Morgan Stanley Coffee Report - Sept. 2, 2020

Arabica lost 10 points on the day to close 131.30, consolidating just off the past 2 day’s highs. The early hours were dull, trading in a tight range around yesterday’s final print level and negative vs prior settlement.  Shortly after 8am selling began to take control as a new low was printed.  Rather than succumb however, KC shook off a strong dollar (+.5%) and weak commodity complex (BCOM -.9%, on energy and precious metals losses; livestock, industrials, and ags fared better) as a new high for the year was missed by a mere 60 points (basis KC2).  The gains were fleeting, peaking at noon NY time, and declines mounted for a 2nd straight day post close, leaving the final print at 130.50.  In aggregate the day could best be termed mixed as ZH lost 15 points to a nevertheless strong -0.50, Z/Z closed unchanged at -3.50, and volume was slightly lower than the past 2 days.  The final print was coincident to the day’s VWAP.  Some friendly news that while anticipated was nevertheless likely welcomed by the bulls was delivered both midday and post close.  Honduran exports for August fell 46% YoY from 272,375 in 2019 to 147,497. Marketing YTD exports stand at 5.3M bags with a lonely month left before moving into the new crop cycle.  Post-close another cert decline was reported as the stock shed 21,731 bags to a new low of 1,210,011.  1.2M has long been a number that has drawn a consensus view as “mattering,” at least by anecdote.  Part of that decline may have been made of the mid-August damaged bags being removed from the stock as for the first day the caveat “The stock report includes 84,423 bags of Exchange certified coffee stored in damaged licensed stores in Antwerp” is no longer on the data release.  Robusta fell $23 to 1440 while trading a lower low, lower high, lower close.  Nonetheless the trend remains strong and well within the trend channel.  U/X closed +90 in notice period where OI remains stubborn at 2451, while the active XF closed unch at -8.