Morgan Stanley Coffee report - May 22'18

While KCN closed a modest 65 points higher at 120.85, the day’s flow felt stronger than price alone would suggest as systematic buying pulsed through the market throughout.  Good chunks of Brazil selling were noted down the board on our desk, and trade house prop selling accompanied them – presumably sparked in part by that very origin action which has repeatedly been a sign that the market is topping.  The real excitement was in the options arena where vol was bid all day, particularly in the back where the Z 140 and 150 C saw size buying at firm prices.  To reduce the market to any given strike would be foolish; a total 18,435 calls traded on the day vs 6301 puts – fairly monstrous volume.  The BRL was a clear driver for the majority of the day, and the sugar/coffee proxy trade was obvious as well.  Robusta fell $5 to 1790, again topping out at 1799 and failing to crack the psychological barrier of 1800.  Origin took a breather in London from our vantage, though one imagines they will be reengaged if another crack through the top of the long term trend can be achieved.