Morgan Stanley Coffee Report - January 11, 2021

Arabica fell 225 points on day 2 of the index rebalance settling 121.45.  Prices dipped as low 118.75 intraday on the spot March contract, yet held on a continuation basis after narrowly breaking through the 38.2% retracement of the recent Nov 2nd low through January 4th high.  Macro pressure was apparent all along as coffee, already lacking in motivated buyers, fell hard on a morning of weakness across risk markets.  Commodities were uniformly lower with precious few exceptions, equities probed a three day low, the dollar rallied notably, the BRL weakened roughly 1.5%,  and Bitcoin, a resurgent risk measure, plummeted 20% at its low at least in part due to dollar strength per financial media reports.  As the extremes of that early  trading pattern eased KC climbed off the floor, taking a cue from a turn in the DXY shortly beforehand.  Commodities remained weak, as did other markets, yet the lows were in for most markets around 10am.  Discretionary buying interest – both spec and commercial – was noted into the lows as value seeking picked up.  Outright volumes were above the 10 day average though well below Wednesday’s highwater mark, while the total volumes continue to be impressive, today aided by 17,567 spreads, the largest since December 10th.  Both the spot HK (-2.10, -.05) and annual HH (-9.65, -.20) saw fresh selling and K outright volumes continue to increase.  London posted a doji pattern, closing a mere $1 (1315, -3) below the opening 1316 price after falling to its lowest level (2nd month continuation) since Oct 22 intraday at 1296.  Spread volumes, 13,637 total, were heavy and notably featured size down the curve; 4089 N/X were only narrowly eclipsed by 4236 H/K. Nonetheless both the HK and HH were settled unchanged.