Morgan Stanley Coffee Report

Coffee started the new week on a cheerful note following Friday’s uneventful COT report.  Robusta continued extending its upside in what has emerged as the more exciting of the two markets.  Weather premium continues to predominate as the ongoing focus on Vietnamese dryness / lacking rainfall sits at the top of trader’s minds, and in the hearts of those looking for a story to trade.  Even with Brazil shipping nearly 3mio bags in March according to new Cecafe figures, causing some to wonder what the effects of even record droughts truly are in well irrigated nations, the demand for robusta continues.  While the dryness obscures the consumption side of the balance sheet, the Vietnamese export pace is expected to remain firm with reports of ongoing roaster  demand continuing to filter in.  The BRL was has been the best performing global currency in the first quarter, and its rally continued this morning as anticipation of the congressional vote on Dilma’s impeachment reaches a crescendo.  Reports hold that such a vote could come as early as the 17th, and the capital city of Brasilia has begun bulking up its security ahead of the massive protests and possible riots that are anticipated.  Gossip surrounding a possible arrest of Lula this week also spread across the local water coolers, further buoying sentiment.  However, with crude surging back above $40 during the day, the USD falling, and Emerging Market currencies rallying on Chinese inflation data (PPI +0.5%, the first monthly gain since 2013), it is hard to know how much of the BRL performance was local politics vs global macroeconomic tradewinds.  Whatever the case, an exciting week is likely on tap in coffee with the ongoing Brazilian saga continuing to unfold, and plenty of economic data set for release.