Morgan Stanley Coffee Report - March 31, 2021

​Arabica held its ground above the 120 line, settling 123.50, +.90 while trading on heavy volume.  Outright action in the active KCK contract saw its thickest trading since March 1st, bookending a month where coffee lost 925 points from open to close, and 1455 from high to low.  While selling was the dominant feature through 10am, discretionary bids of various kinds helped managed the decline through the traditional heavy volume periods.  A strong move in the BRL was a welcome aid for the bulls – a factor that in the past 2 weeks has been an unreliable indicator – as the FX gained 1.5% while KC traded and another 1% after the fact as a shakeup in the Brazilian cabinet and ministries over the past 2 days has driven optimism around budget progress.  Economic data for the top coffee producing nation was poor (unemployment rate ticked up to 14.2%, Feb’s primary budget balance  -11.8B vs +58.4B in Jan, net debt to GDP of 61.63%, just shy of December’s record 62.70%), yet for all but the unemployment rate was that data considered a beat of consensus expectations.  Spread volume was resurgent as well, topping 26k for a second consecutive session, roughly 10k above the 10 day average, as the index roll approaches next week in advance of KCK FND.  Structure was bid on that increase in activity, KN -1.90s, +.15, NU -1.90s, +.05, KK -9.25s, +.20.  London was unable to keep pace on the day however, losing $6 to 1342.