Morgan Stanley Coffee Report - January 14, 2021

Arabica shook off early weakness en route to a 210 point gain, settling 127.35.  Price followed the FX for the bulk of the day and familiar commodities moved largely in unison from 9am onwards as tailwinds were many.  The BRL gained 2%, the DXY weakened, and commodities were up across the board with few exceptions; every ag printed higher, led by sugar at +5.24%, and KC would not be left behind as early shorts were forced to cover.  A potential trucker strike in Brazil on Feb 1 seemed to drive little concern, probably appropriate for as devastating as 2018’s was to Brazil the impact on coffee was short lived and only generated 8c of bottom to top gains, followed by an immediate retreat.  Jobless claims far exceeded expectations yet consensus that the worst has likely passed; optimism around a larger relief package in the pipeline to pass the recently passed measure paired with comments from Fed Chair Powell that “now is not the time” to discuss and exit from their easy monetary policy regime.    In options upside was bid for a second day, yet spreads refused to come along for the ride; HK weakened a tick while KN and HH both gained 5 points.  Certs returned to their familiar ways, increasing 12,423 bags on a gross inflow of 13,900 Brazils which passed at 98% rate.  125,275 bags remain pending.  London refused to follow recording an unch session at 1332.  Spreads were slightly bid, up a dollar each in HK and KN, with some structure buying likely generated by paper buying 2000 K/H 0 Call CSO.