Morgan Stanley coffee report - May 7, 2020

KC (109.00, -1.60) posted an FX dominated session, gapping lower on the open after yesterday’s surprise 75bps Selic rate cut.  Selling pressure was noted from the beginning, ramping up as the BRL opened and quickly traded an interim record low of 5.79+.  Midmorning spec buying, seeking value in the currency driven weakness, helped lift price before succumbing to the continued pressure as the BRL tracked ever weaker.  It is probably not coincidental that the tide in both KC and the BRL turned together with the BRL trading to 5.8744 and coffee 106.30 at their most desperate.  The combination of BCB swap auctions and a weakening of the DXY (it too found an intraday max around the same timing) allowed for a retracement to better levels.  While the BRL “rally” ran out of steam traded back to 5.83, Arabica kept going alongside the dollar as intraday shorts covered and industry added some length with confidence the slide had been arrested – at least for the day.  London traded similarly, losing $15 to close 1186.  NU and UX were slightly stronger.  London certified stock declines again outpaced NY, shedding 2667 bags vs 875 in Arabica.
 

• Tomorrow is June option expiration
• Robusta is closed for May Day
• Arabica will open 7:30am EDT
• (Ice Europe) announces that the Delivery Limits for both London Cocoa and Euro Cocoa (in aggregate) and Robusta Coffee Futures Contracts will revert to 7,500 lots from and including the July 2020 expiries