Morgan Stanley coffee report - July 30

Arabica posted a wild day while causing moments of terror on both sides of the trade, ultimately closing 115.35, +3.75.  Prices began the day building on yesterday’s gains, trading a new of the moment high for what has been a 21.10c bottom to top rally since July 15th.    After backing off slightly and consolidating the gains through the overseas session, things really got moving just after US macro data was released.  Futures spiked 190 points higher after better than anticipated GDP numbers (albeit worse  than expected continuing jobless claims) as 1700 lots traded.  Rather than pullback KC continued an FX-abetted climb, ascending another 165 points over the next roughly hour and a half.  The following hour was less kind to the longs, as the entire move and more was erased, with KC shedding 395 points.  It appeared at this time that rather than a clear breakout rally the charts would record a rejection and failure.  However, systematic buyers were not done and KC rallied back, closing the day just below the high of the 8:33 move.  The trade / exporters reported in unanimity a monster transaction day in the Brazilian market overnight, and while hedge flow did not seem to keep pace with the reports of internal purchasing, Brazil was an aggressive seller throughout the session.  Reports of capacity constraints may have limited some of the flow.  Traders are now left to determine what factor will be determinative in the near-term, a brewing macro / fx  / trend long coffee trade, or a motivated Brazilian producer and skeptical trade house contingent.  Z/H extended its gains, closing 20 points stronger on the high, -1.65, and the Z0/Z1 spread gained 65 points to -5.45.  U/Z again sputtered, unchanged at -2.90.  London proved less equipped to deal with commercial selling as Sept closed 1340, -4.  U/X widened $2 to -16.  Arabica certs fell 3175 bags, all in Antwerp, while Robusta certs declined 250 tons, 230 of them in London.