Morgan Stanley Coffee Report

The Arabica market mustered its best performance since the 22nd of February courtesy of a weaker dollar and buoyed by concerns that continued rainfall in Brazil’s coffee belt will hinder and /or disrupt the harvest.   The release of U.S. May unemployment at 8:30 am showed that only 38,000 jobs were created while the market was looking for an increase of 160k on average. Last month’s 160k increase was revised down to 123k. The dollar tumbled the most in 2 months versus the euro (1.1350), and the real rallied 1.8% (3.53 $/real ) and the yield on 10 year bonds suffering their steepest drop in 9 months.   Coffee prices were swift to react with a 2 cent bounce off of unchanged, setting off a round of buy stops around yesterday’s 12440 high then going into auto pilot as momentum traders became engaged buyers.  Brazil remained quiet as coffee prices climbed to the top of the CRB only surpassed by sugar which has already been sensitive to too much rain during the crush.   Prices climbed steadily into the close attracting more systems buying as the 200 day moving average of 12600 was breached.  The Sep/Sep arb widened by over 3 cents as London reversed yesterday’s losses but failed to keep pace with New York’s inspirational performance.  Gap above 12900-12920 basis July.
Volume in NY a robust 53,615 lots with 18,860 spreads. London 17,498 with 6,366 spreads traded.
COT shows fund net short 7,078 on higher end of expectations.