Morgan Stanley Coffee Report

The week went out with a shrug, as both KCN and KC2 (U) suffered an equal 390 point 5 day trading range, the top 140 of which were last seen Monday.  For historical context, Christmas week 2015 outperformed the past 5 days, with 425 points of gross travel, and the last time a range this small was seen in the N contract was Christmas week 2014 when KCN traded inside 315 points.  If one considers a 2nd month continuation instead, trading was last this tedious in October 2013, when a 365 point range was set.  Similarly uninspiring trading persisted at that time, with many traders anticipating a trip sub $1 at the time, only to have a historic drought in Brazil awaken KC from its slumber.  While one cannot count on such an event recurring, upside calls were again very much in focus today as the Q 150 C traded 1200+ times and the N 130 C & U 140 C both trading 500+ apiece.  Many traders focused on forthcoming cool weather in Brazil, and the accompanying wishes for a more interesting environment.  For such little volatility, day to day open interest changes should keep COT watchers engaged for yet another week, as consecutive 3000+ lot changes were posted.  With most roasting shops shuttered today, and origin still largely dormant, one suspects participation will be better next week following the resumption of work.  Yet with the traditional beginning of summer now upon us, hopefully the week’s (non)events do not foretell what the market will subject its participants to in the coming weeks.  ECF stocks were updated for March, reflecting a 0.2% drawdown, while the Vietnamese General Statistics Office estimated May shipments at 170,000mt, a 60% increase YoY, and April’s number were revised 16% higher.  The VN numbers have been greeted with some skepticism vis a vis other official numbers released and the noted disparity between them.  The Colombian Central Bank hiked overnight repo rates by 25bps as inflation sits at 7.9%, well above the target band of 2-4%.  The COT showed a decrease in the Net Non-Commercial long to 3046 lots on a mix of new shorts and long liquidation.  Commercials stand at -40,493 with short covering prevailing.