Morgan Stanley Coffee Report - May 6, 2020

Arabica posted a single tick loss to close 110.60 in a hard fought yet quiet session.  Prices were down early as the BRL outlook weighed on trader’s minds after Fitch lowered the outlook for the country and ahead of today’s expected Selic rate cut.  Nonetheless, even those negative prints were misleading as they were a mere extension of yesterday’s closing prints which came in below the official settlement an hour earlier.  KC traded in a 75 point band from the opening until 8am when prices dropped sharply with the FX sinking to support around 5.65.  With no follow up selling however, futures stabilized and were cautiously bid higher.  Honduran exports were reported 176k / 19% YoY for April, following yesterday’s 32% decline in Colombian exports, reinforcing some of the supply chain concerns.  While the BRL fell to the brink of 5.70, the dollar gained .3%, and the commodity complex suffered, coffee rallied back, falling just shy of yesterday’s high during the settlement window.  While a positive tick would have been appreciated by the bulls, the session had to provide some hope nonetheless.  Robusta managed what Arabica couldn’t, climbing $1 into green territory to close 1201 before a last minute retreat.   Spreads were stable again.