Morgan Stanley Coffee Report - May 2'18

Coffee shook off a strong dollar, and a weak overnight BRL close, to rally 200 points on the day while settling 124.80.  Brazil was closed for the day, and were likely pleased to have much of their scale selling filled as they enjoyed their caipirinhias by the pool.  OI revealed a fair amount of short covering – or was perceived to have – and the first thought is that another bout was ongoing throughout today as several momentum signals have been flipped.  Perhaps the lead has been buried, as robusta was the story on the day, albeit a condensed cliff notes version that could have been carried out in a 10 minute session.  A fairly monstrous 5093 notices changed hands 1x1 on FND.  Much discussion was had over whether such volume can be merchandized in a short enough window to make the cost worthwhile, and even more was held over the disparity in OI vs  total certs available, and the possibility of a short squeeze in the offing.  Conversations aside, the market seemed unable to care until the close when prices exploded to the highest levels since November 16th , convincingly taking out the top end of the 5 month range.  The $66 range posted on the close was a mere $1 less than the entire range of April!  With Vietnam returning from a four day holiday one imagines they will be quite pleased with the fresh set of circumstances.