Morgan Stanley Coffee Report - Nov 7'17

Arabica shook off early grogginess on its way to a 125.55 closing, +160 points.  Correlations were strong on the day (see chart below), with commodities as a whole trading sideways early and finding a convincing bid around 10am – followed by a dollar move that was similar in pattern yet lagged the complex.  Some credit was given to a bullish market report from an oft-quoted analyst suggesting a substantial decrease in Brazilian 18/19 crop potential, yet the timing of the news article matches equally well to the rally in cocoa, and not long before the moves in crude, sugar and others.  While the COT fell in line with market consensus Friday, providing a non-event for a recalibration trade, most discretionary traders struggle to justify prices at current levels with limited Brazilian participation in the nearby contracts.  The Z/H roll is a touch behind schedule and 4700 lots of trading pushed structure in a tick, settling at -3.50.  The hedged Put Spread / Call Spread tandem (legged iron condor) showed up again in the May contract, trading 1500x each on screen.  London slipped a dollar in rangebound trading, settling 1855 basis F, while spreads remained firm.