Morgan Stanley Coffee Report - January 18'18

Coffee rose on a technical correction climbing 265 points to 123.10 (KCH8) and posting a higher high.  At the point of yesterday’s nadir Arabica had shed 11.5c from the Jan 5th high, nearly equal to the prior 11.85c rally over a 6 day period commencing on Christmas (trading) Eve.  This has become a market of extremes, albeit narrowly defined ones, with moves in the range either finding air or gravity before running into walls of size.  It is worth noting that in the past 3 months KCH has been entirely constrained within a 118-133 range, and only wandered outside the 120-130 range 3 times to the upside and 6 times to the downside.  Volume on the day was aided by another dose of heavy spread action, though the breakdown was more egalitarian with 19k+ total switches being spread up and down the board.  HK tightened a tick to settle -2.45  on 5272 lots.  Options were moderately busy, with the H 110 / 105 PS (1100x) taking the top spot as paper closed out a condor.  Similar trading was noted in sugar in the H 12 / 11 PS (7700x) and it is assumed to have been a softs-centric fund trade.  Robusta too was buoyant, rising $42 to 1769 (RCH8) as H/K exploded $11 higher to +15 on 4000+ lots of volume.  Both GCA and ECF stocks were released exhibiting inventory draws – the GCAs slipping by 106k bags in December and the ECF by 580k bags in lagged reporting from November.