Morgan Stanley Coffee Report - February 16, 2021

​Arabica reversed last Wednesday to Friday’s weakness, gaining 315 points to close 126.20.  Futures gapped higher off Friday’s close, a pattern noted in the BCOM as well, aided by a weaker DXY during the opening hours.  Volume was sizeable as prices rose through the 50dma and it appeared to drive covering by recent shorts.  While the DXY regained ground from roughly 8am onwards and was around unchanged by the close, the upwards trajectory in KC was unchanged ending the day near the top of the BCOM leaderboard, eclipsed only by commodities impacted by the frigid weather across the US (NatGas, Wheat, KC Wheat).  Interestingly, with one final day of active trading before Thursday’s March FND, the answer for the strength and volume was not clean up – KCK implied outright volume was 17,638, the heaviest day of KCK outright trading by far and nearly 7k above Friday’s.  It was also the most for any individual contract since Jan 15th, yet spreads took a breather at 25,728 (16,565 of them H based), around 2k less than the 10 day average (out of total exchange volume of 65,054, 6k more than the 10 day average).  With OI having fallen in the front to 15,997 lots entering the day, EFP’s notching 1111, EFS’s 47, and total turnover in futures at 17,216, it appears an orderly FND is on tap.  H/K gained a tick to -1.85, trading to both -1.95 and -1.80 intraday.  Brazil will return midday tomorrow as Carnaval wraps up (albeit in its less than festive form thanks to Covid), perhaps most impactfully driving BRL related trading back into the market.  London gained $7 as well, settling 1363 in the active K.  Tomorrow is RCH option expiration.