Morgan Stanley Coffee Report

A spread dominated day started off with a slow, choppy trend lower, initially ignoring a positive crude induced-macro performance.  Decreasing US inventories and positive comments from Kuwait regarding the willingness of producing countries to curb output, with or without the participation of Iran, were reported, while US production also fell for the 4th straight week.  However, within 45 minutes of trading the well-correlated commodities found their way back in sync, a fact that became even more apparent at 8am EDT when the CRB prints commenced.  In a case of chickens and eggs, the BRL relationship was notable throughout the day, perhaps a reminder of the influence the oil markets exert on the nation.  Arguably it is an even better aide-mémoire of how much the fate of emerging markets generally are swayed by the global growth proxy trade that crude serves as.  While important stories trickled out of Brazil today, early optimism over the coming impeachment slowly faded and turned into reports of opponents of Dilma trading their votes for change into change in their pockets.  However, it is entirely possible that these political machinations took a backseat to the release of the Fed minutes and the pre-trading of what those comments might contain.  With Chairwoman Yellen’s surprisingly dovish comments of last week still overhanging the market, a keen eye was sure to be cast on the report looking for an indication that this was a consensus view.  Post release it is apparent that a range of views were argued at the mid-March meeting,  and caution over the global economic risks was central in the minds of the committee membership.  The DXY rallied quickly in the wake of the release, while the BRL slid in response, trading action that even if reversed later indicate global concerns are paramount to more narrow national interests, even ones as fundamentally critical to a country as those in Brazil.  It would be nice to say more about coffee fundamentals, but it is clear that the market remains tied to the fate of outside influences.