Morgan Stanley Coffee Report

Coffee posted a volatile day of trading, with KC opening down 125 points following the seemingly innocuous comments of Federal Reserve Chair Janet Yellen yesterday’s afternoon.  While late day reactions in fixed income and the dollar were noted in yesterday’s coffee report, it seemed traders entered today with a renewed axe to grind as the “relative hawkishness” of the FOMC sent the DXY to 14 year highs, yields spiraling, emerging markets crashing, and commodities into a morning long tail spin.  The crux  of the argument seems to fall on Fed inflation expectations, and the potential for fiscal stimulus to drive them, which strikes many as an odd catalyst for lower commodities.  While the macro bears & continued system sellers ran the show for much of the day, buyers emerged in the mid-morning (NY hours) to take advantage, and late day discretionary buyers asserted themselves eventually bringing the market back near the morning’s opening print.  While we tend to focus on New York for little good reason, other than history and volume, even in a year when robusta has offered better fundamental intrigue, the same comments could be made for the robusta market’s price action today minus the opening crash.  Once KC opened the pattern in the markets were remarkably similar, highlighting the interdependency of the two, while notably the closing London print offered some degree of vindication for fundamental traders.