Morgan Stanley Coffee Report - Dec 2, 2020

Arabica posted a more active outright trading session than yesterday’s, even as it battled to a modest 65 point gain (119.10) inside a 235 point range.  Futures volatility was subdued during the overseas session, and traditional pit hours brought renewed selling – pressuring option volatility with it.  Action was choppy and while a clear sell-side weight was present for much of the day, hitting a 117.20 low around 10:30 under spec pressure, a steady rise across commodities as well as value seekers among coffee endemics helped put in a floor and ultimately ran prices to intraday highs as jobbers were forced to cover.  Structure made a partial daily recovery, HK gaining 15 points to -1.80 and HH 30 to -7.95, aiding sentiment.  Wetter weather is expected in Brazil, yet this has often been true and needs to be realized.  London fell $40 to 1343 after triggering stops around 8am EST.  Structure was again at the forefront, undoing recent strength in FH which fell a dramatic $16 to -21.  Appropriately given that the spot spread was the most notable coffee mover on the day, the FH -25 P CSO was the top strike across both markets trading 1700x at $6.