Morgan Stanley Coffee Report - May 11, 2021

Arabica gained 205 points to 150.10 while London trailed behind with a $14 gain to 1532.  Certs cracked the 2M mark as expected, ringing in at 2,005,124 bags, yet it did so on a second consecutive day of less than impressive results (55% pass rate) after consistently notching near 90% effective approvals for the year to date.  With trading quiet overall, even amidst a volatile session, much of the chatter was focused on considerations both familiar (margins, certs, demand anecdotes) and extended (perhaps the earliest attempts by clients to sniff out consensus on a GCA number we can recall – that data will be released Monday).  KCN outright volume was at its lowest since pre-May FND (April 21), 4k below the 10 day average, and total volume was its thinnest since April 22.  This even as KC traded a 410 point range, trading as low as 147.55 in  the early hours and arresting a 90 minute decline as low as 148.25 (after trading above 150.25 in the approach  to 8am) just after 9:30.  Prices largely followed the BRL, which in turn was closely matched with the BCOM.  Aside from a 5th place performance from copper, the top of the commodity complex was littered with Ags; sugar led the charge and W, S, C, BO, LC, KC, and KW rounded out the rest of the top 9, each gaining at least 1.3%.  Roasters are not yet willing to chase, origin has nuanced limitations on flow, and with spec positioning already heavy, perhaps it shouldn’t be a surprise that familiar intraday proxy trading drove price on an otherwise quiet day.  While the 2c gain was impressive, the day over day VWAP was up only a single tick, 149.96  to 150.01, marking the 150 / 152 range a 4 day area of increasing congestion.  Structure reversed yesterday’s losses, gaining a tick in NU (-1.90) and two in NN (-7.65).