling 105 points lower at 106.60 just above the Dec based UBB.  Prices predictably rallied on system short covering early, shaking off good clips of Brazil hedging.  With buy signals flashing, & the BRL accelerating gains on its way from 3.87 to 3.82 over the opening hour, KC was able to rally to 110.80 through a wall of origin selling.  However, as the BRL weakened from 10:30am EDT onwards towards 3.90, and correlated markets like sugar, cocoa, and especially robusta slipped into negative territory, spec buying proved unable to keep pace with the flood of origin & trade house profit taking.  To cap off a disappointing performance, MOC selling inundated the KC at the end of the day all but assuring the negative close.  Robusta, 1588, -16, also fell on the day as spec selling pressured prices lower and roasters were unwilling to accommodate the full brunt of the flow.  Most surprising to many was the weakness in XF specifically, as the front month spread fell to a $2 premium.  The market dynamics are fluid as the crop approaches, and nearby price action will require continued monitoring.