Morgan Stanley Coffee Report - May 6, 2021

​Arabica extended yesterday’s gains another 4.45c to 154.30, closing above both the psychological 150 line and the previous contract high of 153.60, while Robusta gained a more modest $9 to 1547.  Options were predictably active as traders were able to digest yesterday’s move overnight and formulate plans for today’s action, and the 26,053 calls (inclusive of CSOs – more on that in a moment) were the most traded since at least Jan 1 2010, and aggregate options (calls + puts) of 42,137 were the second most in that decade+ window, trailing only  the put-driven day of March 3, 2020 (27,633 puts that session – a record for either side of the put / call equation).  4500 of those calls were via the U/Z -2.50 / -1.75 CS and the U/Z -2.00 / -2.50 Fence, which fits with another statistical point of intrigue.  While outright trade was above normal, it was about the same as yesterday and roughly equivalent to the April 23 and 26 sessions; heavier than the 2 week average by about 34% but not unprecedented.  Spreads however were atypically active, interesting on a day when such heavy focus would normally be on the continued ascent of the flat price and options.  Aggregate futures spreads totaled 33,599 lots (based on a Webice tally – keep in mind Ice totals on their end of day report include futures / options combinations, spreads and strategies, not just future spreads), the most since day 4 of the May index roll.  U/Z volume was 10,923, more than double the prior max of 4637 on April 27th as the spread traded its recent swing high and found defense.  And while Arabica has clear momentum & positioning based reasons for the price action today, it would be remiss not to highlight the broader factors that have helped drive KC to this point and which were present again; the BRL gained 1.5% at the time of KC’s close after yesterday’s BCB hike and telegraph of an additional action at the next meeting, bringing the critical producer’s currency to its strongest level since January, the DXY weakened a significant 0.40%, and the BCOM leader table was littered with ags and metals, coffee trailing only cotton and silver as every on-Broadway Ag was positive, and all metals save zinc were likewise.  Tomorrow is the end of a remarkable week, and with what should be a special COT released after the close, it will be interesting what path KC chooses.