Morgan Stanley Coffee Report - Sept. 22, 2020

Arabica was unable maintain its early gains off yesterday’s marginally positive performance, wasting what was at one point a 280 point rally to settle down 145 points at 110.65.  FX was surely a weight as the BRL lost 1% and the DXY gained .35%, however the dampened sentiment of traders and lack of urgency on the part of roasters hardly provided a bullish platform.  In the process of selling off the KC2 200dma was taken out, while the swing low of 112.15 held by a sliver, forming an effective double bottom with today’s 112.20 low in KCH.  Should that fall as well, the 110.90 and 110.10 levels, again basis KC2/KCH, would be the next obvious levels of support.  Some silver linings emerged, as volume fell on the day and the VWAP for the session in the active KCZ was actually higher than yesterday’s albeit by the slimmest of margins, 111.94 to 111.92.  The swing low did hold for the day, and spreads resisted further material weakness (ZH -1.80, +.05, ZZ -7.15, -.05).  The yield was basically unchanged and post-close certs were revealed to have fallen another 3003 bags with all 2199 new gradings failing to pass muster.  The 1100 in NY would appear to be a LatAm mild of some sort, while the 1099 bags in Antwerp are not an easily divisible number by typical Brazilian standards – the focus of market scrutiny.  London lost $6, closing 1341, holding the August 11th settlement low by $4.  While the chart looks better than New York’s, it will need to build on today’s moral victory to avoid damage.  XF fell $1 to -16.  Certs fell another 4 lots after yesterday’s 22, yet month to date are up 48.