Morgan Stanley Coffee Report

The day started with a story circulating that President Rousseff would be  offering ex-president Lula a ministry position in order to avoid his being jailed in the Carwash probe.   Lula requested at a breakfast meeting that senators take a more critical stance toward the way the public prosecutor is handling the probe and requested that lawmakers should publicly urge for more “responsible” investigations.  The Senators are unlikely to follow Lula’s suggestion, especially since many of the same senators are also being investigated and will be reluctant to criticize the prosecutors.  The real traded with a positive bias which aided in keeping coffee prices aloft to trade a 6th day of higher lows and 5th of higher high’s, in what has been largely a currency driven rally. The low for the day of 12065 was scored on the opening but prices easily gravitated higher to fill the heretofore elusive 11985-12210 gap during the first 8  minutes of trading.  The market traded against the 12290 high’s in a 45 point holding pattern for 2 ½ hours (10-12:30) but back off to 12215 as some restless selling came to the market into the close. Industry participated in the rally, taking on some cover in May and July while origin were largely sidelined. It has taken 6 days for the market to trade 10 cents higher while open interest has only fallen by 1,726 lots over the reporting week. Once bitten twice shy skeptics sell the bounce towards the upper end of a tedious 2 month range. Whether or not skepticism can be deemed “constructive “ will, judging by recent action, likely be dependent upon the fate of the real.