Morgan Stanley Coffee Report - May 17, 2021

​Arabica gained 75 points to 145.75 while holding the uptrend line and trading an essentially equivalent VWAP (145.77 vs 145.69 Friday), while Robusta fell $1 to 1459.  Friday’s COT was taken as a non-event at best, or disappointment for some, though it  bears noting that a 975 point settle to settle rally, or 679 points VWAP over VWAP on excellent volume only generating a net buy of only 794 lots from the non-commercial perhaps gives some indication of the liquidity balance.  With demand trends & supply disruption both on traders’ minds today’s GCA report is the next opportunity for an injection of life into KC.  With a 5,762,567 print, +83.405 MoM / -111,409 YoY, well within commercial traders’ range, it seems unlikely to have much impact.  Volume certainly suggested a lack of commitment as total exchange & outright volume in the 2 most active contracts alike were its lowest since March 17th.  Given focus on inflation, if the GCA number fails to provide market direction (a reasonable bet given even the fleeting impact of the surprise grading in NY, combined with the lack of surprise factor), perhaps Wednesday’s Fed minutes could.  While nothing is expected, it is the most logical next point of focus for a market is search of inputs.  As Morgan Stanley Research notes, “let's not forget that sustained higher underlying inflation, as well as longer-run inflation expectations fits the Fed's framework and to the extent those increases remain modestly above what's consistent with its 2% goal, the Fed would be pleased.”  Spreads weren’t able to keep pace, as NU weakened a tick to -2.00  on unimpressive action and NN a pair to -8.55.  Shorts see little rush to roll and the -2.00 bid was quite accommodative well before the roll period as the net Index long sits at a record 79,230.