Morgan Stanley Coffee Report - May 29, 2021

An electric day of trading in the coffee markets as Arabica printed another contract high (163.15) in KCN before settling 162.35 and Robusta roared to life with a $66 gain to 1583 (1602 high, RCN).  On a 2nd month continuation,  today's peak of 165.10 was the highest since Nov 2016 when prices hit 179.55, while RC2 traded its highest level (1623) since Nov 2018.  Futures accelerated from the opening on an overnight article around the ongoing water crisis in Brazil and the state governments for 5 key agri regions attempts to reduce stress on a national electric system reliant on hydro power.  Buying was noted out of Brazil as risk management considerations were key and the gamut of specs, roasters, and trade all participated in various forms on the upward push.  Volumes stood out as interest was uncovered down the curve; KCZ estimated outright traded was double that of yesterday and the highest in a month, while the front 3 contracts saw their best outright activity since May 6th.  Spreads continue to trade in size (25,233 total) at the familiar -1.95 / -2.00 pricing as the roll out of N picks up.  Option volumes were spectacular as well, 43,838 total, the most since March 2020.  AA’s were also noted down the curve, including 9 lots in March 2024, the longest dated contract listed.  London typically failed to keep pace as the NN arb traded to 91.50 before settling 90.73, yet was impressive as well in its own way.  RCN outright activity (12,250) was more than double the 10 day average (5358) and more than triple Monday and Tuesdays’, while aggregate volume was the most since May 5th.  Spreads were active there as well in the prime of their Index period, yet saw little change, N/U widening $1 to -22 and U/X tightening $2 to -15.  As a reminder both markets will be closed Monday