Morgan Stanley Coffee Report

Quarter end considerations marked the tempo of today’s trading as books were closed on what has been a very interesting month of March.   The month came in like a lion, with a 23 cent rally from 11340, 5 points above a 2 year plus low, in a fund buying frenzy which caused Arabica prices to climb 23 cents higher (20%), by the 23rd, and has been followed by what appears, until and unless proven otherwise, to be a phase of consolidation.   Weakness in the dollar, courtesy of a slowdown in global economic conditions, ran tangentially to political turmoil in Brazil as the “Carwash” scandal probed into the highest ranks of Brazilian government.  The real strengthened by 12% as financial markets took solace in the potential that President Rousseff might face impeachment, and the dollar index alone weakened by 4%, all combined to catalyze a 10% rally in the CRB index and along with it a much longed for boost in coffee prices.  A drop of another 115,000 bags of certified stocks on the month brought the ytd drawdown to 296,000 bags lending a bid to the structure, coincident to funds reversing their net shorts to a net long position at a record pace.  March certainly provided a welcome relief from the tedium, leaving one to ponder what April will do for an encore.