Morgan Stanley Coffee Report - Nov 30, 2020

Arabica lost 90 points, closing 123.30 on the final day of November.  Prices again narrowly pierced the 61.8% retracement before running into resistance, and selling across Ags suggested a possible spec unwind of a cross-product strategy into month end.  However, relatively heavy selling just after 11am found no follow through and rather than post a disappointing collapse, KC regained its footing and saw a final print only 90 points off the intraday high.  While spreads weakened down the curve the worst intraday losses were avoided and HK fell 15 points to -1.80 and HH slipped 80 to -7.55.  Focus continued to be largely on diminished expectations for the 21/22 Brazil crop and it bears reminder, as cliché as it might be, that these are futures contracts.  With record prices prevailing through this past August, eclipsing the prior record set in March (KC2, BRL adjusted), unusually large selling forward has been recorded while availability may be pared more than originally expected, lightening longer term hedge pressure.  A fresh article made the Bloomberg main page just before the market closed casting a further spotlight on Friday’s driving story.  Whether this becomes the prevailing narrative will be determined in the coming days and weeks; in the more immediate term a clear area of technical resistance has built and pending inventories continue to increase – another 5760 bags coming into Antwerp today for a grand total 99,985.  Of the 430 unique lots graded in November, 328 passed for a 76.28% effective rate.  402 lots passed on cup either on initial or appeal, which is higher than the total 328 lots certified, which implies that color must have been the sole source of rejection for some of the coffee.  Robusta lost $10 to close 1401, equal in percentage terms to KC.