Morgan Stanley Coffee Report - February 8, 2021

​A day after yesterday’s wild ride KC futures settled down as KCH gained 45 points to close 124.50 while remaining in a 205 point range.  Outright volumes were below recent norms with a noted shift in favor of K activity, although H remains dominant and at least for today maintains the edge in OI.  However, day 1 of the core index roll exhibited the expected volume increase in spreads as most of the day was spent in firmer territory, peaking with an active -2.05/-2.00 bid ask from roughly 9:30am to 11:15.  H/K would ultimately close -2.15 as the indexes exerted pressure going into the settlement period, yet the bulk of the rolling was done at stronger levels, the prompt spread recording a -2.07 VWAP on 13.5k lots.  This extends a recent trend towards weaker structure on day 1 of index rolls, likely a function of increasing long side spec participation.  K/N also saw good size on the day, trading nearly 3k times and gaining a tick to -1.90, which was actually stronger than the day’s -1.93VWAP.  Roll pressure aside, futures remain rangebound after yesterday’s false breakout; the 124.50 settle / 124.70VWAP on the day slots in well with the 2 most recent COT reporting weeks which saw 124.44 and 124.82 VWAPs as traders continue to debate demand unknowns vs forward supply and macro inputs.  On the weekly chart KC recorded a positive performance, posting an outside week and positive close.  London was even quieter in outright trading, closing 1359, unchanged basis the active May contract and a mere $14 range.  H/K continues to waver to and fro, closing $3 weaker at -19.