Morgan Stanley Coffee Report Feb 17, 2016

A sleepy coffee market disengaged from the crude correlation in the most depressing way possible, settling in negative territory while commodities gained steam along with overseas markets.  The BRL spent much of the day in positive territory, yet moments after KC’s close S&P cut the country’s credit rating from BB to BB+ with a negative outlook.  Reaction was swift though not terribly substantive, as the currency widened to roughly 4.00, well-tread territory.  US economic indicators were generally positive today, while Banxico announced a surprise interest rate hike of 50 bps as it announced a plan to sell USD in an attempt to stabilize the currency.  A well-regarded trade house released what seemed to be a friendly research report, however with the lengths market participants go to in an effort to protect their intellectual property these days, there was little surprise that the number of eyes on the release were limited.  With a wide confluence of friendly events in the market today, the performance must be considered disappointing.  As certs decline another 3166 bags and spreads remain firm, hope remains, yet on days like these one can forgive the optimistic for having their resolve tested.  With 1000 K/N -175 spreads trading at 15 points late in the day, it is clear there are still fundamental believers.  Perhaps Coffee is just a day late to the party, and this will all be forgotten tomorrow.