Morgan Stanley Coffee Report

A riveting close to the second consecutive positive week in KC.  Macro support basis yesterday’s ECB action, a stubbornly firm BRL, and additional gains in crude were important,  however one has to think yesterday’s certified stock draw below the round 1.5mln number further aided the mindset of traders who have been closely watching this number.   With KCK and KC2 both being capped at 130 on the weekly chart stretching back to mid-October, and the smaller range to 126 stretching back to mid-January, discretionary traders were active sellers throughout the day as the upper limits of the said ranges are explored.  With a close above the 200 day moving average of 124.65, the 3/8ths Fibonacci retracement from the October highs at 123.35,  and the best weekly settlement since the opening week of the year, the technical picture is much improved.  Many had been looking for a March / April rally window basis cert draws and a seasonal floor in availability out of Brazil and Colombia, so perhaps the best hopes of the Bulls are on their way to realization.  With a net non-commercial of -13,711 reflecting short covering of 8415 lots and new longs of 5013, one expects many to look at the report with a negative tone.  Commercial shorts increased 8487, while commercial longs liquidated 2937, both interesting numbers as well, particularly given the currency picture and the anecdotal lack of Brazil & Colombia selling of meaningful size.  With the potential of Lula joining Brazilian President Dilma’s cabinet over the weekend, one imagines Monday will be an exciting day in coffee.