Morgan Stanley Coffee Report - May 7, 2021

​Arabica closed out the week with a 140 point retracement to 152.90, while Robusta fell $8 to 1539.  Prices under modest pressure from the open, and while buyers engaged ahead of 8am, theoretically aided by a surprise April jobs number (+266k vs 1M survey, revised down from 916k to 770k in march as well) driving bullish FX inputs at 8:30, KC was never able to dig out of its hole completely.  With economic data done for the session at 10am, and sellers taking control in other softs simultaneously, prices plummeted to 149.25, erasing 3c in 20 minutes and putting Arabica briefly 500 lower on the day.  With positioning stretched, and a Friday session after a long week of trading in play, exhaustion seemed to be the theme on the chats.  At no point did KCN manage a 500 lot minute until the close, and fairly immaterial paper bids coming to the market sparked a sharp reversal higher through 150.  After climbing off the lows prices largely remained bounded in by a 151/152 range from 10:50 until the settlement window, when the heaviest volume of the day showed up (874 lots at 12:24) and price spiked through a scarcity of offers near the day’s opening highs of 154.10, maxing out at 153.85.   Outright volume was back in-line with recent norms, and notably the Sep and Dec contracts saw declining participation; estimated KCZ outright volume of 421 lots was the lightest since we began tracking it with KCK going into notice period.  Technically the charts remains bullish and today’s COT will be stale after Wednesday & Thursday’s action, so what cues KC takes come Monday will be instructive.  As of Tuesday sizeable numbers continue to be recorded on the commercial side; basis the CIT the Gross Commercial Short was just shy of last week’s all-time record of 205,575 lots, the Net Comm was short 118,722, around 10k lots below record, and the Net-Non Comm was nearly unchanged as both new shorts and new longs came in, net long 33,869, +304.   On the London side, volume too was modest, although the standout trade of the day in either market came via the RCN 1625 / 1425 Fence 2000x, delta neutral.  The COT on that side of the coffee street was an eye popper as long commercials fled (gross long producer / merchant was down 7661, net change was -10,216) and manages money shorts were forced to cover, buying back 12,636 shorts and adding 2049 longs for a 16,1665 net buy event.  The gross managed money short is now a mere 5014 lots as of Tuesday, which is remarkably not even the low in the past year, as Dec 1st saw only a 2626 lot gross short, and Sept 15th a slightly shier 2214.